Amazon Pays for Wiki Wisdom

If you're at all Internet-savvy, there's an excellent chance you know about the user-created Web encyclopedia, Wikipedia. It's come under fire from dozens of sources for inaccurate postings, including Comedy Central's late-night snarkmeister Stephen Colbert.

These critics have a point: Wikipedia isn't entirely reliable. But it is a great place to start researching just about anything, thanks to the ease with which community participants can share information. That, in turn, has attracted a huge following: Wikipedia has more than 1.5 million articles published in English.

The founders noticed. In 2004, they created a company called Wikia to take advantage of the open-source technology used to create Wikipedia. Since then, the firm has attracted an all-star roster of investors, including Netscape and Opsware (Nasdaq: OPSW  ) founder Marc Andreessen and Lotus founder and Second Life backer Mitch Kapor, both of whom contributed to the firm's $4 million first round of funding.

Now you can add Amazon.com (Nasdaq: AMZN  ) to the list. Earlier today, Wikia announced that the e-retailer had become the firm's first corporate investor, committing an undisclosed sum. (It's probably not less than Wikia's $4 million first round.)

On the surface, this adds legitimacy to an evolving, open-source business model. That's certainly how Amazon CEO Jeff Bezos saw it, saying in a statement that Wikia had "cracked the code for user-generated content."

Maybe so, but I see this in a larger context, as the value of content continues to evolve. When media empires controlled everything -- some would argue they still do -- the value of a piece of content could be correlated to its source. A report from NBC News was inherently more valuable than a report from your local paper.

Now, value is created via network effects. Credence and authenticity matter as much as, if not more than, the source. That's why I think investors are willing to pay extraordinary sums to buy up the most authentic and relevant communities. Witness News Corp.'s (NYSE: NWS  ) $580 million buyout of MySpace, or Google's (Nasdaq: GOOG  ) $1.6 billion purchase of YouTube.

Perhaps Bezos says it best: "Amazon has always believed in giving the customer as much information as possible so that they can make the purchase that's best for them."

That's good to know. It's also good, Jeff, that you recognize that the communities that hold the greatest sway over your customers are not managed by you or your partners, but instead by Wiki-wielding rebels. Best not to stand in their way.

Amazon is aMotley Fool Stock Advisorselection. Get a backstage look at all of the stocks that are helping David and Tom Gardner beat the S&P 500 by more than 44% as of this writing. You can try Stock Advisor free for 30 days.

Fool contributorTim Beyers, ranked 1,099 out of 15,079 inMotley Fool CAPS, is planning to shop for Christmas gifts at Amazon. Are you? Tim didn't own shares in any of the companies mentioned in this story at the time of publication. Get the skinny on all of the stocks in his portfolio by checking Tim's Foolprofile. The Motley Fool'sdisclosure policyis a rebel on Wall Street.


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