Congratulations to the Wikimedia Foundation for being named a Technology Pioneer 2008 by the World Economic Forum. It’s a fantastic accomplishment. But as Wikimedia becomes a pioneering global citizen, we should challenge their leadership to do more than harness the collective intelligence of its millions of collaborators to just educate, inform and entertain the world for free.
According to my calculations, the collective intelligence captured in Wikimedia’s properties could (and should!) be used to generate over US$1 billion for charitable causes in less than four years, and by year five should be contributing over US$1 billion per year to the world’s charities!
Sounds crazy? Yes. Is it? No! Read on.
Newman’s Own is a U.S. based company that is a role model for what Wikimedia should become. Newman’s Own, owned by famous actor Paul Newman, operates as a regular profit-oriented company with competitive product offerings and market-rate salaries, marketing, distribution, R&D, administration and other general corporate expenses. The big difference is that all net profits generated by the business are donated to charity. If you live in the U.S. you have probably seen Paul Newman’s image clothed in garish costumes on the packaging of salad dressings, potato chips, salsa and other food products. It is shameless exploitation of Paul Newman’s image and reputation. But that exploitation has reportedly generated over US$200 million in charitable contributions since its formation in 1982. In fact, its corporate motto is ‘Shameless exploitation in pursuit of the common good.’ A book with that as its title describes the story and its charitable beneficiaries.
If anyone reading this is unfamiliar with Wikimedia properties, they are community-created web sites with enormous consumer traffic. The largest property, Wikipedia.org, is a ‘crowd-sourced’ online encyclopedia. According to my friends at the leading online media measurement company comScore Media Metrix, the Wikimedia family of sites, when viewed as a single property, is the 6th most popular online media property in the world, in terms of monthly unique visitors (UV’s) and is a Top 25 Global property in terms of monthly page views (PV’s). And every page view is somebody researching something.
It is an iron-clad truth that revenue can be generated from online consumer traffic. Particularly from online consumer traffic where people are searching for something (see revenue and earnings of GOOG). Some percentage of the inquiries at Wikimedia properties has commercial value and advertisers would pay a lot of money to be in front of those people as they do their research. Wikimedia would not even need their own sales force to generate revenue because there are middle-man companies called advertising networks that have already aggregated advertisements from lots of different advertisers that would fall over themselves to serve their ads up on Wikimedia sites (the largest ad network is Google’s Adsense). All Wikimedia would have to do is paste a small bit of code on every page and voila, a money machine is created.
Now here is where the math comes in and the numbers get mind-boggling: First, a term of art in the interactive advertising business is RPM, and it stands for Revenue Per Thousand Page Views (M represents the thousand). A really low-quality site in terms of the traffic having commercial value (think chat and some social networks) can generate about US$1 RPM just by signing up for various ad networks and not even having their own sales force. Sites with traffic constituting more commercial value can get up to US$5 RPM using the ad networks. Sites with high-value traffic that hires its own sales force and works closely with advertisers and their agencies can generate US$20 RPMs and up.
A venture capitalist recently posted his views on expected RPMs for different types of businesses. If you follow that link, you will see that Wikimedia would be classified as a business with many different “endemic” advertising opportunities, which he puts in the US$20 RPM range and up (examples of endemic advertising opportunities in Wikipedia would be entries on cities and countries would attract travel-related advertisements, entries on information technology would attract IT-related advertisements, etc.). Certainly not all of Wikimedia traffic would have endemic advertising opportunities / high commercial value, but a lot of it would and it would probably match or exceed the percentage of Google searches that have commercial value relative to all Google searches.
According to comScore Media Metrix, the Wikimedia family of sites generated 40 billion page views from October 2006 to October 2007! And the number of monthly page views in October 2007 was 66% higher than the monthly number from October 2006. Lets use that to make some conservative estimates:
- Lets cut the growth rate in half to 33% and estimate 53 billion total page views for 2008.
- Lets assume that on average Wikimedia’s traffic can only generate US$2 RPMs.
That is still US$106 million in revenue! And the operating expenses are very low, and this effort would not add much more to it, so almost all of it would go to charity (Wikimedia’s financial statements are available here, and they show the year ending June 30, 2006 had total operating expenses of less than US$1 million). Now maybe there isn’t enough ad inventory available immediately in the ad networks to service all these page views, but Wikimedia could flex its traffic-volume muscles, and its social mission, and pretty quickly take inventory allocation away from other properties to satisfy its page volume appetite.
Looking out a bit into the future and the numbers get really nutty. But its not unreasonable since its an online property that operates at a very high usage scale (just a notch below Google and Yahoo), yet has NONE of the product development and R&D costs that other for-profit companies must incur – their whole product is created by collaborators contributing their time for free. Lets look five years out, at 2012:
- Assume an average annual page-view growth rate of 20% over that period, yielding just over 100 billion page views in 2012
- Assume that Wikimedia has developed its corporate and technical infrastructures and now has a direct sales force focused on its high-value vertical content areas, world-class tools and programs for advertisers and can serve video and animated content and ads and can now generate an average of US$10 RPM. (And there is a chance that some of the governments of the world could be convinced to treat the buying of ads on Wikimedia sites as tax-deductible because it would be in effect a donation to charity.)
That is US$1 billion in revenue, with maybe US$50 million of expenses and all the rest of it donated to charity! And every year the amount gets larger and larger as the traffic volume on Wikimedia continues to grow and the internet advertising industry continues to grow.
Lets put some context to these numbers. Rick Reilly wrote a great article in Sports Illustrated on how the United Nations estimates that over 1 million people in Africa die every year from malaria and that 650,000 of those people could be saved if they just had a mosquito net to sleep under. It costs in total about US$20 to get a mosquito net manufactured, delivered and installed in Africa. Based on that article Sports Illustrated started a program in partnership with the U.N. Foundation called Nothing But Nets. US$13 million donated to that program could save the 650,000 preventable malaria deaths in Africa each year. Even with the lowest assumptions from its first year of operations, Wikimedia has the earnings potential to generate US$13 million for charity in about 6 weeks! This is but one of many examples of how this kind of money can help improve the world.
Even if generating profits caused Wikimedia to vaporize itself after 6 weeks and cease to exist, it would still be the right thing to do if it could save 650,000 lives.
But generating profits would not cause Wikimedia to vaporize itself. It would do the opposite. It would grow stronger every day. Instead of the mythical perpetual motion machine, it would become a real-world perpetual money machine.
The contributors that create the Wikimedia properties would contribute even more passionately because its for the common good. Consumers would consume Wikimedia content even more than they do now because its for the common good. Advertisers would advertise on it at or above market rates because its for the common good. A portion of the money generated would be reinvested to hire smart people at competitive salaries in ad sales, technology and administration, improve its infrastructure to serve video and rich media content and create state-of-art tools for content contributors and advertisers. Wikimedia would have potential employees, corporate partners and advertisers banging its door down to be a part of a company with this kind of social mission combined with its innovation pedigree.
What would be a greater testament to the triumph of free markets than for everyone to supply what they are capable of, as content contributors, consumers or advertisers, in an effort to create a sustainable source of money for those less fortunate? It would be a free market based, global perpetual motion money machine for the common good.
I recently watched an interview with Jimmy Wales, the founder of the Wikimedia Foundation where he said that most of the world’s ills are caused by a lack of education and information. And that you can look at the social value of Wikimedia through a utopian lens and believe that by educating and informing people, it can have a positive social impact. I agree with all that. But I don’t think anyone can disagree that it still takes ‘filthy lucre’ to make things happen a lot faster.
There is a presidential election cycle here in the U.S. right now. Maybe we can get a candidate to adopt this as a cause and use their bully pulpit to make it happen. Or maybe this effort needs its version of Paul Newman to be the face of it. It’s a global operation so it needs someone with global recognition Oprah Winfrey? Global icon and Queen of All Media? Oprah has announced her retirement from her TV show in 2011, maybe she’s looking for a new effort?
Deploying billions of dollars to charitable causes is no small task. It takes a well-run, global organization to do it effectively. Someone should step up and offer their leadership skills. Maybe Wikimedia’s coming out party as a pioneering global citizen at the World Economic Forum in January 2008 can start the ball rolling.
To paraphrase Paul Newman:
To the leadership of the Wikimedia Foundation: If you are unwilling to shamelessly exploit yourselves for the common good, then shame on you.
To all of us as contributors to, consumers of and potential advertisers on Wikimedia properties: If we are unable to compel the Wikimedia leadership to shamelessly exploit themselves for the common good, then shame on us.
Dan Malven is an entrepreneur, venture capital investor, husband and father of three. He runs Drumcott Capital and writes the blog Startup Conversations, where this essay originally appeared.