Note: Excerpts from industry report written for Trends.co
Summary
- The product review industry has undergone significant change since OG Consumer Reports released its first print issue 85 years ago. The internet, affiliate marketing, and Google Search have played profound roles in reshaping the business.
- New trends in ecommerce, consumer online behavior, and influencer marketing are opening doors to new opportunities, with many companies making millions of dollars a year in the space.
- One testament to its growth: BestReviews was recently sold for $160m -- $50m more than its purchase price in 2018.
- Amazon is the largest affiliate network. However, it has been consistently cutting commission rates, leading successful reviewers to forge new affiliate paths.
- We identified more than a dozen opportunities by evaluating the impact of new acquisition channels on existing high-performing affiliate products and uncovering new product opportunities in reliable distribution channels.
- Focusing on the one thing all consumers want will give new sites an edge.
Introduction
“People don’t want a quarter-inch drill. They want a quarter-inch hole!” That’s what Harvard professor Theodore Levitt used to say. But as HBS students Momchil Filev and Ben Faw figured out, many people are actually looking for the best drill.
Filev and Faw were wrapping up their MBAs at Harvard in 2014 and saw an opportunity to capitalize on the $40B of products that are returned each year by consumers who aren’t happy with a purchase.
So they talked to Denis Grotz, a prolific tech investor in companies like ConsumerAffairs, Thumbtack, and Udemy. Grotz had recently purchased a cordless drill after a frustrating time spent searching the web. To them, the inefficiency of searching for products and the volume of product returns seemed related.
So they launched a business that would give consumers information to make confident purchase decisions. They called it BestReviews -- and the first product they reviewed was a DeWalt drill.
Last month, Nextar Media Group, which has nearly 200 TV stations across the country, agreed to acquire BestReviews from Tribune Publishing for a reported $160m, providing Tribune, which had acquired a 60% stake in BestReviews in 2018, with a ~$30m ROI in less than 3 years.
What makes review sites worth so much -- and what’s the blueprint for monetizing them? Trends readers have been asking us to do a proper review of this industry for months. So we studied up on the business, analyzing dozens of review sites and how they make money.
Read on to learn the history of review sites, how some operate with 90%+ margins, and where the business is headed...
Conclusion
...The trick with review site brands is to base them on what consumers want to do or become. Then help them make progress with useful content, calculators, quizzes, and checklists.
Customers want to make progress. After you buy a great drill, you want to build something with it.
The point Levitt was trying to make to his students about drills vs holes is that companies become too focused on their products and miss what their customers actually want. They’re myopic.
Marketing Myopia was the name of Levitt’s article in a 1960 edition of Harvard Business Review. But most companies continue to struggle with it to this day. Which means there’s incredible opportunity for review site business owners who maintain focus on their customers.
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