Wikipedia:Wikipedia Signpost/2007-02-12/Financial state hullabaloo
Comment prompts discussion of Wikimedia's financial situation
An observation made by Wikimedia Foundation chair Florence Devouard at a conference last week, commenting on Wikimedia finances, was picked up by the blogosphere and transformed into reports that Wikipedia would run out of cash and have to close within a few months. While the comment reflected the organization's financial challenges as a charity coping with ongoing growth, some of the more alarmist and inaccurate reports left Wikimedia to reassure people that its demise was not imminent.
The rumor mill
Devouard was the keynote speaker Thursday, 8 February, at the opening of the LIFT conference on new technologies held in Geneva. Another conference participant, Philippe Mottaz, wrote a brief note about this on his blog. Mottaz attributed the following statement to Devouard: "At this point, Wikipedia has the financial ressources [sic] to run its servers for about 3 to 4 months. If we do not find additional funding, it is not impossible that Wikipedia might disappear" (quotes in original, since edited and partially stricken).
A number of blogs seized on the supposed quote "might disappear", interpreting it to mean that a shutdown of Wikipedia was being contemplated. Conference organizer Laurent Haug responded to rebut the rumors. Haug, who conducted a Q&A with Devouard as part of the presentation, provided a transcript of the discussion that apparently sparked it:
Haug: "When we prepared this speech, Florence told me that Wikipedia has enough cash to pay for its server for the next..."
Devouard: "Three months. Roughly."
Haug: "and if we don’t do something, Wikipedia won’t be here in three or four months. That’s a radical idea, it’s not going to happen but...".
Devouard: "...three months is a bit negative. [...] We have somebody making plans for two years in the future, I think we will survive in the next three months".
By this time, however, the warped version of the story had made the front pages of Slashdot and digg. Mottaz subsequently admitted to having used hyperbole and said, "I did a lousy blogging job." Devouard pointed out that the blogosphere reaction was rather out of proportion to the response at the conference itself, which was attended by a number of reporters, none of whom initially seized on it as a newsworthy revelation.
Analyzing the numbers
Some at the conference, notably Bruno Giussani, tried to restore the focus on the actual statements and evaluate the claim that Wikimedia has 3-4 months of cash. Considering that Wikimedia recently concluded a fundraiser that brought in just over $1 million, whereas the operating costs reported (for the year ending 30 June, 2006) in its most recent financial audit were somewhat less, this would seem a fair question.
However, the growth of Wikipedia traffic and the development of the organization means that expenses have been rising as steadily as donations, if not more. As reported by Devouard, Wikimedia's current cash reserves are roughly equal to the amount brought in by the fundraiser. Setting aside for a moment the issue of projecting future growth, the challenge can be illustrated with a simplified snapshot of the current situation.
With no growth at all, reported annual costs for bandwidth and hosting would come to about $300,000. Current staff expenses would be about $450,000 (this estimate includes salary and taxes, but not employee benefits, which could add significantly to future costs). Depreciation figures, which were reported as part of the audit, could serve as a rough proxy for the cost of replacing equipment as it breaks down—that would produce an estimate of $250,000. The result is that the $1 million would be exhausted just to keep the organization and the sites running for a year in exactly the condition they are now.
Already this fails to account for plans such as hiring more staff, notably the intention to add an Executive Director (unless he or she takes no salary, and the recruiting firm helping with the search works pro bono). Wikimedia would have no resources to pursue new initiatives or fill currently unmet needs. And above all, considering the persistent growth of its projects, there would be no servers to handle additional traffic. Following the present growth trend, and given that accommodating this would not only require more hardware but also increase the other costs as well, exhausting cash reserves in 3-4 months, 6 months at the outside, is a plausible characterization.
Naturally, this does not consider the potential to have a new fundraiser or donations received outside the primary fund drives. The one-year interval between fundraisers is unlikely to be repeated, as the last one was delayed partly to allow completion of the audit, so that this report would be available to donors. (Purchases such as an image server were delayed as well due to the cash shortage.) The audit was also needed in order to pursue most grants and matching donations, and the Wikimedia Foundation hopes to incorporate more of the latter into future fundraisers. Meanwhile, the ongoing trickle of donations brought in a little under $10,000 in the week prior to this incident, and the publicity brought a surge in contributions for a few days. As Devouard put it, "we are not going to disappear [but] we do need more money."
Discuss this story
Notes: Bandwidth and hosting figures based on publicly reported amounts (for example http://www.nowpublic DIGGITY DIGGITY DOT com/jimmy_wales_gives_talk_on_free_culture_transparency_and_search). Staff expenses estimate is my own, using the current staff and approximate salaries and including taxes paid for employees but not contractors. Depreciation estimate based on audit, as indicated, but converting to a 3-year useful life instead of 5 years, a change recommended by the auditors. --Michael Snow 19:27, 12 February 2007 (UTC)[reply]
Piotrus, personnel expenses are not "~3/2 of technical". Staff salaries might be more than the cost of bandwidth and hosting alone, but maintaining and replacing equipment (represented here by depreciation) relates entirely to the technical side.
Further regarding the staff costs, a good portion of them are developers whose work is entirely devoted to improving technical matters and keeping the site running. With all due respect to anyone who thinks that should all be handled without hiring staff, a) you are entirely welcome to step up, put your
moneytime where your mouth is, and volunteer, and b) even with the use of paid staff, the available resources have so far been too limited to produce much-demanded features like stable versions or single login.For public discussions of staffing issues, it's been primarily on foundation-l (a couple examples), but responses have tended more towards enthusiasm than debate about the expense. The remaining staff have largely been hired on a basis of organizational need to handle issues that urgently require attention but for which volunteers are inadequate. Some of this is a natural function of scaling up as an organization—when you're suddenly dealing with large amounts of money daily, you need somebody to handle that money. Otherwise bills don't get paid and all the servers in the world don't matter when the lights go dark. Similarly with a General Counsel and legal issues, it's to guard against threats to continued operation.
Relatively speaking, bandwidth and servers are inexpensive from a business perspective, and the strain they put on Wikimedia finances is a sign of the Foundation being run on the cheap. It actually holds the Foundation back from plans to hire more staff, especially developers. For most organizations with any kind of staff (including nonprofits and technology companies), salaries will be the single largest expense, usually by a hefty margin. --Michael Snow 18:03, 13 February 2007 (UTC)[reply]