BALANCING THE BOOKS

Reddit is going nuts over Wikipedia’s spending, but it’s doing far better than its competitors

Redditors are getting worked up over a post titled, “Wikipedia has cancer.” Its author is a longtime Wikipedian named Guy Macon who analyzed the spending of Wikipedia’s owner, the non-profit Wikimedia Foundation. Macon finds that Wikimedia’s expenditures are ballooning, up 25% for the year in 2016, for instance. “Like cancer, Wikimedia Foundation spending is growing at an exponential rate,” Macon writes. “Like cancer, this will kill the patient unless the growth is stopped.”

It all sounds quite serious. Except Wikimedia’s revenues—mainly from reader donations—have more than kept pace with its spending, giving it a healthy operating margin. Its margin is so healthy, in fact, that it puts those of its rivals to shame. I compared Wikimedia’s finances to the operating margins of the world’s top libraries and publishers. Wikimedia is consistently keeping its spending below its revenues, which is more than can be said for its long established rivals. Here’s what it looks like:

The chart isn’t exactly an apples-to-apples comparison. Wikipedia is an online entity while the British Library and NYPL, two of the world’s largest, have plenty of buildings, shelves, and actual books to maintain, for starters. Pearson is the world’s largest publisher of educational material, but also had holdings in news media (stakes in the Financial Times and the Economist, which were disposed of in 2015), and in Penguin Random House, a diversified group of businesses that may not be directly comparable to Wikipedia. Plus, there’s the fact that none of these organizations rely on masses of volunteers to edit their products.

Macon acknowledges that Wikimedia is taking in more money than it’s spending at the moment. But he argues that it would struggle to contain outflows if donations were to dry up. Macon calls for a cap on spending, and an attempt to develop an endowment that would generate enough interest annually to pay for the organization’s expenses, without the need for new fundraising (Update: Wikimedia’s executive director, Katherine Maher, pointed out that such an endowment was created in 2016).

Macon may have a point—watching one’s wallet is generally sound advice—but it’s clear that Wikimedia has been doing a pretty good job of balancing its books so far.

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