In 1990, Encyclopaedia Britannica sold 117,000 book sets and generated $650 million in revenue. By 1996 that number had fallen to less than 3,000.

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The first Encyclopaedia Britannica was published 250 years ago but the company saw the opportunity in the 80s to go after the "homes" market.

They built a door-to-door salesforce and found traction IMMEDIATELY. By 1990 they had 7,500 salesmen $600m in revenue.
The value prop for Britannica was two-fold:

① alleviating parents’ guilt around their children& #39;s education ② signaling "I care about my kids and have enough money to spend $2,000 on a set of books"

The in-house selling experience maximized both. https://twitter.com/lehrjulian/status/1243951658628980736?s=20">https://twitter.com/lehrjulia...
But while Britannica execs where shopping for a car that said "I& #39;m an intellectual with money" something in Seattle was brewing: Bill Gates wanted an encyclopedia.

Microsoft tried to license Britannica but management refused. They were confident on their grip of the market.
They finally found a licensor in Funk & Wagnalls and in 1993 unveiled Encarta as a CD-ROM encyclopedia for $395.
Encarta and Britannica competed on:

• Price
• Accessibility
• Signaling
• Reputation of Content
• Quality of Content
• Multimedia
• Updating Speed

The accessibility, multimedia content and the ability to link articles attracted some customers but the response was meh.
It wasn& #39;t enough. Then Microsoft lowered the price and all hell broke loose.

The $99 Encarta was a smashing success: it quickly sold 350,000 units, making it the best-selling CD-ROM encyclopedia by the end of 1993. Its sales passed a million units the next year.
Britannica saw the threat but it was too little too late.

They developed an $800 CD-ROM but it was text only because the Britannica content was too large to fit on a single CD.

Meanwhile, Microsoft bundled Encarta with computers, positioning them as a "work and study" tool.
Britannica sales started dropping:

110,000 in 1990
↓↓↓
51,000 in 1994
↓↓↓
3,000 in 1996

By 1996, Encarta controlled 44% of the market and, facing financial pressure, Britannica was sold for $135m, a fraction of its book value.
But there& #39;s more to the story.

In 2001, Wikipedia was launched. After a mention on Slashdot in July, the flywheel started spinning.

↱ More articles ↴

More writers More backlinks

⬑ More search traffic ↲
From being laughed out of the room for trying to create an "open source encyclopedia" to insane growth:

Feb: 1,000 articles.
Sept: 10,000 articles.
Dec: 20,000 articles.
Aug 2020: 40,000 articles.
Thanks to the power of the internet, Wikipedia was competing vs. Encarta along completely different dimensions:

• Accessibility →Everywhere
• Price → Free
• Speed of updates → Immediate

Cute drawings and reputation were irrelevant.
Microsoft realized that and dropped the price to $22.95 but it didn& #39;t help much.

Wikipedia attacked Encarta from an angle where Microsoft couldn& #39;t defend.

In 2009, Microsoft decided to shut down the Encarta division.
This story is a lessons on disrupting incumbents and the power of the internet but here& #39;s my favorite:

Shrinking a market by disrupting pricing models is a powerful value creation opportunity (if you can pull it off).

$1b (Britannica) → $100m (Encarta) → $0 (Wikipedia)
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