Wikipedia Business Model Case Study

The proliferation of encyclopedic information can be classified into two eras: pre-internet and post-internet. Both eras gave birth to different models to create a knowledge repository and share it with a wider audience.  

The earliest encyclopedic work to have survived until modern times dates back to the 1st century AD. Still, it was only after the advent of the printing press in the 15th century that encyclopedic knowledge was democratized. Most pre-internet encyclopedias, including Britannica, the earliest and the most famous Encyclopedia in the English-speaking world, had a similar operation style and business model. 

As you can guess, they ran like more or less a centralized entity, relying upon both external subject-matter experts and internal editors with subject-area proficiencies. Once collated, these encyclopedias were targeted at middle-income families. In 1990 alone, Britannica sold encyclopedia sets worth $650 million. Since then, however, sales of Britannica and other printed encyclopedias began to plummet. 

The first blow came in the form of CD-ROM encyclopedias priced at less than one-tenth of printed encyclopedias. The second major blow came in the form of the internet, giving way to the new age Wikipedia Model. At the time of writing, Wikipedia is the 8th most popular website globally, getting more than 2 Billion unique visitors every month.

While the internet played a role in making Wikipedia way more famous than old incumbents like Britannica, Wikipedia’s operating model and business model have also paid a large role in making it the most widely read encyclopedia ever. Let’s look at both how Wikipedia functions and how it makes money to understand how it became as big as it is.  

How Wikipedia Works & How it Makes Money

Wikipedia, unlike its print predecessors, operates in somewhat of a decentralized fashion. Instead of having its own employees and external field experts working in collaboration, the information on Wikipedia is collated, edited, and maintained by volunteers who work without pay. 

When Wikipedia celebrated its 20th anniversary on 15th Jan 2021, around 280,000 unpaid volunteers were editing Wikipedia every month. But why do so many volunteers work for free, and how do people from across the globe collaborate?

People work for free because they are united by Wikipedia’s altruistic mission of creating an encyclopedic knowledge base, and more importantly, making it accessible to everyone on the planet for free.  

Wikipedia is free for readers thanks to its business model — it runs on donations from individuals and corporations worldwide. 

Since Wikipedia is a child company of a non-profit parent called Wikimedia, donations are routed to the parent. In the year ended June 2020, Wikimedia received donations worth $120 million, $10 million more than the $110 million it received in 2019.

Wikipedia writers and editors are able to work together because they are obliged to follow a set of centrally defined rules & guidelines. As far as what type of information can be included on a Wikipedia page is concerned, writers and editors are expected to adhere to three main tenets: information should be presented from a neutral perspective, verified by an outside source, and not based on original research. 

And yes, anyone can indeed edit Wikipedia pages. However, Wikipedia administrators can disable direct editing of pages regularly subjected to vandalism — either abusive language or vandalism. Active editors also always improve the quality and accuracy of information over time, making sure misinformation is weeded out.

All this is not to say that Wikipedia’s operating model is free of flaws. It has been criticized for being unreliable & biased. In fact, one of the two co-founders of Wikipedia, Larry sanger, left due to his conviction that Wikipedia failed to solve the issue of influential editors abusing power sufficiently.  

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