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Wikipedia, a sustainable « open and free » project ?

A frequent question asked by journalists, or even more frequently, by businessmen, is but what is your business model ?

Errrr, well, excellent question…

In a couple of weeks, we’ll publish financial statements, but to make it simple, last fiscal year, our revenue was 1,38 millions dollars. A drop of water when we consider the Foundation is running a top 15 website (in fall 2006, we oscillate between the 10th to 15th most visited website in the world).

Most of this revenue is spent in hardware, bandwidth costs. Expenses totaled $611k, with

  • $189k for hosting
  • $107k for payroll
  • $110k depreciation

And we purchased $425k of hardware

Estimation for this fiscal year are a total of $750k-$1M planned ($400k of hardware already spent) and estimated expenses around $1.75-$2M.

I have been exploring the various ways the Wikimedia Foundation could make money in a sustainable way, without any damage (in terms of image) for the wikimedia projects. In short, how to establish stable and scalable revenue streams ?

Most of our income currently comes from the gift economy

In short, donations. Donations of people, just unknown people who happens to love the project and realise it needs money to run.

We started the concept in 2003, with the Brion Vibber Laptop Fund, then the following years collected money during fundraisings

  • December 2003: ~30,000 USD
  • July 2004: ?
  • September 2004: 60,000 USD
  • February 2005: 95,000 USD
  • August 2005: 243,000 USD
  • January 2006: 390,000 USD
  • December 2006 ???

We also now get a regular revenue stream from donations of about 40 KUSD per month.

Our average donation is around 20 dollars. A grassroot project funded by the grassroots. On one hand, that sounds cool to say this. On the other, when one sees the pile of money distributed every year by big american charities, there are reasons to think we are missing something.

One of the way we wish to explore is the matching donation system. There are two types of donations systems here. In the first one, when an employee makes a donation, his gift can be matched by his employer, providing that the charity is registered in the company list of charities to support.

The second case is more generic. Imagine a situation where all donations made during a day are matched by a company. When individual donations reach 100 000 dollars, we’ll get 100 000 more from the company. That might require to « recognise » the effort made by the company, as well as inform donators of which company will match his gift.

Imagine all pages of Wikipedia with a little line on top-right, « Today, Microsoft matches your gift. Make a donation to support us ». That could be cool.

Reality strike, after several days spent contacting big companies and big organizations, we still do not have a single agreement for matching donations.

It is also unknown how many editors will consider that « advertisement » and complain. I guess a big mention of a famous open-source company will make people at ease, whilst a big mention of political party will not make it look so good. Maybe is that up to us to avoid asking certain companies which may make editors and readers unconfortable.

Accessorizing strategy

A big classical strategy for many open source projects. Concept: sale of items, with use of the brand. Tee-shirt, coffee mugs, key ring, cap, car bumper, mouse pad, teddy bear, you name it…

Now, let us be practical. If you are invited at the conference, would you use 1 kg to transport your toiletries, and the remaining 19 kg to carry promotional items ? Say 50 tee-shirts. One tee-shirt is 20 dollars, with 4 dollars of benefit. Overall benefit for a broken back and 50 teeshirts sold: 200 dollars.

Right. Not sure this can be expected to solve the issue of a multi milions budget.

But from a promotional perspective, it is very cool to go to conference with a wikipedia teeshirt. Please visit our : cafepress site

The Patronage strategy

A company/organisation may financially support us

  • to push certain languages or projects (e.g. a regional languages)
  • To support collection of content (eg, digitization)
  • To support changes of copyright or ip laws
  • to weaken a competitor, through plummeting of the competitors’s market

It may or may not be acceptable for the community, depending on what should be supported. For example, if we accepted money to implement children filters, the community may object to the concept of wikipedia providing filtering.

Also, the money could be proposed to implement a task which does not fit in our mission statement (such as political lobbying).

As of today, we only got one such grant, meant to help the development of WikiJunior. For all I know, the money mostly went to support the global infrastructure. However, I think in the future, we’ll have more such help and these will have the benefit of pushing certain projects, which are never felt as the ultimate priority and as result always fall behind. The main problem with that strategy is that it request someone originally outlining a project, writing the grant application, someone to contact grant makers, and someone to do the job if there are string attached. Most of this will never get done entirely by a volunteer. Which means that we first need money to hire people, who will submit grant appplications…

The merchant model

The concept is to sale some of the byproducts of the website and collect the benefits. Example, publishing of DVD, Paper versions (Wikireaders,Wikipress, Wikijunior). The model surfes on the « long tail ».

In itself, *great* idea.

The main problem with it is the legal responsability and the risk for the projects to be taken down if the Foundation finds itself untangled in a big copyrighted-born lawsuit. This is essentially why the Foundation does not publishes wikireaders or DVD.

Brand licensing strategy

The idea is to charge other companies for the right to use our brand names and trademarks in creating derivative products.

The brand issue is a tricky one. If a local association wants to use the Wikipedia logo, and asks permission, the Foundation will not « charge » the association. Rather the idea is that brands are granted

  • Free use for promotion of wikimedia projects
  • Free use of media
  • Free use for non profit organisations
  • against royalties for commercial uses

This strategy is of limited use as of today, but expansion is to expect.

The drawbacks of this strategy are essentially the following ones. First, there are many unauthorized uses. Most of the time, they come from a misunderstanding and can be fixed simply by a discussion. Sometimes, not. Until now, we have not chosen to go legal against misuses, but at some point, we might have to do it. Second, if we want to actually use our trademarks, we need to own the trademarks. Which means additional costs in terms of securing them and to pay people to manage them.

The service strategy

In this case, the revenu model is based on a service revenue stream rather than a licence revenue stream.

Example of service we already provide: the datafeed (live access to updated Wikipedia content rather than use of the free (and often broken) monthly dump)

In using our free content as part of a global product, a distributor limits his costs as well as increase the global value of his product. He consequently have significant interest in using our content. However, he needs updated content, free of installation hassle. Which is a service we can provide him.

Services are limited as of today, but expansion could be expected. A business manager would probably be required to really develop this model.

Another service we *could* provide, but are not providing, nor are likely to provide, is related to use of Wikis, installation of a wiki etc… There are two reasons for limited input. First, Jimbo Wales company Wikia, is providing free hosting of wikis. Second, it is not really a type of service mentionned in our bylaws. We often receive requests for support and can only recommand names of developers.

The advertisement model

  • This* is the big question. Many websites only survive thanks to advertisement. Accepting to put ads on articles would largely solved our financial needs due to our very large traffic and perfect fit with the content provided.

However, a significant part of the community is against putting ads on Wikipedia, for various reasons, amongst which failure of neutrality or ethical principles. A community even forked in the past because a rumor circulated… the spanish wikipedia is only slowly recovering from this fork in summer 2002.

Various solutions have been proposed

  • Ads on articles pages is the most widely rejected solution, though there are a few supporters
  • An opt-in system. Readers will have the opportunity to say « yes, I want advertisement ». This would likely require the reader to be identified by an account, and to login. Most readers are unlikely to have an account, so it is not clear this solution would bring much money.
  • An opt-out system. Readers will have the ads by default, but can request not to have the ads displayed. Most editors also feel this solution intrusive and it is unlikely to be retained
  • Advertisment on search pages. This may be the least controversial solution, as it can not be said to damage our concept of neutrality, and might on the contrary bring a benefit to the reader. It has not been approved though.

The endowment strategy

We may diversify our income sources in setting up an endowment. Operating costs, all those unsexy expenses such as payroll, travel expenses, phone costs etc… could be paid thanks to the endowment. Donors could focus on giving money for the *fun* expenses (such as Wikimania, or distributing DVD’s in schools) or expenses that make sense to them (such as hardware costs).

The endowment strategy is a very likely one to consider for our future. It is one that could free our time from seeking money every couple of months, and one that could ensure that at any time, we have enough money to ensure the basic minimum for the websites to work.

What we do not envision

There are a couple of business solutions, sometimes used by open source projects, that we do not envision

  • Subscription or fee to access content – we must not put financial barriers to access to knowledge. So, access to the website is free and will stay free. This will be added in our bylaws
  • Proprietary licensing of content (even partial) – against our very mission, since we went information to be available to the largest number.
  • Monetization of consumer data or consumption patterns – very unethical from our perspective
  • Affiliation (link exchanges) – assimilated to advertisement
  • PR agencies paying to publish their aproved biographies – funny solution, but I mention it because we are receiving proposals of various types, asking us how much money is asked for to put a biography on wikipedia…

This is a quick overview. Most promising solutions sounds to be matching donations system, monetization of our trademarks, with a pinch of service; But who knows… I intend the board to discuss that in the future. More in a few days, after publication of our financial statements 🙂