What’s old is new again, and again. Today’s digital darlings, from BuzzFeed and PopSugar to Who What Wear, are trying to grab people’s attention (and dollars) online—and offline by striking licensing partnerships with retailers. A smart cooktop from BuzzFeed’s Tasty to a PopSugar-branded blouse are not unlike the Sports Illustrated football phone of yesteryear. The endgame remains the same as well: to diversify revenue streams, help the bottom line and extend its brand recognition.
“It’s important to understand that these deals are made to increase the value of the product for the companies,” said Steve Miller, director of undergraduate studies in journalism and media at Rutgers University. “The deals have been going on for years—it’s just more open now because of the openness of the media environment.”
Owen Youngman, professor of digital media strategy at Northwestern University, explains that before the advent of the web, these licensing deals were made by executives based on a “gut” feeling. Now, these deals are better informed through shared data collected by both media companies and retailers.
Media companies make most of their money in these ventures from licensing fees, but, depending on the deal, retail analyst Bruce Winder estimates that publishers typically get a cut of 10 to 20 percent in product sales (though a deal with Walmart may range between 5 to 10 percent).
“Data is the new currency in retail,” Winder said. “It’s definitely a battle of brands right now.”
“If you’re asking for a real difference,” Youngman added, “I don’t think it’s the fact that there’s licensing going on; it’s the rigor of the decisions based on research that points to a benefit for both parties.”
BuzzFeed’s first great leap into licensing is Tasty’s line of 100 products sold at Walmart. Ranging in price from a few dollars to $100, Tasty has sold more than 2 million items since late March, said Ben Kaufman, head of commerce at BuzzFeed. He declined to give exact details on the percentage of revenue it gets from licensing fees with developers, and Walmart did not return calls for comment.
BuzzFeed has further expanded its product line of 100 home goods, from linens to kitchen knives, at Macy’s under its health and wellness vertical, Goodful, with partners such as Cuisinart.
The partnerships also serve the interests of brick-and-mortar stores, noted Winder. A BuzzFeed and Walmart relationship is strategically advantageous for the latter as it adds a digital halo effect to the retailer—and keeps the products out of Amazon’s grasp. “It’s a chance for digital media companies to reach their audiences who would recognize their brands in these new settings,” said Diana Gordon, director, Shop+ at Mindshare North America.
PopSugar got into this space with beauty products and, most recently, a clothing line sold exclusively at Kohl’s, ranging in price from $24 to $92.
“We see the collection as an opportunity to draw more millennial customers and women with young families to Kohl’s, which is a core part of our overarching customer strategy,” said Greg Revelle, Kohl’s senior evp and CMO, in a statement. “PopSugar is one of the most engaging media outlets in the industry and knows what millennial customers want through the content they are searching, browsing and engaging with.”
PopSugar plans to use its data tech tool, TrendRank, to predict future trends in the fashion industry and include pieces in its coming lines to reflect what people are talking about. For example, the tool predicted that bright colors were popular ahead of the wedding between Prince Harry and Meghan Markle in May. It was an accurate prediction, as everyone from Oprah to the Queen of England showed up in colorful outfits, said Geoff Schiller, chief revenue officer at PopSugar.
PopSugar declined to give further details about the partnership with Kohl’s, including revenue generated to date and the length of the deal.
These licensing relationships also allow media companies to dip their toes into retail and reach more customers without investing in the expensive overhead of a store, explained Arnaud Simeray, vp, strategic partnerships at Storefront, a pop-up location platform company that helped develop the PopSugar and Kohl’s activation. It’s also a way to keep customer acquisition costs low while increasing online lift. Simeray added that ecommerce pop-up shops can see a 15 to 20 percent increase in ecommerce sales from consumers in the area, and in some cases, 45 and 50 percent.
“This is not a trend,” noted Simeray. “This is the way retail and the shopping experience is moving forward.”
(Disclosure: Ann-Marie Alcántara, a reporter on this story, was a former editor at PopSugar.)