Bye-Bye Britannica, Hey Siri
Contrary to popular belief Wikipedia didn’t cause the downfall of The Encyclopedia Britannica, the PC did, but they are helping the Tech Giants win from the digital transformation of the encyclopedia.
Britannica’s Age of Dominance
Encyclopedia Britannica’s entire business was built around print media, from mechanical tools and a release cadence that matched the production timeline of paperback books, to a direct sales force of more than 2,000 people at its peak. The sales force sold the multi-volume pack to households at a break even price and made money on the “yearbook”, their annual single volume full of updates. The sales model focused on going door to door with the pitch of giving a family an information source in their living room. Not only was an encyclopedia a very visible sign of education and wealth in a home, but also gave parents the comfort of supporting their children’s education by giving them a physical wealth of knowledge. [1]
In 1990 Britannica was thriving with more than $650M in revenue and selling more than 100,000 volumes of their encyclopedia a year.[2] By 1994 their print volume had dropped to 3,000 units and by 1996 the company was sold for a mere $135M.[3]
What Happened?
Many are quick to conclude that Wikipedia killed Britannica however Wikipedia wasn’t founded until 2001. In reality, the rise of the PC and the digital age was the true threat to the encyclopedia giant. Families increasingly introduced a PC to their living room, opening the door to CD ROMs full of content, and an alternative single source of information in the home. Bookshelves were replaced with a monitor and competitors entered the market to provide the wealth of knowledge that Britannica previously held a monopoly over.
Ironically, Microsoft pitched Britannica on a digital version, but they rejected, so Windows made Encarta. Encarta became the most threatening competitor, not because their content was better, but because Microsoft was willing to bundle the product as a loss leader to sell more PCs.[4] In Britannica’s defense, they responded relatively quickly to the threat and offered a digital version by 1994, but the competition was stiff. Britannica faced a tough sell with their offering at $1,200 and Encarta offering a “good enough” product for free. Britannica watched their paper sales plummet while their digital growth was weak and unable to make up the difference. After a rapid downfall they sold to Swiss investor Safra in 1996 and shifted their focus to educational products for schools. [5] They returned to profitability in 2003 with a new business model focused on e-learning and instructional material for schools, with 55,000 U.S. Subscribers as of 2012[6]
Wikipedia’s Rise
Wikipedia was first proposed by Stallman in 2000 as a “free-as-freedom” online encyclopedia and was officially founded in 2001. Its core tenant was that there would be no central authority controlling the content, which was in stark contrast to other digital encyclopedias including Britannica and Encarta, and online encyclopedia predecessor Nupedia. Wikipedia quickly overcame all of their competitors to be the largest online encyclopedia. Today it is the 5th most popular website in terms of overall traffic with monthly readership of 495 Million and 15.5 Billion page views per month.[7]
Wikipedia’s value proposition is incredibly clear – instant information on almost any topic. While the quality may not be sufficiently high for academics, it has proven adequate for almost any other use. The connection to a global wealth of knowledge and the sheer volume of a platform with virtually unlimited size, gave Wikipedia a strong advantage over conventional encyclopedias. Although there are some potential downsides to the “open” model in the short run, namely mixed research on the quality of Wikipedia results, constant changes to controversial topics, and biased content, in the long run the platform has shown to have unique benefits. For example, the potential for Wikipedia’s model to reduce bias through each revision is an encouraging outcome in an increasingly divided media landscape.[8][9]
Here Come the Giants
While Wikipedia is clearly a winner in the digital transformation of the encyclopedia, their non-profit business model opens the door to further winners in the space. Google, Facebook, Amazon and even Apple have utilized Wikipedia’s vast database of knowledge to also become “winners” in this transformation:
- Google’s “knowledge graph” displays answers to user’s questions immediately and relies heavily on content from Wikipedia. [10]
- Amazon’s Alexa and Apple’s Siri use Wikipedia to quickly serve users answers to their questions.[11]
- Youtube announced that they would use Wikipedia to fight the spread of conspiracy theories on their platform by displaying captions and links to additional information.[12]
- Numerous companies have used Wikipedia’s wealth of content for development of their Artificial Intelligence and translation services.[13]
- Facebook has started using Wikipedia to fight fake news by directing users to articles to give more information. [14]
Many feel this value capture is indicative of the growing power of the Tech Giants as they pass off the responsibility for ensuring accurate, reliable content to Wikipedia, then reap the benefits of the value capture themselves. Ensuring accurate content is an incredible challenge, one that they can’t even do themselves, and Wikipedia has been increasingly seen as an infrastructure or public good to do this. Large tech companies continue to take significantly more from the platform than they give back in the form of donations.[15] Although users don’t explicitly pay the Tech Giants for the services Wikipedia enables; the features create value inside the ecosystems that the companies continue to capture value through advertisements and data.
Conclusion
The digital transformation of the encyclopedia has drastically changed the ease of access and amount of information available to the average global citizen. From the first digital versions on CD-ROMs to the truly immense online version today it’s hard to even call Wikipedia an encyclopedia. Although Britannica isn’t officially dead, after cancelling the print version of their 244-year-old encyclopedia in 2012 and undergoing a forced change in business model towards learning and instructional content, I would argue they lost in this transformation.[18]
On the other hand, the winners are two-fold: Wikipedia and the Tech Giants. Although Wikipedia is a non-profit and unable to capture the monetary value of the transformation, they are an indisputable winner in achieving their mission “to empower and engage people around the world to collect and develop educational content under a free license or in the public domain, and to disseminate it effectively and globally”[19]. The Tech Giants have utilized the huge success of Wikipedia to introduce new features that deliver value to customers and train future algorithms that continue to support their dominance. Wikipedia’s wealth of information has therefore directly contributed to the massive value capture of firms like Facebook, Google, Amazon and others through advertising and data collection.
Sources
[1] Cauz, Jorge. 2013. “Encyclopædia Britannica’s President on Killing Off a 244-Year-Old Product.” Harvard Business Review 91 (3): 39–42. http://ezp-prod1.hul.harvard.edu/login?url=http://search.ebscohost.com/login.aspx?direct=true&db=bth&AN=85463180&site=ehost-live&scope=site.
[2] Ibid.
[3] Carmody, Tim. “Wikipedia Didn’t Kill Britannica. Windows Did.” Wired, Conde Nast, 15 Jan. 2018, www.wired.com/2012/03/wikipedia-didnt-kill-brittanica-windows-did/.
[4] Ibid.
[5] Cauz, Jorge. 2013. “Encyclopædia Britannica’s President on Killing Off a 244-Year-Old Product.” Harvard Business Review 91 (3): 39–42. http://ezp-prod1.hul.harvard.edu/login?url=http://search.ebscohost.com/login.aspx?direct=true&db=bth&AN=85463180&site=ehost-live&scope=site.
[6] Frenkel, Karen A. “Encyclopaedia Britannica Is Dead, Long Live Encyclopaedia Britannica.” Fast Company, Fast Company, 30 July 2012, www.fastcompany.com/1824961/encyclopaedia-britannica-dead-long-live-encyclopaedia-britannica.
[7] “History of Wikipedia.” Wikipedia, Wikimedia Foundation, 2 Mar. 2019, en.wikipedia.org/wiki/History_of_Wikipedia.
[8] Knowledge, HBS Working. “Wikipedia Or Encyclopædia Britannica: Which Has More Bias?” Forbes, Forbes Magazine, 20 Jan. 2015, www.forbes.com/sites/hbsworkingknowledge/2015/01/20/wikipedia-or-encyclopaedia-britannica-which-has-more-bias/#33b5361c7d4a.
[9] Greenstein, Shane, and Feng Zhu. “Do Experts or Crowd-Based Models Produce More Bias? Evidence from Encyclopædia Britannica and Wikipedia.” MIS Quarterly 42, no. 3 (September 2018): 945–959.
[10] Herrman, John. “YouTube May Add to the Burdens of Humble Wikipedia.” The New York Times, The New York Times, 19 Mar. 2018, www.nytimes.com/2018/03/19/business/media/youtube-wikipedia.html.
[11] Ibid.
[12] Ibid.
[13] Ibid.
[14] Maher, Katherine. “Facebook and Google Must Do More to Support Wikipedia.” WIRED, WIRED UK, 15 June 2018, www.wired.co.uk/article/wikipedia-google-youtube-facebook-support.
[15] Herrman, John. “YouTube May Add to the Burdens of Humble Wikipedia.” The New York Times, The New York Times, 19 Mar. 2018, www.nytimes.com/2018/03/19/business/media/youtube-wikipedia.html.
[16] Patel, Neil. “The Beginner’s Guide to Google’s Knowledge Graph.” Neil Patel, 15 Feb. 2019, www.neilpatel.com/blog/the-beginners-guide-to-the-googles-knowledge-graph/.
[17] D’Onfro, Jillian. “YouTube Will Add Wikipedia Links Debunking Conspiracy Theory Videos.” CNBC, CNBC, 14 Mar. 2018, www.cnbc.com/2018/03/13/youtube-wikipedia-links-debunk-conspiracy.html.
[18] Frenkel, Karen A. “Encyclopaedia Britannica Is Dead, Long Live Encyclopaedia Britannica.” Fast Company, Fast Company, 30 July 2012, www.fastcompany.com/1824961/encyclopaedia-britannica-dead-long-live-encyclopaedia-britannica.
[19] “Wikimedia Foundation Mission.” Wikimedia Foundation, 14 Sept. 2018, www.wikimediafoundation.org/about/mission/.
[Coverphoto] Kozlowski, Michael. “Encyclopedia Britannica Moves into an Exclusive Digital Format.” Good EReader, Good E-Reader, 14 Mar. 2012, www.goodereader.com/blog/e-book-news/encyclopedia-britannica-moves-into-an-exclusive-digital-format.
Great post, Maren! thanks for bring this up – its an interesting take to something that somewhat we take for granted these days. Wikipedia leverages the mobility of knowledge and information within the internet using their open knowledge initiatives, where everyone can create and edit any content with supervision, thus making it easy to scale exponentially while that was not the case for traditional encyclopedia and books…
Britannica vs. Wikipedia brings up some pretty scary aspects of the digital economy. One, in this era of network effects businesses (and the other 90% of companies that *think* their market is winner take all and so network effects are critical to their success), companies are willing to temporarily sacrifice profitable pricing in their own or adjacent industries in order to gain share in the hopes of one day making profits. This can be devastating for companies that have less investor capital sitting around or are more focused in this ‘loss leader’ industries. I’m thinking of examples we’ve discussed like Uber and cab companies/drivers, Amazon and paintball gear, and Microsoft and Netscape. These companies decide they can afford to hemorrhage cash while focused companies bleed out. Pretty unnerving for any company in an industry the Tech Giants decide is a nice-to-have platform enhancer. Really goes against sense that the magic of the modern capitalist economy is specialization…
Second, there are tons of benefits around crowdsourcing across industries (big believer in big data), though I’m not sure the benefits are applicable across applications… in the Wikipedia example, I am still quite concerned about the quality aspect… similarly, Yelp and other review platforms may tell you what the average person likes or doesn’t but not necessarily what YOU will like. And that’s if the people who *choose* to post are representative, and in Wikipedia’s case, informed! I’m skeptical.
Also your post conjured up some really nice memories around Britannica and Encarta, thanks for that 🙂
And LOL at your Siri search. Do you even go here?
Fascinating post! Perhaps the ‘winners write history’ mantra will die with crowdsourced information via Wikipedia. On the other hand, in a future state, with constantly changing updates to a digital encyclopedia, will we lose the ability (or easy ability) to query old version of encyclopedic volumes to see how our understanding of a given topic (think: craniometry) has changed over time.
Really awesome description of an industry that’s transformed from analogue to digital, to a value-creating platform, to an ecosystem that both creates and captures value.
The current state of the ecosystem seems to be well-balanced, and all hinges on a non-profit organization that is well run and delivers heaps of value to billions of consumers and organizations. I wonder how much additional value could be created if other industries followed this operating model, and how governments and interest groups could incentivize these practices…
Maren,
Thank you very much for a very insightful (and nostalgia-inducing) post! When I graduated from elementary school, my Mom gave me a choice between a PC or an Encyclopedia Britannica. Of course, I chose the books 🙂 (which I still have).
One of the most salient points from your post comes from the dates of the conflict between Britannica and Encarta. Even when Britannica recognized the threat and took action (in 1994, five years before the dot-com bubble!) it was too late for them to prevent encroachment by Encarta. This feels like one of the shortest windows for a coordinated response that I can recall before the advent of the Internet.
The other main takeaway for me is the importance of Wikipedia as a knowledge resource and its fragility as a non-profit company. As you mentioned, Wikipedia is the 5th most popular website in the world, but it is the only non-commercial site in the top 10 and only one of two (along with AmpProject) in the top 50. The high costs of servers needed to handle this traffic and to maintain the database emphasize the importance of the donations that Wikipedia receives, and I would hope that the value that they create for search engines would drive these companies to support Wikipedia further.
Reference
[1] “Top 10 Most Popular Websites for 2017”, Webhostface, 30Oct17, https://www.webhostface.com/blog/top-10-most-popular-websites-for-2017/, accessed March 2019.