I just don't see it as a conflict of interest.
I see it as a conflict of interest that the founder of a popular online encyclopedia uses his status to push a for-profit endeavor of his. I see it as a conflict of interest that the software behind Wikia was initially developed for Wikipedia (yes, I know MediaWiki != Wikimedia, but one cannot deny their relationship). But I *do not* see the presence of Wikia on the interwiki map to be a huge conflict of interest, except in the sense that Wikia is only "notable" because it was founded by a notable person.
Wikia is among hundreds of prefixes available on the interwiki map, and very few - actually, close to none - have any relationship to Wikipedia or its founder.
Rich Holton wrote:
I still don't understand the resistance to making all non-Foundation sites no-follow. The fact that people disagree with the idea, but are providing no rational reason, only encourages the perception that there *is* conflict of interest in the current situation.
Let me emphasize: perception is important in this issue.
-Rich