Wednesday, June 19, 2013

Online crowdsourced encyclopedia - an innovation in the encyclopedia industry

I had written an article last week about how a strategic move by a leader actually made a huge difference to a company. The blue ocean article made me decide on how I could work on the same post and build on how Wikipedia succeeded in creating a marketplace for itself.

Back then when Wikipedia started off, the major sources of factual information for students and all other people worldwide were encyclopedias. It could be considered as the red ocean because there were a lot of competitors like Encyclopedia Britannica, World Book encyclopedia, Oracle Encyclopedia, Compton’s Encyclopedia, Encyclopedia Americana and the competition was really tough. The current price of a 32 set Encyclopedia Britannica is around $414 and this only makes certain the fact that the prices would have been a lot higher back then.  There was a lot of competition on who holds the market share and there was heavy competition but Britannica was the incumbent and managed to beat off competition from the others by regularly updating their encyclopedias with around 100 full time editors along with 4000 contributors. 

Jimmy Wales, the founder of Wikipedia wanted to step into the online encyclopedia market and started off with around 3 to 5 employees (editors) with the idea of expert-written peer reviewed content. His idea was to tap into the potential of the internet and get in more contributors than other encyclopedias’ available but maintain a level of expertise in doing the same. This worked in the beginning but fell apart during the dot com burst. Wikipedia got into action after it was severely hit by the burst and this led to the decision of Wiki opening its gates to the public. This strategic decision not only got them more contributors but it also gave people the freedom to edit the factual information. This increased the number of contributors as well as the number of editors.  By doing this, Wikipedia had created a completely unique market, a market for an online open sourced encyclopedia. Wikipedia's departure from the expert-driven style of encyclopedia building and the presence of a large body of non-academic content had created a revolution of sorts. Although, there were and are concerns about vandalism on pages, the threat is simply negligible as a lot of online studies have pointed out. All this continuous updating has made it almost as reliable as the encyclopedias that are available as print. Such a huge page like Wikipedia with approximately 100 billion page views over the year would net at-least a million dollars by even placing a single ad. This would mean huge revenue if ads were allowed but Jimmy Wales has been consistent in his demands for an ad-free Wikipedia. The strategic thought behind this is that people will stop contributing if they start feeling that they are working towards revenue and that too for an organization which is not theirs. This would mean a drastic drop in the number of contributors. The quality of Wikipedia is based on the number of contributors it has and this is something Wikipedia would not want to lose. As a personal contributor to articles in Wikipedia, I’ve always felt that the moment Wikipedia would become a for-profit organization, I would definitely stop contributing to articles.  Times magazine states, "Wales, who is still the "spiritual head" of the movement, says he wants Wikipedia to one day contain the sum of human knowledge. It has a way to go, but in just a few years the site has come closer to reaching that lofty goal than anything else. "

The number of articles in Wikipedia over time

Wikipedia created a unique marketplace and has become incumbent in the blue ocean. This seems like a territory that they wouldn’t be giving up for the foreseeable future. Like the article lists out, if a company innovates and creates a blue ocean, it would not just get the revenue, but the company would become incumbent and would have the majority of the market share (in this case, it has also taken away the market share from the traditional red ocean as well) Even though print encyclopedias have come up with online versions, it clearly is not working out that well and it would take quite an effort to shake the already incumbent majority market share holder in the blue ocean (at-least in this case).

Blue Ocean Strategy (Kim and Mauborgne), Harvard Business Review, Oct ‘04

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