You have to love the Web in general and the blogosphere in particular.
In “traditional journalism,” someone writes something, some people talk about it, other media might reply to it, and months or years after the fact, it becomes a reference or an afterthought.
Not online.
Spreading Just Like Wildfire
I emailed Fred Wilson my analysis on Wikipedia’s potential value if it were a for-profit and if “many things could be assumed.” I figured that as a VC, he might have something interesting to say or simply enjoy the heretic exercise in putting a monetary value on something so cherished and beloved on the Web.
He forwards it to Jason Calacanis, who has been criticized a time of two for his actions and his words, but whose criticism is sometimes warranted, oftentimes unwarranted and in some cases driven by jealousy or envy.
He says that I ”am being conservative and that Wikipedia could generate $100M per year by simply adding a leaderboard,” that being a 728×90 display banner advertisement on top of its main page.
Nice to see Jason Calacanis taking the heat for my analysis on Wikipedia’s potential value as a for-profit.
$omewhere between $580 million and $5 billion
While I have no doubt that Wikipedia’s growth trajectory and potential monetization could one day make it work $5 billion, indeed I think Jason is a bit off the mark (with all due respect) for saying that: “Wikipedia if it was a private company would be worth $5 Billion.”
That’s just nonsense when you consider that YouTube - a wildly successful video social networking site with much greater costs and much greater copyright concerns - fetched $1.65 billion and only boasts 60-odd employees.
Risk Factors
Bear in mind that any investors or bankers would be hesitant to place any lofty valuation on the company because:
a) it lacks any track record in monetizing traffic,
b) it has probably not been setting, meeting and surpassing revenue, profit and traffic targets (at least not the initial two),
c) it has very little “management” or executives to invest in,
d) there is no real way to discount the valuation for the “mutiny” risk of seeing every contributor leave the site for a new startup sticking to the free, ad-free, any one could edit model, or seeing every contributor commit mass acts of vandalism (removing accurate and true content off the site), especially if most editors do not undo those acts.
Moreover, I was trying to be somewhat conservative in my estimates because when I suggested that YouTube could be generating $7.5 million per month in revenues, people thought my estimates were a bit aggressive when given Google’s $1.65 billion acquisition, they were probably conservative too (also, I do not really need or care about the vindication, but you might have noticed that indeed, nowadays YouTube runs numerous ad networks whereas before, it did not, running one simple ad network and not maximizing its revenue, alas, give 200% of the credit to YouTube for realizing that, but just thought I should, you know, point it out).
Who Decides Which Ads to Accept?
Anyway, I certainly do not think that should Wikipedia pursue a ad-supported model, it should plaster ads on every page. It should be a bit more clever, say some ads by - for example - The History Channel on historical pages, or ads by Expedia, Travelocity, British Airways - again for example - on any city review.
But, no matter what, I agree that any advertising on Wikipedia would make it lose at least some credibility. Imagine if suddenly Darfur and Baghdad are “prime touristic destinations” cause Expedia wants them to be… or indeed, as someone mentioned in one of the many comments bashing Jason that AOL has no criticisms or controversies because it’s a major advertiser.
Avoid All Corporate Backers
And, while I recall Google offering to handle a lot of Wikipedia’s bandwidth issues a couple of years ago, I do not think it makes sense for any company to support Wikipedia because make no doubt about it, said company would censor information.
Censorship Issues
One of my biggest worries about Google’s acquisition of YouTube is that Google begins to monitor and censor content (like those of American soldiers being critical of the War in Iraq) as Google has done on its own Google Video pages (note that our company WatchMojo.com has business relationships with Google Video and YouTube and I should technically dont be saying any of this).
Wikipedia: Reality vs. Theory
Alas, my bigger concern and something that no one has mentioned in any of the many sites discussing this is that who would decide whom can or cannot advertise on Wikipedia?
In theory, Wikipedia is the site that “anyone can edit,” but that is as accurate as “we live in a perfect democracy.” We don’t. We are given pre-determined choices and every day have to curtail our democratic freedoms. That’s not a democracy. Similarly, Wikipedia is not what it sets out to be because what it sets out to be is a tad too idealistic to be possible.
Example: if I walk into a classroom for the first time and say something about Alexander the Great, every one will look at me suspiciously as the new guy. But so long as what I said is true and no one can dispute it, no one can “undo” (or actually unsay) what I have said and it gives me leverage and courage to say more.
On Wikipedia, this is not the case. I can say something that is true, or I can say something that is untrue, but what “sticks on the wall” is “what can I convince other editors is true.” Point is: another editor decides if what I say remains on the site. That’s not exactly democratic, it’s borderline a bully / caste system. My colleague calls Wikipedia Wikimafia. I would not go that far, but you get the idea.
Similarly, who’s to decide that Expedia is allowed to advertise but Travelocity is not?
Who Would You Trust?
That’s just one concern. The other concern is you cannot entrust such a big task to any salesperson, because a salesperson’s innate tendency is to outsell, impress and cruch numbers. On Wikipedia, you need a person whose DNA consoists of 1/3 salesman, 1/3 gatekeeper/custodian, and 1/3 ombudsman.
Fundraising For Now
Bottom line: Wikipedia is doing just fine and still trying to find its sweet spot with content.
Indeed, one day Wikipedia will have a business model and generate funds, be it through licensing or advertising, though I doubt it will be the latter. As per the former? It would need to clean up its content and address - see a trend? - its copyright issues (much like YouTube). When someone adds a line to a page on Wikipedia, it ain’t always their words, they might have simply copied and pasted it from elsewhere. As a non profit entity, the site who got “ripped off” might not mind it as much, but the instant you run ads and start throwing out $580 million or $5 billion valuations, they would.
Right now, methinks that Wikipedia is doing fine, and it has a business model: its fundraising efforts.
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October 29th, 2006 at 3:02 pm
[…] So very soon after Jason posts his proposal for advertising, the original website he drew his information from posts this: “Why Wikipedia Should Avoid Ads“. In this new piece, they spend a bit of time both rebutting his hyperbole, noting that Wikipedia could hardly be worth $5 Billion, when Youtube - a company that currently boasts 60-odd employees and a similar traffic ranking to Wikipedia - sold for “only” $1.6 Billion. […]
October 29th, 2006 at 11:03 pm
Thanks froosh for the very interesting commentary, it made for a great discussion on the Wikipedia Weekly podcast. (sorry, no transcript) but your numbers make a lot of sense, and helped us out a lot.
October 30th, 2006 at 11:52 am
[…] Part II - Why Wikipedia Should Avoid Ads (For Now At Least) […]
October 30th, 2006 at 11:20 pm
The big problem with any ads on Wikipedia — whether fixed corporate ads (a la Expedia) or context-sensitive like Google Ads — is that the advertisers will have a vested interest in “tweaking” the site to maximize their click-throughs.
People who have ads on *static* sites do this, trying different text content, different headers, and so on, to try to eke out a few more cents. Think how crazy it would be on a site that anyone can edit anonymously.
Do you really think that every advertiser is ethical enough to back off and leave well enough alone? Even if it’s not a corporate policy, someone in the cube warren is eventually going to think they’ve got a bright idea that might help the company, and start editing Wikipedia in ways targeted at the ad audience rather than the encyclopedia audience…. they *might* even be smart enough to do it at an IP address that isn’t connected to their company, or hire a handful of freelancers to do it for them.
It would be especially bad with the context-sensitive ads that some people advocate as the best choice for Wikipedia — think of the edit wars over which keywords are most prominent in an article, in order to trigger the display of particular ads….
oof. I’ll just keep donating, and encouraging others to do the same, thanks.
November 5th, 2006 at 9:52 pm
[…] Frankly it can be seen as Wikipedia.org should Wikipedia.org become a for profit: good information on a topic, with ads (for an examination of what Wikipedia.org could be worth as a for-profit, click here; to see why Wikipedia.org should avoid ads altogether, click here). […]
November 17th, 2006 at 12:30 pm
[…] HipMojo.com - IT, Video, Web, Technology, Gadgets » Why Wikipedia Should Avoid Ads (tags: Wikipedia) […]