Britannica Burned by the Web (for Now)

Encyclopedia Britannica was the definitive old-economy media company. It was ponderous, authoritative, and dedicated to the proposition that the world was changing slowly enough that giant tomes were the perfect vehicle for communicating information about it. And Britannica’s experiences with new technologies, beginning with the CD-ROM and then extending to the Internet, have done nothing to dispel its old-economy image. The problem is that now Britannica is trying to play in the new economy. At every turn, Britannica has reacted slowly, incompletely, and in almost blissful ignorance of the economics of the Web.

But what’s important about Britannica’s most recent screw-up–it opened its revamped Web site for business two weeks ago and then immediately shut it down because the sheer volume of traffic crashed the site–is not just that it shows how ill-equipped to deal with the Internet most big companies remain. It also shows that Britannica’s reputation carries enormous weight in the online world. The site crashed, after all, because tens of millions of people tried to access the encyclopedia online. And that has interesting implications for the way we think about offline brands and their extension onto the Internet.

First, though, the bad news. Britannica’s performance in the 1990s has been an object lesson in what not to do. Because the company thought its brand name was irresistible, it brushed off the challenge posed by Microsoft’s Encarta CD-ROM encyclopedia, and when it first introduced the CD-ROM version of its own encyclopedia, it priced it so high that Encarta was essentially handed the market. There are now millions of people who use CD-ROM encyclopedias, and almost none of them have bought Britannica in book form.

You could argue that those are customers Britannica couldn’t have pursued without endangering its core franchise. But as the last few years have demonstrated, the endangering was going to take place whether Britannica pursued them or not. And had Britannica approached the CD-ROM market seriously, it could have snared a huge chunk of it. Or so, at least, its recent (if short-lived) performance on the Internet suggests.

The Web-site disaster similarly speaks to Britannica’s continued struggle to adapt to new technology. The company has actually been online since 1994, offering fee-based research, but the revamping marked Britannica’s acknowledgement (one we Slatesters are very familiar with) that the Web and fees don’t go together well, and its hope that its brand was powerful enough to make an advertising business work. (As has been the case with Yahoo.) Making that conceptual shift was important. But so was doing the back-end work that would keep users happy. And here Britannica fell short again.

This may very well mean that Britannica won’t ever really figure out how to capitalize on the Internet, since technology isn’t going to stop changing and any successful company will have to make adaptability a core competence (at Britannica right now, it’s not even a marginal competence). But the fact that tens of millions of people wanted to use the Britannica Web site makes up for a lot of mistakes. A few weeks ago, at a conference organized by Michael Mauboussin of Credit Suisse First Boston, Disney Imagineer Danny Hillis said that he thought Britannica’s brand was so strong that once it got its act together, it would be a Web powerhouse. At the time, I thought he was incredibly wrong, both about Britannica’s brand name and about its future on the Web. But oddly, after the last two weeks, it looks more and more like Hillis might very well be right.