Rise of Crowdsourcing

Overview

Crowdsourcing is a method for soliciting input from or distributing a task among a large group of people in order to make the individual effort expended minor, even if it is being used to accomplish a large task. The term originated in 2005 in the context of new business models being used in the technology field, but the concept is much older, and was used at least as far back as the eighteenth century. The term is a combination of two different concepts, outsourcing and crowds. Outsourcing comes from the field of employment, and refers to an organization that delegates certain tasks or projects not to its own, permanent employees, but to groups or individuals outside of the organization. This can be done for a variety of reasons, but in most cases the motivation is to save time, save money, or both. When the organization has a need that is temporary in nature and requires skills that its members do not possess, it can be more cost effective to outsource the work and have the task completed by those who already possess the requisite expertise. Otherwise, the organization would have to expend the resources needed to train current employees or hire new ones to perform the task, and this would be difficult to justify if the task were not a long-term one (Granell, Romero & Martínez‐Hinarejos, 2018).

The main difference between outsourcing and crowdsourcing is that with outsourcing, the parties to which the work is assigned are identifiable before the work begins. An organization will choose a person or a group or an entire company for whom the assignment is appropriate; one would obviously not select a plumber to repair an airplane, for example. With crowdsourcing, the work is not assigned to particular people, it is announced in some fashion and then those who are interested in participating self-select, opting to join the project. Another difference between crowdsourcing and outsourcing is in the size of the groups involved. With outsourcing the size is constrained by the resources of the organization commissioning the outsourcing and by the scope of the work to be done. With crowdsourcing, there is no practical limit to how many people can participate in a project, and in many cases, the larger the crowd, the more quickly and effectively the project can be completed. This is because crowdsourcing tends to rely heavily on mobile technology and telecommunications in order to function. If workers involved in crowdsourcing were not able to participate by communicating and working over long distances, then they would face many of the same constraints as do workers in an outsourcing context (Nehls & Livengood, 2018).

Further Insights

Crowdsourcing is at its best in situations where there is a job that is too large or too expensive to be taken on by one person or even a workgroup. By breaking the job into smaller pieces that can be distributed among many workers, the job is finished in a shorter time and each worker is required to expend less effort. A scenario that helps to explain how the method works requires one to imagine an employer that needs to have one million envelopes sealed and stamped. If one person or a handful of people undertake this task, it will take them a very long time to complete it, but if a way can be found for a million people to each stamp and seal one envelope, then the job can be completed in a moment or two (Clark & Brudney, 2018).

There are numerous types of crowdsourcing. Many involve some form of labor, while others may center upon the need to raise funds for a common purpose. Crowdsourcing a fundraising project is usually either charitable or altruistic in nature or part of an investment system. An example of crowdsourcing being used for altruistic fundraising is often seen when a person is confronted by a medical emergency caused by illness or accident. Unanticipated medical issues like these can be incredibly expensive. Since a medical expense may be unanticipated and can exceed a family budget, friends and family of the victim may turn to crowdsourcing as a way to reach out to a wide pool of people, often sympathetic strangers, inform them about the situation, and give them an opportunity to donate money. Such fundraising pleas are created and shared using social media and can spread rapidly, particularly if they receive any news coverage as a consequence of their large distribution. In many cases, the money collected exceeds the amount required, especially if the victim's situation is especially compelling. For example, the family of a police officer injured in the line of duty might start a campaign seeking to raise ten thousand dollars to help with the costs of physical therapy, only to learn that in less than twenty-four hours over fifty thousand dollars are raised (Wang, Nickerson & Sakamoto, 2018).

Toward the more entrepreneurial end of the crowdsourcing spectrum, one finds enterprises of an altogether different sort. Many of these share a common trait: They are designed to allow many people to contribute small sums of money in order to finance an expensive undertaking. Rather than the target of this generosity being a person in need, in this case the goal is to raise money to support a project, usually a product or service. Startup costs for a new business can impose an insurmountable barrier to people who have a product idea but lack resources, such as cash for materials to develop it or a facility to manufacture or sell it.

Traditionally, the only way around this problem would be to obtain a loan from a financial institution, the government, or an investor willing to take a chance that the idea is good enough to eventually turn a profit. Unfortunately, during periods of economic difficulty, even these options can prove elusive, as larger numbers of people are competing for the limited amount of startup funding dollars available (Acar, 2018). Crowdsourcing offers another way forward, by making it possible for a large number of people to contribute small sums, instead of a small number of entities contributing large amounts. Skeptics initially questioned why investors would be interested in investing a small sum, when the return on a small amount would be similarly small and extremely doubtful; likening it to an investment that brings a profit of ten percent, an investment of a million dollars would return one hundred thousand dollars, but an investment of a dollar would be a dime—hardly worth one's time. The motives, however, for making small crowdsourced investments are considerably different from those of venture capitalists.

Entrepreneurs incentivize the crowd to participate by offering them rewards for their contributions, some of which are limited editions of merchandise or swag available only to investors. Often, crowdsourced startups will offer different incentives based on the amount being invested (Liang, Wang, Wang & Xue, 2018). One can imagine an inventor who wants to make a flashlight that can be recharged using solar energy. For investors who give ten dollars, the minimum amount, the inventor promises that they will receive one of the flashlights as soon as production begins. For those who provide twenty-five dollars, the inventor will provide two flashlights and a special carrying case. For fifty dollars, the investor receives six flashlights with carrying cases, and a personalized certificate signed by the inventor.

As part of the overall arrangement of the fundraising campaign, the inventor announces the total amount of funding being sought, and the time period during which investments may be made. The inventor then begins accepting pledges, until either the pledge goal is reached, or the campaign's time limit runs out. If the pledge goal is not met by the time the end date arrives, then all pledges are refunded. If the goal is met, then all of the pledge money is gathered and the inventor then has the money needed to begin production. This model of entrepreneurship has been widely praised because it allows a person with a good idea to bring it to fruition if enough other people agree that the idea is sound, and it is done in such a way that none of the participants is required to assume a significant amount of risk (Feng et al., 2018).

While the classic use of this type of crowdsourcing involves an entrepreneur who is not yet established in the market, the approach is also used by established companies to test the waters to see if there is sufficient demand for a new product to justify spending time and money manufacturing it. Thus, a company that has had great success making toy cars might start a crowdsourced campaign to see if consumers are willing to buy toy airplanes also.

There is another variation of crowdsourcing that is geared more toward creative personality types, such as artists, musicians, and so forth, rather than to inventors or manufacturers. This scenario requires different features than those needed for investment in product manufacturing. There, the product itself is the incentive. In the case of creative individuals, the output of their creativity is not as predictable; a writer famous for poetry might one day decide to write a novel or a series of short stories, for example. In previous eras, artists and writers were often supported by a wealthy patron, who paid their living expenses in exchange for special access to their talents. Crowdsourcing offers an option similar to patronage, but instead of one person supporting the artist by themselves, large numbers of people pay a small amount on a regular basis, and the artist is able to make a living by combining all of these small contributions. In exchange, donors receive incentives such as early or exclusive access to some works.

All kinds of creators use this system to help make ends meet, from painters and sculptors to musicians to filmmakers and game designers. There are even those who design objects that can be manufactured using a 3D printer. Often, these designers' business model involves making a design, offering the designed object for sale, and then printing it for the customer when a purchase is made. Some designers augment their income from this type of business by soliciting patrons, who, in exchange for five or ten dollars a month, receive the actual design files for the objects, so that they can print them on their own 3D printers instead of having to pay for the finished product (Dunlap & Lowenthal, 2018).

Issues

Crowdsourcing has certainly been able to offer a solution to many problems related to resource allocation, inasmuch as it makes it easier for people to pool their effort or funds to accomplish a common goal. At the same time, crowdsourcing is not without its challenges and controversies. One of these has to do with trust. From time to time, crowdsourcing efforts are known to stumble on the way toward their goals, either through poor planning and management or because of unscrupulous behavior. For example, a person hoping to acquire money through fraud may pretend to have a serious medical condition and start a fundraising campaign to help with nonexistent bills. Schemes like this are usually unsuccessful because the crowdsourcing model relies upon many people—including the fraud's real-life friends and relatives, one or some of whom usually lets the truth be known, and the campaign quickly falls apart. Nevertheless, the attempt seems easy and stands some chance of success because crowdsourcing almost always involves people who do not know each other and who are separated by great distances (Samimi, Ravana, Webber & Koh, 2017).

Crowdsourcing can also run afoul with mismanagement that is not deliberate. Once production begins, delays cause deadlines to be missed, and eventually those who invested money may grow tired of waiting for their returns, demanding either immediate delivery or a refund. This can happen even when those running the campaign have only the best intentions, in part owing to the very nature of crowdsourcing. Part of the job of crowdsourcing campaign organizers is to encourage people to participate, and often this leads to making overly optimistic projections about how quickly production will begin, how fast shippers will be able to deliver products, and how soon the money will be raised. This issue becomes even more complex when campaigns involve products that require coordination between several different manufacturers, as each link in the chain of production becomes another potential source of delay and confusion (Ahmed & Srivastava, 2018).

Bibliography

Acar, O. A. (2018). Harnessing the creative potential of consumers: Money, participation, and creativity in idea crowdsourcing. Marketing Letters. doi:10.1007/s11002–018–9454–9

Ahmed, T., & Srivastava, A. (2018). Analyzing crowdsourcing to teach mobile crowdsensing a few lessons. Cognition, Technology & Work. doi:10.1007/s10111–018–0474–2

Clark, B. Y., & Brudney, J. L. (2018). Citizen representation in city government-driven crowdsourcing. Computer Supported Cooperative Work. doi:10.1007/s10606–018–9308–2

Dunlap, J. C., & Lowenthal, P. R. (2018). Online educators' recommendations for teaching online: Crowdsourcing in action. Open Praxis, 10(1), 79–89.

Feng, Y., Jonathan Ye, H., Yu, Y., Yang, C., & Cui, T. (2018). Gamification artifacts and crowdsourcing participation: Examining the mediating role of intrinsic motivations. Computers in Human Behavior, 81, 124–136. doi:10.1016/j.chb.2017.12.018

Granell, E., Romero, V., & Martínez‐Hinarejos, C. D. (2018). Multimodality, interactivity, and crowdsourcing for document transcription. Computational Intelligence, doi:10.1111/coin.12169

Liang, H., Wang, M., Wang, J., & Xue, Y. (2018). How intrinsic motivation and extrinsic incentives affect task effort in crowdsourcing contests: A mediated moderation model. Computers in Human Behavior, 81, 168–176. doi:10.1016/j.chb.2017.11.040

Nehls, K., & Livengood, J. (2018). Facebook, crowdsourcing and the transition to college. Journal of Further and Higher Education, 42(3), 366–376.

Samimi, P., Ravana, S. D., Webber, W., & Koh, Y. S. (2017). Effects of objective and subjective competence on the reliability of crowdsourced relevance judgments. Information Research: An International Electronic Journal, 22(1).

Wang, C. et.al. (2020, Jan. 20). Crowdsourcing in health and medical research: A systematic review. Infectious Diseases of Poverty, 9, (8), idpjournal.biomedcentral.com/articles/10.1186/s40249-020-0622-9

Wang, K., Nickerson, J., & Sakamoto, Y. (2018). Crowdsourced idea generation: The effect of exposure to an original idea. Creativity and Innovation Management. doi:10.1111/caim.12264 Xu, H., Wy, Y., & Hamari, J. (2022, Feb.) What determines the successfulness of a crowdsourcing campaign: A study on the relationships between indicators of trustworthiness, popularity, and success. Journal of Business Research, 139, pp. 484–495. doi.org/10.1016/j.jbusres.2021.09.032