Hey everyone! I wanted to let you know about an interview I am doing on Wednesday. Rather than asking the question, this time, I’m the guest.
Stewart Fortier of Compound Writing and I will be talking about niche media companies and my experience writing A Media Operator over the past year. As an A Media Operator subscriber, you get access for free.
It’ll go for about an hour and there will be some time for Q&A. If you’re interested, you can RSVP here.
Now let’s jump in…
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It looks like Wirecutter is looking to hire a Director of Marketing to, in part, help the company build out a subscription product. The job listing says:
Wirecutter is seeking an all-around marketing leader to drive the strategy and go-to-market execution of its future consumer subscription product. You will oversee Wirecutter’s efforts to expand its reach and build its consumer business from the ground up.
Axios confirmed these plans with The New York Times and had more to offer. David Perpich, Head of Standalone Products at The Times, told Axios:
"To launch a subscription offering you need to deeply understand the audience, what the willingness to pay is, and what the execution needs to be like. Having someone come in from a marketing perspective is a key part of puzzle for us."
“…it's better to be in a position of having multiple revenue streams.”
At its core, Wirecutter’s purpose is to provide useful information to consumers so that they are inclined to click through to Amazon and purchase goods. If people start to hit a paywall anytime they want to see a product review, that affiliate revenue is likely to drop.
This feels like a situation where the company is so myopically focused on building a subscription on every one of its products even if the model doesn’t support it.
But let’s give The Times the benefit of the doubt—many people questioned the more than $30 million purchase in 2016—and try to understand why The Times might be making this move.
Let’s look at three separate areas to potentially support this move.
Consumer Reports
The reality is, Wirecutter wouldn’t be the first to have a subscription built into its review website.
Consumer Reports has always done it, convincing millions of people to grab either a print or digital subscription for access to all the in-depth, professional reviews. According to CJR (published in 2018):
In 2017, CR had 3.6 million print subscribers (more than People), who pay $30 a year, and 2.9 million online subscribers. Its online traffic grew to an average of 14 million monthly uniques in 2017, up 17 percent from the previous year, according to a company spokesperson.
Having 2.9 million online subscribers who are paying for professional reviews is an incredibly strong indicator of consumer interest. If we look at CR’s 2018 tax return, it appears to have generated $109 million in digital subscription revenue. That was up $10 million from the previous year.
So, it’s clear that people are willing to pay for access to the reviews. However, Consumer Reports has an incredibly strong brand and it’s an aging audience that has stuck with CR for years now. In that same CJR article:
In 2008, the average age of a CR print subscriber was 60, and that of the average online subscriber 50. By 2016, those ages had risen to 65 and 56, respectively.
CR’s aging audience is a particular problem because younger people don’t have the built-in allegiance to professional reviews, preferring online opinions.
Can Wirecutter, which has notoriously been a free site, suddenly start charging? That depends on this next point…
How do people find Wirecutter?
I did a Google search today for a rowing machine. I need to do something about all this sitting at my desk. My first instinct was to search Google and then land on whichever site came first.
I would wager that the vast majority of people do the same thing, which explains why SEO has always been such an integral part of review sites.
What I’d like to understand is the audience breakdown between referral and direct. Sadly, we never will because Wirecutter is now part of nytimes.com versus being its own domain (a terrifying exercise for anyone that has done complete site migrations).
Suffice it to say, that breakdown will tell you a lot about an audience’s willingness to pay for content. By and large, people pay for something that they have regular association with. Here are the two scenarios:
High referral/low direct traffic: These are people coming through the side door. They are not finding the site because they seek it out, but because they land on it thanks to off-site activity.
Low referral/high direct traffic: These are people that are seeking Wirecutter out. These are people that might be typing the domain name into the browser or subscribing to one of the newsletters.
It goes without saying, but a site that has a higher direct-to-site ratio also likely has a more loyal audience with one exception.
Years ago, Google stopped showing the specific keyword that people use to access our websites. There’s a chance that much of the referral traffic could be branded keywords. A branded keyword is where it includes the name of the company and then the keyword. For example, A Media Operator Revenue Server would be considered a branded keyword.
I would also want to understand the breakdown of users that read a single review versus reading dozens. And, more importantly, that activity should be across categories and over a much longer period of time. If the majority of users come to the site through Google, read rowing machine reviews, make a decision and then never return, you likely don’t have a loyal audience. On the other hand, if people are consistently visiting Wirecutter before making major decisions, that could mean the audience is brand loyal.
Is The Times worried about cookies?
There’s no denying that publishers have been feeling affiliate fee pressure from Amazon. Although the largest have so far been left unscathed, the writing is on the wall. Amazon doesn’t believe it needs to rely as much on its network of publishers to drive sales. Or, worse, it knows that publishers have no other choice.
If Wirecutter is already seeing revenue dropping, it might believe there is a break-even point whereby a leaner, subscriber-driven business is better than the affiliate revenue it has been generating. However, The Times told Axios that its affiliate revenue has been higher during the pandemic.
There is a bigger reason why this might become prudent even if revenue is skyrocketing right now.
We spend a lot of time talking about the death of the 3rd party cookie in connection with programmatic advertising. However, affiliate marketing cookies also rely on 3rd party cookies. If these are going to die, the style of affiliate marketing that Wirecutter has relied on for so long might also struggle.
Recall, browsers are going to start block tracking cookies. If that’s the case, when a user clicks over from Wirecutter to Amazon, the retailer has no way of knowing who should get credit.
Therefore, The Times might simply be preparing for that future when it makes less money on affiliate revenue anyway, so it needs to find other ways to monetize. It doesn’t want to charge for inclusion—that seems to run counter to its ethical guidelines—so charging the user seems appropriate.
It’ll be interesting to see how this plays out. While I don’t really see a path forward for subscriptions today, without a lot of data and without understanding their internal thinking, it’s hard to pass too much judgement on their plans.
Lookout Local is Intriguing
There has been a lot of recent press around Ken Doctor’s Lookout Local, a for-profit attempt at building a local media company in his home town of Santa Cruz, California.
The New York Times wrote about it a couple weeks ago:
Mr. Doctor’s start-up is a for-profit, public-benefit company. It has funding from the Knight Foundation, the Google News Initiative Innovation Challenge, the Lenfest Institute for Journalism and others. He said he plans to start Lookout Santa Cruz in the fall with a staff of eight to 10 journalists. The site has a deal with The Los Angeles Times to use its content management system, Graphene, and to run some of its content.
Some people advised Mr. Doctor to start smaller, with two or three journalists, but he decided to heed the advice he had laid out in a January column arguing that in-depth coverage will attract subscribers and ultimately pay for itself. If Lookout Santa Cruz is a success, he plans to start sibling sites.
Additionally, Doctor and his CRO, Jed Williams, joined Digiday for its weekly show, The New Normal. During it, they said:
“It is still very cheap to do a digital product, so at less than $2 million a year, we can map a full service news company that has two to three times the reporting strength in quantity of a daily newspaper,” said Doctor.
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“The business community is part of the model along with readers and members for the long haul,” he said. Lookout Local is looking to also give Santa Cruz’s local businesses a new place to reach immediate potential new customers.
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To gain more awareness and scale, Lookout Local will be testing a bundle with the Los Angeles Times that will offer a discounted membership to Lookout and a subscription to the Times.
Each of these points is so critical and I am really excited that Doctor and Williams touched on them both.
First, $2 million a year is all that he really needs to have a newsroom that is stronger than what is already in Santa Cruz. It’s able to do this because it doesn’t have much of the same fixed costs that legacy newspapers do. Having a product worth paying for—that means deep and consistent coverage—is critical to finding success. But even then, as they explained, they only need 5,000 to 7,000 members.
Second, their understanding that advertising is a smart play is important. When many people think of advertising, they only think about the media company earning money. However, there’s also the advertiser. There are hundreds (or more) of local businesses in Santa Cruz that are looking for customers. If Santa Cruz can build the right, targeted audience and create smart products, perhaps there’s a business there.
Finally, the Local/National bundle in partnership with the Los Angeles Times is an interesting play. I would like to see how this plays out. If it requires users to get two separate subscriptions, it might be tricky. As we know, users that pay for news only want to pay for one subscription. However, if it’s bundled together in a single subscription, it could be a brilliant way to give users everything they need.
I can envision Lookout Local expanding into other cities in California and offering the same bundle. Santa Cruz isn’t even a top-10 city by population, so there’s plenty of room for this bundle to spread.
I’ll be interested to see how the team launches the site. A blended membership/advertising play that has smart partnerships with the Los Angeles Times is a good plan. Perhaps it could be a formula for other upstarts.
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