NerdWallet is an online personal finance platform that offers tools and advice on many topics.
This startup gained traction as an easy-to-use tool for comparing credit cards. NerdWallet earns money from affiliate commissions that are established by affiliate agreements.
NerdWallet is a personal finance comparison site where you can compare credit cards, investment alternatives, insurance, student loans, banking, home loans, personal loans, and savings options.
NerdWallet business model is based on affiliate commissions paid to NerdWallet whenever a user signs up for a credit card or similar product via NerdWallet website.
The NerdWallet website offers information on credit cards, mortgages, and so much more. Look closer at the NerdWallet business model.
What is NerdWallet?
NerdWallet is a FinTech website that offers financial advice on various topics, including loans, mortgages, insurance, taxes, and investing.
Apart from reviews, NerdWallet has developed several tools to assist individuals in managing their finances more effectively.
NerdWallet, Inc. develops online solutions that provide users with information, insights, and consumer-driven financial advice.
Customers can use its features to navigate and understand personal finance decisions involving credit cards, mortgages, insurance, loans, investing, small businesses, healthcare, education, and shopping.
NerdWallet earns money through affiliate commissions. Financial institutions, such as banks or mortgage lenders compensate the company for each signup created through the company’s platform.
NerdWallet was founded in 2009 and has evolved to become one of the major financial comparison websites in the United States. Each year, the company gets more than 160 million users.
|Founded Date||August 2009|
|Headquarter||Madison, WI, US|
|Location Served||San Francisco, CA, USA|
How Does NerdWallet Work?
NerdWallet is a financial counseling and content platform covering banking, student loans, taxes, insurance, and mortgages.
Credit cards and other financial products are reviewed by the organization extensively. As NerdWallet states, “we provide clarity for every decision we make in life.”
Additionally, NerdWallet offers various calculators to assist users in planning these critical financial decisions, including a down payment calculator and an interest rate calculator.
Finally, the organization publishes instructions on themes such as how to save money, how to buy stocks successfully, and how to refinance your mortgage.
Users can also track information such as their credit score or account balance if they register with NerdWallet. NerdWallet will then recommend a product and a strategy based on the user’s data.
NerdWallet is accessible via the company’s website as well as its Android and iOS mobile applications. Additionally, consumers who prefer audio formats can listen to the firm’s podcast.
NerdWallet Business Model
How does NerdWallet earn money if the website and app are free to use?
The NerdWallet business model relies on affiliate commissions paid to NerdWallet whenever a user signs up for a credit card or similar product through the NerdWallet site.
The commissions charged by NerdWallet range from $0 to hundreds of dollars. Around 5% of customers progress from reading to purchasing a product. The corporation is compensated on a percentage basis for products such as loans.
NerdWallet discloses affiliate commissions via disclosure on the site, but they also state that these commissions have no bearing on the suggestions or advice on the site.
NerdWallet is extremely customer-centric and does extensive user testing to ascertain the many types of financial advice consumers seek.
The company’s objective is to hire the best and invest in generating comprehensive material that answers consumers’ problems.
NerdWallet’s success is due in part to its great content strategy. Due to this technique, the company earned the trust of its users and dethroned several incumbents in the sector at the time.
When the site was launched, the founder committed to posting 500 high-quality articles per month, progressively increasing to 1000 per month. He quickly recognized that organic search was the way to proceed.
NerdWallet obtained high-quality links from respected sites in this manner and has established itself as the go-to source for objective financial analysis.
This emphasis on content strategy will contribute to its continued success as it grows into new market categories and geographies.
How Does NerdWallet Make Money?
NerdWallet earns money through affiliate commissions on each lead or signup generated by the company.
Therefore, why are businesses willing to compensate NerdWallet for acquiring these users? To provide context, the following are a few data points:
The average consumer in the United States keeps their bank account for 16 years, while approximately 26% keep it for more than 20 years.
Americans pay an average of $501 a month for a family of four’s health insurance. An average 30-year fixed mortgage costs $1,275 per month. A typical 15-year fixed mortgage costs $1,751.
In essence, anything involving financial products (such as credit cards, loans, or insurance) is a highly profitable business — and established corporations are willing to invest billions of dollars in gaining new users.
NerdWallet is compensated when a user signs up for a product or service. The commission it earns is contingent upon the terms of the arrangement NerdWallet reached and the product it promotes.
Commissions for mortgage or insurance signups can range from a few dollars to well over a hundred dollars.
One significant disadvantage that NerdWallet and several of its competitors (Credit Karma or CreditCards.com) face is ensuring that their reviews maintain the requisite journalistic objectivity.
Previously, concerns were raised about their suggestions being slanted toward partners who pay the greatest commissions. None of these issues have been confirmed thus far.
While the NerdWallet website is free to use, the company is banking on around 5% of readers’ purchasing.
This percentage informs Gibson and Chen about the type of readership they must recruit to meet revenue targets. Indeed, a large part of NerdWallet’s success is due to its prolific publishing approach.
The company promised to publish 500 high-quality articles every month in its early years. This has grown to 1000 articles every month over time, creating a massive resource backed up by authority backlinks from similar websites.
This emphasis on organic search traffic is critical to NerdWallet’s revenue-generating approach. It enables them to broaden their reach and boost their credibility while maintaining a low-cost structure.
NerdWallet also receives compensation from certain financial institutions in exchange for writing a review of their services on its website.
While earning money from endorsements is a gray area for customers, NerdWallet insists that such endorsements have no bearing on their suggestions or advice.
What is the Funding and Valuation of NerdWallet?
Crunchbase reports that NerdWallet has raised a total of $105 million over four stages of venture capital funding. The company’s investors include RRE Ventures, Silicon Valley Bank, and Institutional Venture Partners (IVP).
NerdWallet last reported its valuation publicly in 2016. NerdWallet was valued at $520 million at the time of the announcement. It is reasonable to assume that its value has increased greatly since then.
What is the Revenue of NerdWallet?
NerdWallet currently earns approximately $150 million per year from its financial content. The Coronavirus pandemic has accelerated the company’s growth as more and more people seek financial guidance on topics such as refinancing or interest rate optimization.
Success Story of NerdWallet
NerdWallet was started in 2009 by Tim Chen (CEO) and Jacob Gibson in San Francisco, California.
Both founders, who met in high school, learned the ropes of finance while working on Wall Street.
Chen, a Stanford Economics graduate, began his career as an analyst at Credit Suisse before transferring to Perry Capital in an investment job.
On the other hand, Gibson studied mathematics at MIT and subsequently worked at JP Morgan Chase in various senior capacities.
Chen quickly became unemployed due to the banking sector’s financial crisis (while Gibson was lucky enough to keep his job).
Since demand for bankers has virtually ceased to exist, Chen frequently finds himself hanging out at pubs with his former banking colleagues.
However, as fortune would have it, he soon discovered a means to escape his boredom. His sister was studying abroad in Australia at the time and requested assistance in locating a credit card with cheap foreign transaction costs.
Chen urged Google for a response, believing it would be simple and quick to find. Rather than that, he discovered a collection of dubious-looking websites that pushed dubious offerings.
He spent a weekend manually entering data into an Excel spreadsheet from the nation’s 7,400 credit unions. Following his sister’s receipt of that document, the file took on a life of its own and was shared with numerous additional family members and acquaintances.
This provided Chen with all the necessary confirmation. He invested approximately $800 to launch NerdWallet’s homepage and got Gibson to join as well.
They created NerdWallet in February 2009, utilizing Chen’s original credit card data collection. However, despite their great ambitions, the first few years of operation were not without difficulties.
The site’s first year generated only about $75 for the founders. By year two, revenue had increased to $65,000, but Chen was torn between returning to Wall Street and continuing to work 16–20 hours each day on his business.
Chen eventually decided to continue working on NerdWallet due to a lack of outstanding chances on Wall Street, which was still reeling from the consequences of the financial crisis.
By the end of 2010, NerdWallet had generated enough revenue to provide Chen with the confidence required.
NerdWallet maintained a solid development trajectory in the years that followed. In 2014, the young business made some noteworthy employees, including Dan Yoo (previously VP of Business Operations at LinkedIn) and Florence Thinh (a former partner at Khosla Ventures).
They effectively took the place of Gibson, who assumed an advisory role. The entrepreneur desired to devote more time to his family following the birth of twins.
A year later, NerdWallet announced its first round of investment after operating entirely independently for the first six years of its existence.
It secured approximately $64 million in funding from investors, including RRE Ventures and iGlobe Partners.
By that point, the enterprise was already profitable. Thus, while the funding round was not necessary for survival, it was almost certainly done on favorable terms, allowing NerdWallet to increase its cash on hand.
The spectacular rise of NerdWallet was fueled by a slew of variables. To begin, current competitors provided a mediocre user experience at best.
This resulted in a few instances where competing firms such as Bankrate were forced to settle with the SEC for fraudulent practices.
NerdWallet, on the other hand, positioned itself as an objective and independent financial advisor. This enhanced user trust in the company’s recommendations, which resulted in a higher conversion rate.
Another driver in the company’s growth was traditional banks’ reluctance to adapt to a digital-first society and mistrust during the financial crisis.
As a result, they were forced to dedicate increasing expenditures to online customer acquisition, which benefited startups like NerdWallet significantly.
Finally, NerdWallet has always placed a premium on extending its product offering while providing best-in-class financial advice.
To that degree, the company could recruit authors from well-known media outlets such as USA Today or The Wall Street Journal.
Nonetheless, NerdWallet’s rise came with a price. Due to its emphasis on experimenting, it had hired personnel incompatible with its culture or general strategic direction.
To that end, NerdWallet was forced to lay off over 50 people in 2017, accounting for 13% of the company’s staff. Among them was COO Dan Yoo, who had been hired by the corporation only three years prior.
NerdWallet currently employs approximately 500 individuals in its San Francisco location.
Recently, the company moved into the United Kingdom by acquiring Know Your Money, a comparable platform situated in Norwich. Each year, NerdWallet’s platform is visited by more than 160 million users.
Key Takeaways From NerdWallet Business Model
NerdWallet is a comparative website for personal finance. Tim Chen and Jacob Gibson founded it with an initial investment of $800 with the simple purpose of analyzing credit card offers.
The bulk of NerdWallet’s revenue comes from affiliate marketing. The precise commission amount is determined by the advertised product and the relationship between NerdWallet and the linked company.
Approximately 5% of all NerdWallet users make a transaction to generate affiliate revenue for the company.
As a result, the organization employs a prolific content development strategy to establish authority and grow its reader base at a low cost.