Success Without Ads
About 150 people at Consumer Reports do the testing. Jim Langehennig checked cellphone headsets.
YONKERS — It makes no sense for publications to charge readers on the Web — at least, that’s the conventional wisdom. But conventional wisdom does not carry much weight at Consumer Reports, that detailed guide to buying everything from prescription drugs to pickup trucks.
The resolution of a camera lens was tested at the group’s office.
Consumer Reports, a monthly, refuses to publish ads, which are the primary source of revenue for most magazines, yet it makes a healthy profit. And it not only charges for access to most of its Web site, it has three million paying subscribers online — up about 60 percent in the last 18 months — which experts say may be the largest number in the industry.
Very few big publications have tried charging Web readers, and almost all of them have had second thoughts. The Wall Street Journal has most of its content behind a pay barrier, but its owner-to-be, the News Corporation, is reconsidering that policy. The New York Times and The Los Angeles Times tried charging for some online content, then abandoned the practice.
For a decade, however, Consumer Reports has charged Internet readers the same price as print subscribers, currently $26 a year (or $5.99 for a month’s online access or $45 a year to get the magazine both in print and on the Web). While the rest of the industry sees print readers as more valuable — because advertisers do — Consumer Reports actually makes more money from readers on its Web site, because it avoids printing, trucking and mailing costs.
“It’s not like we’re a stroke of brilliance,” said John Sateja, senior vice president for information products at Consumers Union, the nonprofit group that publishes Consumer Reports. “We had no choice. We have no advertising, so we had to survive on what readers pay.”
The organization does more than just survive. Consumers Union reports that its publications — Consumer Reports and a few much smaller ones — generated $208 million in revenue in the year ended May 31, with an operating margin of about $28 million.
“We had to become more entrepreneurial,” said Jim Guest, president of Consumers Union.
This success subsidizes the organization’s consumer advocacy work, helping to reshape a group that early in this decade was losing $7 million a year. In recent years, Consumers Union has set up shop in dozens of state capitals, has signed up more than half a million activists who send e-mail messages to lawmakers and corporations and has taken on causes like forcing drug companies to disclose the results of clinical trials.
Given Consumers Union’s self-appointed mission of protecting the public from corporate misdeeds, and given the type of people such a mission attracts, the group has a liberal, though nonpartisan, bent. The work histories of some staff members suggest as much; Mr. Guest used to work for groups that advocate abortion rights and gun control.
“They’re like Ralph Nader without the politics,” said Victor Navasky, former publisher and editor of The Nation. “So it’s amusing that what they do comes across in conventional, capitalist terms — helping people who want to spend their money to spend it and get value for it, and pushing corporations to perform better.”
Mr. Guest sees no incongruity in any of this. “We have to think and act like a business,” he said, seeing readers as the shareholders.
That meant, among other things, more aggressive placement of the magazine in checkout aisles and newsstands, and buying a long list of sponsored search terms on Google and Yahoo. Fierce competition for terms like “S.U.V.” puts those words out of Consumer Reports’ price range, but there is substantially less clamor for the rights to, say, “toaster.”
Subscriptions to the magazine still produce the vast majority of Consumers Union’s revenue: the dead-tree version of Consumer Reports has a paid circulation of 4.5 million, more than all but a handful of American magazines. There is relatively little overlap between the print and Web subscribers — about 600,000 — which allows the magazine to reach two large, distinct audiences.
More than 60 percent of the print magazine’s readers are men, but the Web site, where readers are split almost evenly by sex, has helped Consumer Reports draw more women. Online readers average 50 years old, a decade younger than print readers, and are better off financially.
A reader of the printed magazine might be “someone who generally wants to be a well-informed consumer,” said Giselle Benatar, editor in chief of online media. “But on the Web site, we’re attracting very transaction-minded consumers. They are shoppers. They’re looking for a product, they want ratings, they want recommendations, and they want it now, not once a month.”
The site has been steadily built up, with additions like, this year, crash test videos — front and side impact — on nearly every vehicle sold in the United States. One of the site’s primary attractions is its deep well of product ratings — not only more data on some products than will fit in the magazine, but also ratings published months or years ago. It can also produce reviews of new products like the iPhone much faster than the magazine, as well as safety warnings on things like lead paint in toys, which are always available on the free portion of the site.
And the magazine’s most consistent message may just be, as the editor in chief, Kimberly Kleman, said, that “a lot of the highfalutin brands are rock-bottom in our ratings,” while the cheap, plain products can fare quite well.
Consumer Reports’ own brand has come under attack from time to time, its credibility questioned by companies whose products get low ratings. There were two protracted lawsuits brought by automakers in the 1990s, after the magazine called their S.U.V.’s too prone to rolling over; neither case ended with a clear result.
The worst blow came last January, when Consumer Reports reported that most of the child car seats it had tested were unsafe in side-impact crashes.
Within days it said publicly that its conclusions were wrong. Consumers Union quickly sent letters of apology to all subscribers and removed the article from the Web site. The magazine published a long article explaining how the mistake was made.
The erroneous report involved a kind of crash test the magazine had never tried before, conducted by an outside testing company it had never used, leading to misinterpretation of the data.
Others in the magazine industry — and even some of the car seat makers — were impressed by how Consumer Reports dealt with the affair. Circulation kept rising and, perhaps as important, the news media continued to quote Consumer Reports as an authoritative source of product ratings.
“I think the way they handled it increased their credibility,” said Kent Brownridge, who heads the Alpha Media Group, publisher of Maxim and Blender. It would take more than one such misstep, he said, to dent the magazine’s reputation.
Consumer Reports’ relationship with product makers is often awkward. Despite many requests, it does not allow companies to trumpet high ratings from the magazine in ads. Companies that fare poorly rarely make much noise about it — executives at several such companies said that doing so just draws attention to bad reviews — and the complaints they do voice are usually muted, objecting to the magazine’s conclusions, but not its motives.
The magazine tries to keep manufacturers at arms’ length, while occasionally consulting them about how to test their products, and giving them a chance to respond to serious allegations before publication. After the car seat debacle, the magazine said it would shift the balance toward more communication, especially when working in unfamiliar terrain. Consumer Reports has a large staff, more than 300 people; about 150, many of them engineers, do nothing but test products.
Enter one room in the headquarters north of New York City, and find a long table with hundreds of dishes arrayed in rows, each carefully smeared with the same pasta sauce, chili, mustard and other stain-makers, before being loaded into dozens of dishwashers. Down the hall is a room furnished to simulate a suburban den, where audio components play for a mannequin whose electronic ears funnel the results to a computer. The magazine even has its own vehicle test track in Connecticut.
(After testing, all the products are auctioned off to employees.)
Consumer Reports also has survey researchers and statisticians who analyze responses to product-performance surveys from more than a million readers annually. And there is a team of people who fan out around the country to buy products incognito in every region, from every sort of retailer.
But those costs are offset by economic advantages Consumer Reports has over many other magazines. Its headquarters, in the parent group’s low, nondescript building, sits off a highway in Yonkers, a mostly blue-collar town, a few miles from the Midtown Manhattan hive of the magazine swarm, but much farther away in mind-set and in dollars.
Consumer Reports prints on cheap paper, unlike magazines whose high-quality stock is dictated by glossy ads, and as a nonprofit group, it pays much lower postage. Consumer Reports spends about $17 million a year on paper and postage; commercial magazines of similar size can spend $40 million.
Magazine industry executives voice admiration for what Consumer Reports has achieved, but they are skeptical about applying its experience to other magazines. For starters, after seven decades, it has no direct competition.
None of it would work if it were not for the fact that “what they do is useful, practical, needed,” Mr. Brownridge said, and that the magazine “has credibility, an authoritative voice.”
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