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Wikipedia's cash crunch

February 08, 2007

In a speech at the Lift 07 Conference in Geneva today, Florence Devouard, chairwoman of the Wikimedia Foundation, which operates Wikipedia, made an appeal for funds to keep the online encyclopedia afloat. "At this point," she said, according to a report from Philippe Mottaz, "Wikipedia has the financial resources to run its servers for about three to four months. If we do not find additional funding, it is not impossible that Wikipedia might disappear.”

As Wikipedia has expanded, its computing costs have gone up substantially, putting the nonprofit in an apparent pinch. According to another report on the speech, from Bruno Giussani, Devouard said the encyclopedia is currently running 350 servers and needs about $5 million to sustain itself. It raised about $1 million in its recent fundraising drive, she said.

Mottaz says Devouard's warning was "certainly dire" and that "it is another illustration of how difficult it is to find the proper business model in the digital age, and more precisely in this case in what Florence called the 'gift economy.'" Not even gifts scale for free.

Wikipedia has made a pledge to remain free of advertising and sponsorships. That pledge, it seems, may soon be tested as never before.

UPDATE: Devouard also, according to Giussani, seems to have aligned herself with Wikipedia's Inclusionists (who don't want restrictions on what topics are covered in the encyclopedia): "We used to have this notion that information has boundaries, that it's possible to define what information is relevant (and belongs in an encyclopedia) and what is not. But what is relevant to you is different from what's relevant for me." That's interesting because, from my outside perspective, it appears that the Deletionsists, who very much want "to define what information is relevant (and belongs in an encyclopedia) and what is not," currently have the upper hand in guiding Wikipedia's policies.

UPDATE: In a comment on this post, Wikimedia's communications director, Sandy Ordonez, writes: "Ms. Devouard's comment was taken out of context. Wikipedia will not be closing any time soon. Ms. Devouard was simply referring to the ongoing, pressing needs for funds that Wikipedia, like most nonprofit organizations, face."

Comments

Enter Google....

Posted by: IsaacGarcia [TypeKey Profile Page] at February 8, 2007 02:44 PM

Hi. I an employed staff member of Wikimedia Foundation - the organization that runs Wikipedia. Ms. Devouard's comment was taken out of context.

Wikipedia will not be closing any time soon. Ms. Devouard was simply referring to the ongoing, pressing needs for funds that Wikipedia, like most nonprofit organizations, face. Ms. Devouard was attempting to showcase how, because of our global reach, Wikipedia needs to be much more creative in its fundraising efforts.

Posted by: Sandy_Ordonez [TypeKey Profile Page] at February 8, 2007 02:52 PM

Those numbers sound like she's talking about something else, given the numbers reporting here:
http://en.wikipedia.org/wiki/Wikipedia:Wikipedia_Signpost/2006-12-11/Financial_audit

"The audit also found that the Foundation raised nearly $1.3 million through contributions in 2006, an increase from the $300,000 raised in 2005 and the $70,000 raised in 2004. Despite the increasing income, expenses also jumped markedly: internet hosting costs rose from $40,000 in 2005 to nearly $200,000 in 2006, and operating costs increased by almost three times from 2005 to 2006. Depreciation of computer software and equipment cost the Foundation nearly $150,000 in 2006. The auditors also noted that this equipment is currently being depreciated based on a 5-year useful life, and recommended that this be changed to a more standard 3-year period. Since expenses overall were less than the income, the Foundation increased its total assets each fiscal year, going from about $300,000 in 2005 to $1,000,000 in 2006."

Maybe there was a preceding statement about if expenses grow at the current rate, and contributions don't keep pace, etc.

Posted by: Seth Finkelstein [TypeKey Profile Page] at February 8, 2007 04:30 PM

Google must be salivating... a few lines of AdSense code on the Wikipedia template could solve Wikipedia's cash issues permanently, and give sudden justification to Wikipedia's dominance of the organic search results.

Posted by: lorenzinho [TypeKey Profile Page] at February 8, 2007 04:35 PM

Nice FUD, Nick!!

We get it...you don't like WIkipedia.

Posted by: pwb [TypeKey Profile Page] at February 9, 2007 02:22 AM

Nothing FUDish about it. Wikipedia faces increasing economic strains, and the way they'll be resolved remains to be seen.

Posted by: Nick Carr [TypeKey Profile Page] at February 9, 2007 08:38 AM

Anyone familiar with public broadcasting should be familiar with this sort of "your silence is killing us" appeal.

So they have only four months operating revenue on hand? Many small businesses have only short-term reserves for operational purposes. Many charities support next quarter's activities with this quarter's donations. Even PBS continues to struggle with a desire to fund operations from endowment proceeds when charitable donors don't seem to find the charity worthy of endowment funding. Wikimedia Foundation can get in line with thousands of other charitable soliciters who beleive their cause is worthy of big money.

Until that money comes in, there's plenty Wikimedia Foundation can do to cut expenses, which have skyrocketed in recent months. First, they can cut payroll, which has grown exponentially in the past year. It could cut expenses such as the recent hiring of a head-hunter firm to select the foundation's next well-paid executive director. That's an odd approach -- wikis are good for writing dubious biographies but apparently the community that is entrusted with the responsibility of compiling "all the world's knowledge" is not qualified to select from among itself a qualified executive director.

Then the Foundation could look at its travel budget. Wikimedia Foundation supposedly thrives on volunteer contributions, but some volunteers get more perks than others, including subsidized vacations at wikipedia's many off-line community-building events.

Even is the Wikimedia Foundation were to fold, which might not be a bad thing, Wikipedia content and development of MediaWiki software would survive. Wikipedia has been forked by hundreds of other sites. If wikis work, as the founders of WF claim, they can work elsewhere. Chances are, if the Foundation folds, the first company to benefit will be Wikia, Inc. -- founded by Wikimedia Foundation board members -- and which offers free hosting to almost any wiki that can demonstrate public interest.

Hosting by a for-profit company would be a more honest approach. Instead of presenting the project as "undoutably (sic) good" as Jimbo Wales presents wikipedia, it could be presented as would be any other enterprise -- an effort of its principles to advance their social standing (prifit) while advancing their individual ideals (in Wales' case, libertarian objectivism of the Ann Rand variety).

Posted by: anglemo [TypeKey Profile Page] at February 10, 2007 02:29 PM

corrected last paragraph:

Hosting by a for-profit company would be a much more honest approach. Instead of presenting the project as "undoubtably (sic) good) as Jimbo Wales presents wikipedia, it could be presented as would be any other enterprise -- an effort of its principles to advance their social standing (profit) while advancing their individual ideals (in Wales' case, libertarian objectivism of the Ann Rand variety).

Posted by: anglemo [TypeKey Profile Page] at February 10, 2007 02:31 PM

Correctly corrected version (Nick - you could delete these two posts and replace the end of the first post with the corrected content. Or not.)

Hosting by a for-profit company would be a much more honest approach. Instead of presenting the project as "undoutably (sic) good" as Jimbo Wales presents wikipedia, it could be presented as would be any other enterprise -- an effort of its principles to advance their social standing (profit) while advancing their individual ideals (in Wales' case, libertarian objectivism of the Ann Rand variety).

Posted by: anglemo [TypeKey Profile Page] at February 10, 2007 02:33 PM

(sorry, I've come down with a case of Wikifixitlater)

Hosting by a for-profit company would be a much more honest approach. Instead of presenting the project as "undoubtably (sic) good" as Jimbo Wales presents wikipedia, it could be presented as would be any other enterprise -- an effort of its principles to advance their social standing (profit) while advancing their individual ideals (in Wales' case, libertarian objectivism of the Ann Rand variety).

Posted by: anglemo [TypeKey Profile Page] at February 10, 2007 02:34 PM

Nick, please delete all my posts, including this one, but not the next one, which is a corrected version. I seem to have pasted the post from a draft version and keep including errors I intended to correct. My skills have seriously eroded as a result of editing in casual environments such as Wikipedia that set a vague threshold between draft and publication.

Posted by: anglemo [TypeKey Profile Page] at February 10, 2007 02:44 PM

Hosting by a for-profit company would be a much more honest approach. Instead of presenting the project as "undoutably (sic) good) as Jimbo Wales presents wikipedia, it could be presented as would be any other enterprise -- an effort of its principles to advance their social standing (prifit) while advancing their individual ideals (in Wales' case, libertarian objectivism of the Ann Rand variety).

Posted by: anglemo [TypeKey Profile Page] at February 10, 2007 02:45 PM

Anyone familiar with public broadcasting should be familiar with this sort of "your silence is killing us" appeal.

So they have only four months operating revenue on hand? Many small businesses have only short-term reserves for operational purposes. Many charities support next quarter's activities with this quarter's donations. Even PBS continues to struggle with a desire to fund operations from endowment proceeds when charitable donors don't seem to find the charity worthy of endowment funding. Wikimedia Foundation can get in line with thousands of other charitable solicitors who believe their cause is worthy of big money.

Until that money comes in, there's plenty Wikimedia Foundation can do to cut expenses, which have skyrocketed in recent months. First, they can cut payroll, which has grown exponentially in the past year. It could cut expenses such as the recent hiring of a head-hunter firm to select the foundation's next well-paid executive director. That's an odd approach -- wikis are good for writing dubious biographies but apparently the community that is entrusted with the responsibility of compiling "all the world's knowledge" is not qualified to select from among itself a qualified executive director.

Then the Foundation could look at its travel budget. Wikimedia Foundation supposedly thrives on volunteer contributions, but some volunteers get more perks than others, including subsidized vacations at Wikipedia's many off-line community-building events. The problem here is that Wikimedia Foundation leaders – especially Jimmy Wales – claim the Wikipedia community “knows each other” through online personas. They don’t. Wikipedia writers know only the slice of other contributors’ personas they choose to reveal. That’s not enough to create the critical mass of a community, so contributors, with the Foundation’s blessing, created several other venues where core members could conspire outside the collaborative, all-edits-are-preserved, know-them-by-their-work constraints of Wikipedia. And this sort of international community-building, outside the low-cost online venue, is costly. The Foundation has footed much of the bill for building an offline community using donors’ cash.

Even if the Wikimedia Foundation were to fold, which might not be a bad thing, Wikipedia content and development of MediaWiki software would survive. Wikipedia has been forked by hundreds of other sites. If wikis work, as the founders of WF claim, they can work elsewhere. Chances are, if the Foundation folds, the first company to benefit will be Wikia, Inc. -- founded by Wikimedia Foundation board members -- and which offers free hosting to almost any wiki that can demonstrate public interest.

Hosting by a for-profit company would be a much more honest approach. Instead of presenting the project as "undoubtably (sic) good” as Jimbo Wales presents wikipedia, it could be presented as would be any other enterprise -- an effort of its principles to advance their social standing (profit) while advancing their individual ideals (in Wales' case, libertarian objectivism of the Ann Rand variety).

Posted by: anglemo [TypeKey Profile Page] at February 10, 2007 02:45 PM

Anglemo: If you read the audit, you'll find that wikipedia spent only 107 thousand dollars in 2006 on salaries. That's for the entire foundation. (From what I hear, they're pretty overworked.) In the broader world, there are *individuals* who make that amount per year.

To make things clearer, I put together a couple of charts:

http://upload.wikimedia.org/wikipedia/meta/d/d2/WM-expenses-pie-2006.png

http://upload.wikimedia.org/wikipedia/meta/4/44/WM-expenses-graph-2006.png

Posted by: Ben Yates [TypeKey Profile Page] at February 10, 2007 08:54 PM

Note that, in all the multiple "corrected" versions of anglemo's posting, the name of the founder of Objectivism is mis-stated; it's Ayn Rand (Ayn rhymes with "pine"), not Ann Rand.

Posted by: Dan T. [TypeKey Profile Page] at February 10, 2007 09:36 PM

Ben,


Sure, some people earn six figure incomes. Others earn minimum wage. Some work for free. Some are forced to work. What is your point? More to the point, what is the relevance of one figure, out of context of the prior year or the next year?

An examination of Wikipedia's fundraising appeals suggests the foundation president is hard-pitching for more money to support an ambitious hiring plan for the previously volunteer project and to build up reserves that auditors say are dangerously low.

How about this line from the foundation’s explanation of why it needs money: “Details will not be given here, but generally, prospectives for hiring should make the total payroll goes (sic) up from $32,000 to $100,000.” From 32K to 100K monthly that is, and the $32,000 monthly was a 633% increase over the prior year.

If payroll hits $100,000 monthly during 2007, that monthly payroll rate would be 1120% the monthly payroll of 2006. And this ambitious hiring plan is implemented even as auditors are urging the foundation to increase reserves by more than 50% and preferably by more than 300%.

I put together some figures, too, so things could be more clear.


Total Expenses:

2006: $791,907

2005: $177,670

2004: $23,463


Total Revenues:

2006: $1,305,292

2005: $292,571

2004: $70,491


Revenue/Expenses:

2006: 165%

2005: 165%

2004: 300%


Revenue growth:

FY 2007/2006: 173% (projection based on FY2007 so far)

FY 2006/2005: 446%

FY 2005/2004: 415%


Payroll growth:

2006/2007: 358% to 1120% (depending on board actions)

2006/2005: 633%

2005/2004: (no 2004 payroll expenses reported)


Payroll as a proportion of total expenses:

2007: 42% (at current reported payroll)

2006: 13.5%

2005: 9.5%



Increase in payroll as proportion of total expenses:


2007/2006:313% (at minimum proposed payroll expansion)

2006/2005:142%

And what about the current year budget for the open-source non-profit? Maybe you can tell us where to find it. It's not here where one would expect to find it in proper relation with the posted budget from 2005.

Instead of an honest budget, which would be a pdf of whatever document the board approved, or an otherwise accurate presentation of that complete document, we get this fundraising pitch, which at least discloses that the board is prepared to compound the upward spiral of payroll expenses.

BTW, Ben, are you perhaps being considered for one of the several new payroll jobs (CEO, CTO, chapter liaison, several developers, possibly others)?

sources: http://wikimediafoundation.org/wiki/What_we_need_the_money_for
http://wikimediafoundation.org/wiki/Budget/2005
http://wikimediafoundation.org/wiki/Budget/2007
http://upload.wikimedia.org/wikipedia/foundation/2/28/Wikimedia_2006_fs.pdf

Posted by: anglemo [TypeKey Profile Page] at February 10, 2007 10:19 PM

"Note that, in all the multiple "corrected" versions of anglemo's posting, the name of the founder of Objectivism is mis-stated; it's Ayn Rand (Ayn rhymes with "pine"), not Ann Rand."

Dan,

Is this intended to advance the discussion, as a spell-flame or as an assault on my credibility? There are other errors in my final corrected version that you failed to identify. I explained that my online writing habits have been influenced by sites that allow me to later edit my contributions.

http://www.albion.com/netiquette/rule10.html

Posted by: anglemo [TypeKey Profile Page] at February 10, 2007 10:23 PM

I don’t keep up with such things, but the last time I knew anything about it, Wikimedia had about 5 employees and they all drove VW vans. I gave $50 thinking I was buying them a years worth of Ramen Noodles, so imagine my surprise when I heard this news...


Continued here: Think or Thwim.com.

Posted by: Jeff Buscher [TypeKey Profile Page] at February 17, 2007 01:07 AM

The earliest speculation I can find about advertising on Wikipedia is Jimmy essay about it in November 2001 where he suggests that it is inevitable but not in the near future at that time. I note that Can History be Open Source? Wikipedia and the Future of the Past indicates that an attempt at advertising was made in order to try to provide Larry Sanger with an income before he was fired by Bomis in February 2002. The latest I have seen on the subject is Kelly Martin's August 2007 The difficulties of targeted advertising.

Posted by: SallyF [TypeKey Profile Page] at October 19, 2007 12:31 AM

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