GBA 547: MANAGEMENT INFORMATION SYSTEMS
CROWDSOURCING
Crowdsourcing
What is it?
Definition of Crowdsourcing

“the practice of obtaining needed services,
ideas, or content by soliciting contributions from
a large group of people and especially from
the online community rather than from
traditional employees or suppliers.”
Who Coined the Term & When?

Jeff Howe, contributing editor of Wired
magazine, coined the term in his 2006 article,
“The Rise of Crowdsourcing.”
When Did the “Concept” of
Crowdsourcing Begin?

The practice of tapping a crowd has long been
used by governments & businesses.
 Evidence from 1700s
 Planter’s Peanuts - 1916
Current Utilization of Crowd Funding

List from Gofundme.com
Crowdsourcing Uses


1) For Businesses
2) For Entrepreneurs
Crowdsourcing For Businesses
1 of 2 Practical Applications

Large companies are using crowdsourcing to
complete big projects. This type of
crowdsourcing involves “breaking down a
project into tiny component tasks and farming
out those tasks to the general public by posting
the requests” on crowdsourcing websites.
Crowdsourcing Websites

Dozens of crowdsourcing companies exist. Two
examples: Crowdflower & Amazon.com’s
Mechanical Turk
CrowdFlower

How do you earn money?
 Customer
and Lead Data
 Content Moderation and Creation
 Sentiment and Opinion Analysis
 Surveys

CrowdFlower
App for iPhone

How do you earn money?
Retail
 Surveys/Research
 Local Business Information
 Real Estate


How much can I expect to earn?


$3-12 per job
Field Agent
App for iPhone

How do you earn money?
 Field
Audits
 Photgraphy
 Surveys/Research

How much can I expect to earn?
 $4-100

Gigwalk
per job* “based on “reputation”
2 of 2 Practical Applications

Companies also use crowdsourcing to access a
large contingent of people to complete surveys
in order to collect data that is of interest to the
company.
App for iPhone and Android

How do you earn money?
 Surveys/Research
 Panel
Surveys
 Project Management
 Survey Programming

How much can I expect to earn?
 Reward

iPinion
points
Examples of Practical Applications

Crowdsourcing Categories:
 Individual
businesses or sites that channel the
power of online crowds.
 Brand-sponsored initiatives or forums that
depend on crowdsourcing.
 Brand initiatives that allow users to customize
their products.
 Brand-sponsored competitions/challenges
focused on crowdsourcing.
 Crowdsourcing Examples
Online Surveys

Survey Demo
Benefits of Crowdsourcing
to Farm Out Work or Conduct Surveys
1) Speed
 2) Affordability

 Crowdsourcing
is faster & cheaper than
hiring temps or traditional outsourcing firms.
Downside of Crowdsourcing
to Farm Out Work or Conduct Surveys

1) Quality
 Vetting
the Quality of Work and/or Data
 Vetting Quality of Survey Methodology

2) Potential Ethics Issue
 Digital
Sweatshops
Crowdsourcing for Entrepreneurs
Crowdsourcing For Entrepreneurs


Startup Seed Money
In this context often referred to as Crowd
funding, Crowd Financing, or Hyper funding
Entrepreneur Crowd Funding




Platforms take contributions from a large group of
individuals to accomplish some goal.
Donators typically are interested in the topic or
desire to help a selected cause
Currently platforms for crowd funding offer
contributors incentives such as a copy of the book, a
T-shirt, recognition etc.. However, no equity.
Money donated is considered “goodwill” and is not
considered a loan or investment.
Entrepreneur Crowd Funding



Entrepreneurs use various means on the platforms to
get interest from potential contributors such as
videos, personal stories, and demonstrations.
Many platforms (but not all) use an all or nothing
approach where if the goal isn’t reached then they
don’t collect from contributors and project gets
nothing.
The platforms offer a variety of options for the
service and usually charges from 4% to 9%
depending on specifics of the fundraising campaign.
The JOBS Act and Crowd Funding
Platforms





April 5, 2012 President Obama signed the JOBS
(Jumpstart Our Business Startups) Act.
This Act relaxes some restrictions and requirements for
crowd funding for equity.
Still awaiting direction from the Securities and
Exchange Commission (SEC)
Platforms currently offering equity crowd funding must
work with a securities broker and accept only from
“accredited investors”
SEC regulations and direction was expected by
December 31, 2012 but now 4th QTR 2013
Examples of CrowdFunding Websites






WeFunder (Over $35M Pledged)
Startup Addict (For StartUp Addicts)
RocketHub (Funding for Creative Projects)
New Jelly (For Artists)
CoFolio (For Local Small Businesses)
Kick Starter (Worlds Largest Crowdfunding Site)
KickStarter








Investors meet Entrepreneurs
Creative projects in categories: films, games, music to
art, design, and technology
Launched April 28th, 2009
Over $300M pledged by over 2.5M people with over
30,000 projects
All or nothing funding
Fee’s 5% Kickstarter 3-5% Amazon Payments
Run by 46 people in a tenement building in NYC
43% Success Rate: Stats
KickStarter Structure






Pledge Amount
Clearly defined product, goal, timeline
Video demonstrating the implementation, benefits,
use, and funding required
Text description of the product with any prototypes,
images, etc
“Rewards”
FAQ’s
KickStarter’s Most Funded

Pebble-E-Paper Watch for Iphone/Android
 VIDEO
Similar Projects



RoBO 3D Printer
FORM 1
Eventorbot!
Benefits of Crowd Funding






Gives more great ideas a chance to develop
Utilizes the powerful tool of networking on the
internet
Each donor has very small exposure and one entity
isn't put at great risk
Entrepreneur stays in control of the project
Opportunity for feedback from the entire online
community on the project
Free Marketing
Disadvantages of Crowd Funding





Many Entrepreneurs need an experienced investor
that can offer more than just the startup money.
Entrepreneurs often lose their drive on the project
itself when they are trying to please conventional
investors that have large stakes
Often the funding needed is not met
Risk of exposure of your ideas online
Lack of long term viability
5 Force Model
Industry Rivalry: (high) “Revenue of businessfocused crowdsourcing firms grew 74%
between 2010 and 2011.” (WSJ Jan 2012)
 Threat of New Entrants: (high) “It's demand
from start-ups that is driving rapid growth in
the crowdsourcing sector, which has more than
doubled in size since the recession.” (WSJ Feb
2012)
 Threat of Substitutes: (Low) Not one on the
horizon; outsourcing can’t compete in price.

5 Force Model Continued
Bargaining Power of Suppliers: (high) “It’s not
unusual for the contribution of a crowd to be
worth millions to a company,” especially when
complex algorithms have been used to distill
the information. (Crowdsourcing 101)
 Bargaining Power of Buyers: (Low-Med) The
demand for crowdsourcing companies is high,
however, WSJ Feb 2012 article mentions only
33 crowdsourcing companies so still not a lot of
companies available worldwide.

References


5 Key Points To Know About Equity Crowdfunding.
Forbes January 15, 2013. Retrieved January 20,
2013, from
http://www.forbes.com/sites/tanyaprive/2013/01
/15/5-key-points-to-know-about-equitycrowdfunding/
Crowd funding. Retrieved on January 20, 2013,
from http://en.wikipedia.org/wiki/Crowdfunding
References Continued


Rosenburg, J. (2012) New Crowdfunding Law Helps
Small Businesses Find Investors. The Huffington Post.
Retrieved January 20, 2013, from
http://www.huffingtonpost.com/2012/04/12/newcrowdfunding-law-help_n_1420708.html
Crowdfunding for Everyone. Retrieved on January
20, 2013 from.
http://www.gofundme.com/?aff=cwr
References Continued

Crowd Funding 101. Retrieved on January 20,
2013 from.
http://www.startupexemption.com/crowdfunding101#axzz2IeHp6dft
References


Brown, J. (2012, June 15 ). Federal crowdsourcing
may solve problems fast. Public CIO. Retrieved
from http://www.govtech.com/pcio/FederalCrowdsourcing-May-Solve-Problems-Fast.html
Crowdsourcing [Def. 1]. Merriam-Webster Online.
Retrieved January 18, 2013, from http://
www.merriam-webster.com/dictionary/
crowdsourcing
References Continued


Crowdsourcing 101(2006). Retrieved January 18,
2013, from http://www.chaordix.com/
crowdsourcing-101/
Howe, J. (2006, June). The rise of crowdsourcing.
Wired Magazine. Retrieved from http://
www.wired.com/wired/archive/14.06/
crowds.html?pg=4&topic=crowds&topic_set=
References Continued


Loten, A. (2012, Feburary 12). Small firms, startups drive crowdsourcing growth. The Wall Street
Journal. Retrieved from
http://online.wsj.com/article/SB10001424052970
204653604577251293100111420.html
Planters Historic Timeline. Retrieved January 18,
2013, from
http://www.planters.com/history.aspx?section=timel
ine
References Continued


Silverman, R.E. (2012, January 17). Big Firms try
crowdsourcing. The Wall Street Journal. Retrieved
from
http://online.wsj.com/article/SB10001424052970
204409004577157493201863200.html
Vaunt Design Group (February 2005). Planters
Peanuts. Retrieved January 18, 2013, from
http://www.ideafinder.com/history/inventions/plant
nuts.htm
References Continued


Field Agent: A Search Engine for the Real
World. Retrieved January 20, 2013, from
http://www.fieldagent.net/
Gigwalk: Instantly Mobilize People to Do Work
A nywhere. Retrieved January 20, 2013, from
http://gigwalk.com/
References Continued


iPinion: Research, Now Mobile. Retrieved
January 20, 2013, from
http://www.ipinionsurveys.com/
Crowdsourcing Examples. Retrieved January 20,
2013, from
http://crowdsourcingexamples.pbworks.com/w/page
/16668404/FrontPage
References Continued

Crowdsourcing, Labor On Demand CrowdFlower. Retrieved January 20, 2013,
from http://crowdflower.com/?gclid=CKuSruCXrQCFUxxQgodyV0AMQ