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 per job* “based on “reputation”

Gigwalk

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 points

iPinion

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 business-focused 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-equity-crowdfunding/

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/new-crowdfunding-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/crowdfunding-101#axzz2IeHp6dft

References

Brown, J. (2012, June 15 ). Federal crowdsourcing may solve problems fast. Public CIO. Retrieved from http://www.govtech.com/pcio/Federal-Crowdsourcing-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, start-ups drive crowdsourcing growth. The Wall Street Journal. Retrieved from http://online.wsj.com/article/SB10001424052970204653604577251293100111420.html

Planters Historic Timeline. Retrieved January 18, 2013, from http://www.planters.com/history.aspx?section=timeline

References Continued

Silverman, R.E. (2012, January 17). Big Firms try crowdsourcing. The Wall Street Journal. Retrieved from http://online.wsj.com/article/SB10001424052970204409004577157493201863200.html

Vaunt Design Group (February 2005). Planters Peanuts. Retrieved January 18, 2013, from http://www.ideafinder.com/history/inventions/plantnuts.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=CKuSruCX-rQCFUxxQgodyV0AMQ