As you may have heard Encyclopaedia Britannica will no longer publish its 32-volume print edition and is going online only. The company is also focusing the bulk of its effort on educational materials for schools. Britannica president Jorge Cauz spoke with us about its evolution in the virtual world and what its innovations--and 60 apps--mean for the future of knowledge. Here's how a 244-year-old business is adapting to change--and winning.
Fast Company: Are congratulations for going totally online in order?
Cauz: I do believe it is a happy moment for Britannica. We are doing this now because we usually print the encyclopedia every two years, so customers are waiting to buy the new printed set. We decided to tell them that it’s not going to happen. This is an important benchmark--we have made the transition to a digital company. Not only are we digital, we are diversified. Only 15 % of our revenue comes from Britannica content. The other 85% comes from learning and instructional materials we sell to the elementary and high school markets and consumer space. We have been profitable for the last eight years. The company is vibrant.
What is your business now?
We have not only content, but solutions to help students learn math, science, or language skills in class, the school lab, or home. That’s a very different product from the encyclopedia. It's a very large market that has been disrupted by technology. That allows us to be more nimble and develop products that address the needs of teachers with digital whiteboards and kids who have iPads. We’re also excited about what Britannica is better known for--our digital encyclopedia. We have half million households worldwide and about 100 million students who have access through their schools, universities, and public libraries.
How many subscribers do you have?
We have 55,000 U.S. schools that subscribe to reference and e-learning solutions and we’re in almost every state and all the large districts. 65% of our revenue is from abroad. Entire countries via education ministries–-Brazil, Ireland, Finland––subscribe. We have large penetration in schools in Australia, the U.K., and Latin America. And we are active in Japan and China, as well. And we sell print curricula mostly to India because their schools lag in technology adoption.
And how much does it cost for consumers?
It’s $70 for a year, or $1.99 a month for the app for the iPhone and iPad. We’re launching Android next month. We’re also developing new apps for Windows 8. We’ll launch a few every month for a total of 60 apps--some examples already available are dinosaurs, Egypt, Aztecs, American Presidents, The Rain Forest.
We’re also becoming more social. The digital environment allows for a process that is intrinsically cooperative, which is creation and dissemination of knowledge. So users can suggest content, links, bibliographies, and images for entries. Suggestions will be vetted to make sure they’re correct.
Why did you feel you had to go social? I thought Britannica has always prided itself on entries having been written by authorities on the subject. That was key to the brand.
Many articles are also written by staff editors. We have only accepted 33% of user submissions and they helped enlarge the database, made it more accurate, and pointed out different ways to treat a topic and areas where we needed to expand knowledge. Articles by experts can become outdated, so we work with them to update the content. It’s really a constant dialog between us and the original contributor. That's very different than the way we operated before and allows us to create a better product.
So how will you compete with Wikipedia?
We’re not competing with Wikipedia per se. Our product is different. We are a lot smaller. We cannot post an article on every cartoon character, celebrity, or sports figure. We can only allocate resources for certain subjects. We all know that Google’s algorithms love Wikipedia. People say Wikipedia has so many page views and they have 3 million articles in the English language. Britannica is insignificant compared to the size of Wikipedia, but with our articles, which are just a fraction of Wikipedia’s articles, we get 16% of Wikipedia’s total page views, which is 3 billion a month. The equivalent, given the size of our database, would be 500 million. That tells you that in effect we are one sixth the size of Wikipedia, but it doesn’t just get search engine traffic. People go to it directly. About 65% of their traffic comes from Google and 45% arrives on its own.
From that we estimated the total number of times queries for which we have content get asked on Google, Yahoo, and Bing. There are between 1.2 and 1.5 million queries for which Britannica could have a good, reliable answer. But Britannica is on page 2, 3, or 4 of a Google search and very few people venture to the second page, so therefore we get extremely low traffic--0.6 to 0.7%. The analysis showed that Britannica still makes money despite little search engine referral traffic, which is great. Second, it shows a potential upside for a market that we’re not serving right now. So we make money and are significantly profitable and growing without participating in that platform.
What kinds of articles do people want for free?
It was difficult to pinpoint. Why would they pay for this biography and not another? Is it because it’s longer or has more multimedia? Perhaps people are not willing to pay for Abraham Lincoln. So then does it make sense for us to have Lincoln behind our pay wall?
Who will they pay for, Jennifer Aniston?
[Laughter] They pay for religion articles. Humanities and science draw a lot of subscriptions. Articles that have to do with places and events, as opposed to biographies of well-known individuals. But you asked about Wikipedia. It doesn’t bother me that Wikipedia is so popular. What bothers me is that a process that involves the experts, that is rigorous, a process that ensures that what you read is well-written and factually correct is not as popular. That really is not good, not just for Britannica, but for society. I don’t see this as a battle between two knowledge providers as much as a complementary way of approaching knowledge creation and dissemination. This is a 244-year-old turnaround––a company that has made it to a new business model. It’s not really about the brand, but about people for whom quality content really matters.
How certain are you that the new model will work?
Our model worked before newspapers. Britannica was the canary in the coal mine. We were the first to feel the impact of technology--CD-ROMS, the fact that print was so costly, needing sales people, the editorial investment. We have been struggling and working with that impact in a precipitous way. It was typical to blame the managers of the 1990s for “not getting it.” Who could have gotten it? The lessons have been going on for 15 years. Today is a wonderful graduation day for us. We have replaced print dollars with digital pennies. But at the same time, we have maintained the revenue for the company and increased the profitability.
How much have you been growing?
Digital revenue has been growing between 12% and 25%. Our top line has remained the same for eight years. We lost lots of money in the 1990s and started making money in 2003.
What happened in 2003?
Access to the Internet and broadband started to happen. And schools got wired. So we created a new set of products that had nothing to do with the editorial process but with curriculum specialists and instructional designers and listening to teachers. And that has made us a very different company.