Encarata died a sudden death.
The hunter: Wikipedia.
The free, peer-edited encyclopedia has become the default reference source on the web, averaging something close to 60 million users every month.
Wikipedia is fast, frequent, self-correcting and open: all characteristics of Web 2.0 applications.
These are the attributes of what Mark Zuckerberg at Facebook calls “elegant organizations.”
In the Christian Science Monitor, John Yemma has an article reflecting on the implications of Encarta’s demise and applying some of its lessons to the free vs. paid debate about newspaper content.
If all the big newspapers at once adopted a pay model, some upstart would come along and use a small group of journalists and a larger group of Wikipedia-like amateurs to build a multimedia newspaper. Like Wikipedia, it would be the butt of countless jokes about unreliability.
Maybe it would even report on its own unreliability.
But it would grow stronger because it would be organically constituted on the World Wide Web. That’s the power of open-source knowledge. And that’s the challenge the news media face as they dive into the Internet:
The notion is compelling, but it’s missing the actual culprit. If anything is bringing down the newspapers it’s Craig’s List, another open, elegant organization, and the myriad specialized classified services that have developed over the past five years.
The death of newspapers isn’t really at the hands of the free news on the web, nor the imminent threat of a trib
e of citizen journalists. So, the paid versus free debate doesn’t truly get at the problem newspapers have.
Look at the trajectory of newspaper print revenue since 2000.
In 2000, newspaper revenue was $48 billion dollars. In 2008, it was $13.9 billion lower, at $34.7 billion.
That’s a significant transfer of highly profitable dollars.
Strikingly, 70% of the decline came in classified revenue, the biggest profit engine of a metro newspaper. After declining at the start of the decade, classified spending leveled out for a couple of years, on the strength of the real estate boom, which offset sustained weakness in automotive and employment. The last two years, real estate classified h
as cratered, and the entire classified category with it.
National and retail advertising have been more resilient during the period: only last year, in the teeth of the recession, did retail advertising begin to substantially drop.
Large advertisers haven’t abandoned newspapers wholesale. Sliding readership hasn’t been the crippling blow. That has come from the migration of classified spending away from newspapers, largely into online systems, many of which are free.
The economic model of classifieds has been utterly changed by a combination of free and open systems, like Craig’s List, and more traditionally-modeled online classifieds like AutoTrader. The $9.6 billion of classified revenue that has migrated has been replaced with probably $3 billion of online classified revenue. Further, the online service is more effective and immediate for the consumer.
That’s a hard proposition to beat.
