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NONPROFIT INVESTORINDEPENDENT RESEARCH FOR PHILANTHROPYWikimedia Foundation, Inc.                           SUMMARY       ...
OVERVIEW OF WIKIMEDIA’S ACTIVITIESWikimedia is a US-based non-profit organization that operates a multitude of projects ce...
Wikimedia Global Audience                                                                                        (millions...
100,000 worldwide volunteer editors in January 2012. When dividing the full operating budget by the total volunteereditors...
Further straining the issue is that the total active editor base has been in decline since early 2007 (only English Wikipe...
editors. However, avoiding ad revenue has restricted revenue growth that could be used to fund a more aggressiveinfrastruc...
In February 2011, Wikimedia published a 5-year strategic plan outlining strategic goals through 2015 with projectedlevels ...
salaries / wages and non-compensation related items within each category. For the period of 2008-2011, programexpenses ave...
THIRD PARTY RATINGSCharity Navigator    •    Overall rating of 65.49 (out of 70) / 4 stars (out of 4).    •    “Financial”...
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NPI Evaluation of Wikimedia Foundation


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NPI Evaluation of Wikimedia Foundation

  1. 1. NONPROFIT INVESTORINDEPENDENT RESEARCH FOR PHILANTHROPYWikimedia Foundation, Inc. SUMMARY The Wikimedia Foundation, Inc. (“Wikimedia”) is a nonprofitNonprofit Investor Rating: organization dedicated to supporting the development andBUY distribution of online content of collaboratively edited reference projects to the public free of charge. Along with a network of chapters, Wikimedia supports the infrastructure and organizationalMission Statement framework for these wiki-based projects, including Wikipedia.The mission of the Wikimedia Foundation is toempower and engage people around the world STRENGTHSto collect and develop educational contentunder a free license or in the public domain, ▲ Global reach. With 482 million unique monthly visitors, 21 millionand to disseminate it effectively and globally. Wikipedia articles and 100,000 volunteer editors, Wikimedia projects are viewed, read and edited throughout the world.Financial Overview ▲ Highly leveraged operating budget. Wikimedia Foundations$ in MM, Fiscal Year Ended June 30 substantial reach required less than $18 million of total expenses in 2009 2010 2011 fiscal 2011.Revenue and Support $8.7 $18.0 $24.8 ▲ Strong financial discipline. 30%+ operating margin continues toOperating Expenses $5.6 $10.3 $17.9 build a healthy net asset position and room for expansion of the% of Total: operating budget. Program Expenses 64% 76% 68% G&A 15% 10% 20% CAUTIONS Fundraising 21% 13% 12% ● High reliance on volunteer editors. Wikimedia’s operating leverage inherently causes less direct editorial monitoring by theYear Founded: 2003 Wikimedia Foundation. ▼ Declining number of volunteer editors. Over the last few years,Contact Details growth in content has been coupled with a decline in the base ofWikimedia Foundation, Inc. active editors.149 New Montgomery Street, 3rd FloorSan Francisco, CA 94105 ▼Revenue highly concentrated in contributions. An opportunity forPhone: +1-415-839-6885 revenue generation through advertisement exists, but could alter theEmail: supply of volunteer editors. 20-0049703 RECOMMENDATION: BUYAnalyst: RJ Price Wikimedia has actively grown both revenues and expenses in recentPeer Review: Kent Chao, Arthur Xu years to support its growing operations. Even with that growth, the large global footprint of Wikimedia projects requires minimalPublication Date infrastructure and operating expenses. Information quality andJune 11, 2012 future growth in revenue remain concerns, but the impact and reach currently trump those risks. Nonprofit Investor Research |
  2. 2. OVERVIEW OF WIKIMEDIA’S ACTIVITIESWikimedia is a US-based non-profit organization that operates a multitude of projects centered on a core belief of freeinformation sharing throughout the world. All major projects are collaboratively developed by users through theMediaWiki software, allowing for content to be freely used, edited, copied and distributed within the confines ofWikimedia’s licensing agreement.Wikipedia, Wikimedia’s flagship project, is an effort to build free encyclopedias in all languages. Started in 2001,Wikipedia currently offers more than ten million articles in 273 languages, with the largest collection of articles currentlypublished in English. Wikipedia is known for its community of followers and volunteer editors, with over 650,000registered users having made at least ten edits each since inception. While Wikipedia is a “living document”, someWikipedias release or plan to release regular “snapshots” capturing the content at a point in time.Wiktionary creates free content dictionaries in every language. The project aims to be more extensive than a typicaldictionary, including thesauri, rhymes, translations, audio pronunciations, etymologies and quotations. Started in 2002,Wiktionary is currently available in over 150 languages with over three million entries.Wikiquote combines quotations from famous people, books, speeches, films or other interesting mediums, withproverbs, mnemonics or slogans to form a robust database. The project started in 2003 and currently includes over110,000 pages in over 75 languages.Wikibooks builds a collection of e-book resources, including textbooks, course material and manuals. It aims to helpboth students through self-instruction and teachers through examples of teaching material. Wikibooks began in 2003and now has over 140,000 modules from over 5,000 books across over 100 languages.Wikisource is a project to archive a collection of free and open content texts for storing classics, laws and other freeworks, as well as a base for translating these texts. Wikisource began in 2003 and currently offers over 880,000 sourcetexts in total.Wikispecies provides a central, extensive species database for taxonomy. Launched in 2004, Wikispecies currently hasover 240,000 entries.Wikinews reports the news ranging from original reporting and interviews to summaries of news from external sources.Founded in 2004, Wikinews currently has 29 language versions with more than 140,000 news articles in total. Wikinewsaims to provide a free alternative to commercial news sites, while maintaining a fact-checked, neutral position.Wikiversity is dedicated to learning materials, learning communities and research. Wikiversity’s approach to learningcontinues to evolve, but is currently centered on models of “experiential learning”. Established in "beta" phase in 2006,Wikiversity currently has over 30,000 learning resource entries across 12 languages.Wikimedia Commons provides a repository for free photographs, diagrams, maps, videos, animations, music, sounds,spoken texts and other free media.MediaWiki is wiki software used by all Wikimedia projects and other sites.PROGRAM RESULTS AND EFFECTIVENESSWikimedia is actively focused on tracking metrics related to article counts, new content, active editors, unique visitors,page views and numerous other operational metrics. The organization’s data-driven focus on analytics allows forexcellent reporting on the scale of the organization, as well as for transparent measures of momentum in key areas.Wikimedia’s numerous projects reach a staggering viewer base that continues to grow at a rapid rate. At the end of2005, unique monthly viewers totaled fewer than 100 million. Averaging 35% compounded annual growth over the lastsix years, that total swelled just short of 500 million by the end of 2011. Wikimedia Foundation, Inc. | Nonprofit Investor Research 2
  3. 3. Wikimedia Global Audience (millions of unique viewers per month) 500 450 400 350 35% CAGR 300 250 200 150 100 50 0 Feb Jun Feb Jun Feb Jun Feb Jun Feb Jun Feb Jun Aug Aug Aug Aug Aug Aug Apr Oct Apr Oct Apr Oct Apr Oct Apr Oct Apr Oct Dec Dec Dec Dec Dec Dec Dec 2005 2006 2007 2008 2009 2010 2011Source: Comscore through Wikimedia Report Card (January 2012)Those results on their own are impressive, but become even more dramatic when viewed relative to Google viewers andmost broadly, total internet usage. Over the last three years, Wikimedia’s unique viewers have grown slightly abovetotal internet usage, as evidenced by Wikimedia’s percentage of total internet users eclipsing 30% in the last half of 2011.Google continues to generate considerably more traffic than Wikimedia (~75% of total internet users also every month), but with a drastically different infrastructure and budget. For a point of comparison, in 2011,Wikimedia’s operating budget was $18mm versus Google’s “traffic acquisition cost” alone of over $8.8bn. Beforeallocating Google’s vast budgets in General & Administrative, Sales & Marketing or Research & Development, Googlestill spends more on traffic alone than 500x Wikimedia’s full annual operating budget. Wikimedia is able to generate andsupport an outsized viewer base relative to its minimal operating budget. Unique Visitors Percentage of Internet Use (millions of unique viewers per month) (unique visitors percentage of total internet users) 1,600 Wikimedia Google Total 90% Wikimedia Google 1,400 80% 1,200 70% 60% 1,000 50% 800 40% 600 30% 400 20% 200 10% 0 0% Feb Apr Jun Au Oct De Feb Apr Jun Au Oct De Feb Apr Jun Au Oct De Feb Apr Jun Au Oct De Feb Apr Jun Au Oct De Feb Apr Jun Au Oct De 2009 2010 2011 2009 2010 2011Source: Comscore through Wikimedia Report Card (January 2012)To orient potential donors further around the impact of contributions to Wikimedia, the following is an overview ofseveral key operating metrics.A relatively small paid Wikimedia staff is able to support a large volunteer base that creates new content, updatesexisting articles and edits constantly. As of June 2011, there were 78 employees of Wikimedia relative to approximately Wikimedia Foundation, Inc. | Nonprofit Investor Research 3
  4. 4. 100,000 worldwide volunteer editors in January 2012. When dividing the full operating budget by the total volunteereditors, implies ~$180 of operating budget to support each volunteer editor.Across a host of other productivity metrics, the results are even more staggering. Each unique monthly visitor ofWikimedia projects costs only $0.04 to support. Similarly each of the 21 million articles currently available throughWikimedia projects costs only $0.85 to support. Each of these metrics is an approximation, but should provide a scale forthe relative impact of the Wikimedia projects versus the corresponding operating budget. Productivity Statistics Worldwide Volunteer Editors(1) 100,000 Full-Time Employees(2) 78 Volunteers / Employee 1,282 2011 Expenses Statistic $ / Statistic (1) Worldwide Volunteer Editors $17,889,794 100,000 $178.90 Wikipedia Articles(1) 21,000,000 $0.85 Unique Monthly Visitors(1) 482,000,000 $0.04 New Articles per Year(3) 1,840,000 $9.72 Page Views per Year(4) 494,000,000,000 $0.00004 (1) As of January 2012 (Wikipedia Key Facts - Jan 2012) (2) According to 2011 Annual Report (3) Assumes new English articles / day as of Jan 2012 grossed up to annual. Uses ratio of 5.4 worldwide articles to English articles (4) Assumes English monthly page views of 7.6 billion grossed up to annual. Uses ratio of 5.4 worldwide articles to English articles Sources: Data Summary (Jan 2012) & Wikipedia Key Facts (Jan 2012). 2011 Annual ReportWikimedia’s flexibility of content is both its greatest strength and weakness. Except in the case of vandalism-pronepages, any reader can edit content, with immediate effect. Any error or biased opinion is visible to all users until anothereditor identifies and corrects any blemish. As Wikimedia continues to leverage a large volunteer base, informationquality largely depends on volunteers with little professional oversight. Wikimedia supporters argue that while “wiki”content editing lacks professional writers and editors, it provides for viewer consensus to be expressed in each article. Active Editors (English Wikipedia) 60,000 5+ Edits 25+ Edits 100+ Edits 50,000 40,000 30,000 20,000 10,000 0 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 2003 2004 2005 2006 2007 2008 2009 2010 2011 Wikimedia Foundation, Inc. | Nonprofit Investor Research 4
  5. 5. Further straining the issue is that the total active editor base has been in decline since early 2007 (only English Wikipediaactive editors shown in the following chart). With a growing content base and declining number of active editors,recruitment of additional editors is a noted priority for the organization going forward. NPI has not encountered publiclyavailable and verifiable information on the evolution of editing frequency per article or metrics on information qualityand error frequency, but that would be an area of additional diligence if access was available. Wikimedia seeminglyprovides high quality, relatively unbiased information, but further improvement in information will be predicated onmore active editors and / or increased monitoring by the Wikimedia infrastructure.FINANCIAL OVERVIEWWikimedia’s support and revenue base primarily relies on donor contributions. On the heels of a large fundraisingcampaign in 2010 featuring direct outreach from the founder, Jimmy Wales, contributions have represented anincreasing percentage of support – up from 73% of total support and revenue in 2009 to 93% in 2011. Other sources ofrevenue, primarily revenue through special events and in-kind service, have remained fairly steady but contribute asmaller percentage of total top-line as a result of the torrent growth in contributions. Irrespective of the components ofsupport and revenue, the total has grown dramatically since 2008 ($5.0mm), with 2011 ($24.8mm) representing a 392%increase over 2008, or a 49% CAGR over that period. Wikimedia believes that this strong historical growth will continuein the near future. In Wikimedia’s annual plan detailing revenue and expense projections for the upcoming year,Wikimedia has set a target of $29.5mm total support and revenue in 2012 (+24% Year-over-Year). Revenue Breakdown Expense Breakdown$ in millions $30 $20 $17.9 100% $24.8 $18 90% $25 76% $16 68% 80% $14 63% 64% 70% $20 $18.0 $12 $10.3 60% $15 $10 50% $8.7 $8 40% $10 $5.6 $6 30% $5.0 $3.5 $4 20% $5 $2 10% $0 $0 0% 2008 2009 2010 2011 2008 2009 2010 2011 Contributions In-Kind Service Revenue Program General & Administrative Investment / Other Income Net Assets Released from Restrictions Fundraising Program Expense % of TotalWikimedia’s 2012 projection appears conservative versus recent growth rates; however, there are several risks worthnoting. First, recent fundraising campaigns have featured direct appeals from Jimmy Wales, draining goodwill towardsthe organization with a constant request for donations tied to prominent pictures of Jimmy. As noted in the 2012 AnnualPlan, recent campaigns have been the target of gentle mocking from both the media and general public alike. Wikimediahas generally relied on Jimmy’s mission and devotion as a rallying cry, but future fundraisers will require new, creativeenergy or an entirely new source of revenue altogether. Second, relying on contributions is inherently more volatile thanprogram revenue. Wikimedia has consciously disassociated from commercial interests given that contributions haveconsistently exceeded spending needs and liquidity has been ample (net assets exceed annual expenses). Further, anadvertising model would not likely affect content, but could make editors less likely to volunteer, forcing a switch to paid Wikimedia Foundation, Inc. | Nonprofit Investor Research 5
  6. 6. editors. However, avoiding ad revenue has restricted revenue growth that could be used to fund a more aggressiveinfrastructure / organizational build in the medium / long-term. Wikimedia retains the option to pursue ad revenue ifcontributions slow, or if strategy dictates a larger spending need. Detailed Financial Statement (GAAP basis)(1)Fiscal Year Ended June 30 2008 2009 2010 2011 Support & Revenue Contributions $4,402,910 $6,297,433 $14,490,273 $23,020,127 In-Kind Service Revenue 333,125 578,279 502,558 349,516 Other Income, net(2) 248,449 410,144 945,968 712,690 Investment Income, net 21,497 17,954 7,219 36,856 Net Assets Released from Restrictions 27,000 1,354,196 2,033,294 665,903 Total Support & Revenue $5,032,981 $8,658,006 $17,979,312 $24,785,092 % Growth 72% 108% 38%Support & Revenue Sources Contributions 87% 73% 81% 93% In-Kind Service Revenue 7% 7% 3% 1% Other Income, net (2) 5% 5% 5% 3% Investment Income, net 0% 0% 0% 0% Net Assets Released from Restrictions 1% 16% 11% 3% Expenses Salaries & Wages $1,147,679 $2,257,621 $3,508,336 $7,312,120 Awards & Grants 0 0 208,662 471,060 Internet Hosting 537,204 822,405 1,056,703 1,799,943 In-Kind Expenses 333,125 578,279 502,558 349,516 Operating 952,019 1,259,161 3,846,420 5,761,273 Travel 307,679 223,193 476,663 1,159,200 Depreciation & Amortization 233,314 419,947 524,341 1,000,400 Other(2) 29,704 56,630 143,110 36,282 Total Expenses $3,540,724 $5,617,236 $10,266,793 $17,889,794 % of Support & Revenue 70% 65% 57% 72%Expense Allocation (% of Total) Salaries & Wages 32% 40% 34% 41% Non-Compensation Expense 68% 60% 66% 59% Support & Revenue Less Expenses $1,492,257 $3,040,770 $7,712,519 $6,895,298 Restricted Contributions 2,054,629 1,367,025 631,739 3,420,018 Net Assets Released from Restrictions (27,000) (1,354,196) (2,033,294) (665,903) Change in Net Assets $3,519,886 $3,053,599 $6,310,964 $9,649,413 Net Assets at End of Year $5,178,168 $8,231,767 $14,542,731 $24,192,144 Avg. Balance as % of Annual Expenses 96.5% 119.4% 110.9% 108.3%(1) According to financial statements prepared in conformity with GAAP, as audited by KPMG(2) Includes special event related revenue / expenseSource: Audited Financial Statements prepared in conformity with GAAP, as audited by KPMGOn the expense portion of the income statement, Wikimedia has maintained strong spending discipline during the lastfour years. Expenses have grown considerably to expand the support staff and infrastructure of Wikimedia’s projects,but still average only 66% of total support and revenue during 2008-2011. This discipline is the result of active planningand budgeting by the management team. Wikimedia Foundation, Inc. | Nonprofit Investor Research 6
  7. 7. In February 2011, Wikimedia published a 5-year strategic plan outlining strategic goals through 2015 with projectedlevels of annual spending to achieve its objectives. In addition to projecting overall spending, expenses are budgeted byproject for the upcoming year, similar to a corporate budgeting process. Wikimedia lists itemized estimates of futureexpenses and discloses these numbers to the general public. In the 2012 annual plan, the following five topics weredetailed as top areas of spending increases: • Additional technical staff and contractors: +$1.6 million • Increased hosting costs: +$0.8 million • Mobile platform development: +$0.7 million • India and Brazil editor recruitment: +$0.7 million • Increased spending on grants: +$0.7 millionThis type of disclosure provides potential donors with both comfort around adequate financial controls and insight intokey spending priorities for new donations.As a result of the aforementioned healthy operating margin, Wikimedia has consistently generated positive contributionto net assets annually. In 2011, the organization began the year with $14.5mm in net assets and ended with $24.2mm innet assets, of which $20.8mm is held in current asset accounts. This controlled spending relative to revenue growth hasmaintained sizable liquidity on an absolute basis, as well as relative to Wikimedia’s operating budget; the average netasset balance in 2011 was equal to 108% of 2011 expenses. Functional Allocation of ExpensesFiscal Year Ended June 30 2008 2009 2010 2011 Program Salaries & Wages $575,956 $1,189,115 $2,378,652 $4,860,808 Non-Compensation 1,663,568 2,425,234 5,471,348 7,260,602 Total Program $2,239,524 $3,614,349 $7,850,000 $12,121,410 General & Administrative Salaries & Wages $479,078 $481,643 $531,616 $1,618,534 Non-Compensation 597,293 365,216 533,226 2,007,633 Total General & Administrative $1,076,371 $846,859 $1,064,842 $3,626,167 Fundraising Salaries & Wages $92,645 $586,863 $598,068 $832,778 Non-Compensation 132,184 569,165 753,883 1,309,439 Total Fundraising $224,829 $1,156,028 $1,351,951 $2,142,217 Total Expenses $3,540,724 $5,617,236 $10,266,793 $17,889,794% of Total Program 63% 64% 76% 68% General & Administrative 30% 15% 10% 20% Fundraising 6% 21% 13% 12%% of Support & Revenue Program 44% 42% 44% 49% General & Administrative 21% 10% 6% 15% Fundraising 4% 13% 8% 9%Source: Audited Financial Statements prepared in conformity with GAAP, as audited by KPMGWikimedia allocates its expenses within three major classifications: program, general & administrative and fundraising.Audited financials from KMPG provide a clear breakout between the three buckets and also provide a breakout of Wikimedia Foundation, Inc. | Nonprofit Investor Research 7
  8. 8. salaries / wages and non-compensation related items within each category. For the period of 2008-2011, programexpenses averaged 68% of total, general & administrative expenses averaged 19% of total and fundraising expensesaccounted for 13% of total spend. In isolation, the relative percentages of general & administrative and fundraisingappear to account for a large percentage of expenses. Since most of Wikimedia’s “contributors” are volunteer editors,the Wikimedia G&A staff must be viewed in the context of the operations, not just the operating budget. Given thiscontext, it is staggering that in 2011 Wikimedia only spent $3.6mm on G&A to manage an organization with over 21million articles, nearly 500 million monthly visitors and approximately 500 billion page views per year.FUTURE OF WIKIMEDIAWikimedia is actively aware that while its progress to date has been extraordinary, there is an active pipeline of goals forthe future. In the recent 5-Year Strategic Plan, Wikimedia set out the following strategic priorities and targets: “Our strategic priorities over the next five years: • Stabilize infrastructure • Increase participation • Improve quality • Increase reach • Encourage innovation We will know we’re succeeding when we reach these critical targets: • Increase the total number of people served to 1 billion • Increase the number of Wikipedia articles we offer to 50 million • Ensure information is high quality by increasing the percentage of material reviewed to be of high or very high quality by 25 percent • Encourage readers to become contributors by increasing the number of total editors per month who made >5 edits to 200,000 • Support healthy diversity in the editing community by doubling the percentage of female editors to 25 percent and increasing the percentage of Global South editors to 37 percent” (Wikimedia Strategic Plan).The support of future donors and volunteers will be crucial to reaching these aspirational goals.TRANSPARENCYWikimedia prides itself on being one of the most transparent nonprofit organizations in the world and their actionsstrongly support that claim. Through their Wikimedia Foundation website, a plethora of organizational materials areavailable for free to the public: • Financial Information: Audited financial statements, Form 990s and detailed financial planning documents are available on the Financial Reports section of Wikimedia’s website. • Strategy Documents: One-year forward annual plans and long-term strategic plans are well developed and readily available. • Board Materials: The Wikimedia Board of Trustees posts meeting minutes and resolutions. • Policies and Procedures: All key policies and procedures, including Privacy Policy, Donor Privacy Policy, and Trademark Policy, are available in their entirety. Wikimedia Foundation, Inc. | Nonprofit Investor Research 8
  9. 9. THIRD PARTY RATINGSCharity Navigator • Overall rating of 65.49 (out of 70) / 4 stars (out of 4). • “Financial” subcategory ratings of 65.04 / 4 stars based on key financial metrics. • “Accountability & Transparency” subcategory ratings 66.00 / 4 stars based on key performance metrics checklist. • Highest rated organization amongst five identified as “Performing Similar Types of Work”.GreatNonprofits • Average rating of 4+ stars out of 5 across 13 reviews. • Individual reviewers cite similar amazement at the incredible leverage of resources, “the relative size of their projects and the relatively low cost of these projects compared to sites of similar size” and the impact of Wikimedia projects on global knowledge aggregation.GET INVOLVED • Donate: • Become a volunteer: • Become an editor: Price certifies that he does not have any affiliation with Wikimedia Foundation, Inc. and has never made a donation to theorganization. Additionally, RJ has not supported directly competing organizations in a greater capacity than a nominal donation. NPIanalysts and NPI as an organization do not receive any form of compensation from reviewed charities.This report is for informational purposes only and does not constitute a solicitation for donations. While the reliability of informationcontained in this report has been assessed by NPI, NPI makes no representation as to its accuracy or completeness, except withrespect to the Disclosure Section of the report. Any opinions expressed herein reflect our judgment as of the date of the materialsand are subject to change without notice. NPI has no obligation to update, modify or amend any report or to otherwise notify areader thereof in the event that any matter stated herein, or any opinion, projection, forecast or estimate set forth herein, changesor subsequently becomes inaccurate, or if research on the subject organization is withdrawn.Opinions and recommendations in our reports do not take into account specific reader circumstances, objectives, or needs. Therecipients of our reports must make their own independent decisions regarding any organization mentioned by NPI. Wikimedia Foundation, Inc. | Nonprofit Investor Research 9