Crowdsourcing: A Brief History
As I mentioned in the introduction, in 2005 journalist Jeff Howe coined the phrase “crowdsourcing.” Howe, along with his editor from WIRED Magazine, Mark Robinson, realized that businesses were soliciting on the Internet and outsourcing work to different individuals. Howe and Robinson came to the conclusion that those businesses were outsourcing to the crowd online, hence the new “crowdsourcing” platform (Wikipedia.com, 2015).
In the 2000s, crowdfunding is about gaining capital more so than gaining or sharing knowledge. In February of 2008, Daren Brabham, PhD, one of the first academics who published a scholarly report on crowdsourcing, stated that it was an “online, distributed problem-solving and production model” (Wikipedia, 2015, p. 1). Brabham also wrote a book called Crowdsourcing (2013), and he shares that crowdsourcing is the collective intelligence of online communities for a specific purpose set by the organization seeking the crowdsourcing (Brabham, 2013). I like what Brabham says about collective intelligence, which reminds me of what historian Pierre Levy shares in his book Collective Intelligence: Mankind’s Emerging World in Cyberspace (1999). Levy mentions the new knowledge space (in this case the Internet) and how it is created by a collective intelligence, or rather a group of people sharing and interacting within a technological arena (Levy, 1999). Levy believes that with this knowledge space, the collective of the people will continue to help those involved to grow intellectually and socially. I’m not sure Levy had crowdsourcing in mind when he pursued his theory of collective intelligence, but crowdsourcing does share several commonalities to Levy’s knowledge space.
So how does crowdfunding work?
Believe it or not, crowdfunding is not anything new. The Jerry Lewis Telethon broadcasted on television in the 1960s clear through the 1990s, but crowdfunding has been at work even longer than that. As far back as the 1700s there were models of crowdfunding. Many companies of the time held contests for prizes to obtain information or services for a product. For example, in 1714 the British government tried to find a way to measure a ship’s longitude. The government was at a loss as to how to do this and decided to hold a contest offering 20,000 British pounds to the winner who could solve this problem and create a method of accurate measurements (Wikipedia, 2015). Companies, non-profit groups, and the government have all used a crowdfunding model.
Here’s a great video that explains in better detail just how crowdsourcing works and it’s history.
Currently there are four types of crowdfunding models. In Gary Spirer’s book, Crowdfunding the Next Big Thing (2014), he explains the different types:
1. Strictly donate your money. With this model the donator donates with no regard for reward, only the satisfaction of sharing and offering help.
2. Donate it for some reward. In this case, there is a reward basis for donating and the rewards can be simple to extravagant.
3. Donate it for an advance purchase of a product. This is similar to the reward-based funding, but this is more for those wanting to offer donations for a product. For example, if one wanted the new Apple watch, one would offer their donations, and Apple would allow the new donator an early release and delivery of the product to that person. The idea is to receive products or services before the general populace.
4. Or, soon, buy part ownership in the company to which you give money (called equity-based crowdfunding, still being defined by the Securities and Exchange Commission, or SEC)
(Spirer, 2014, p. 2).
Note: Equity-based crowdfunding has begun since the date of this publication.
The market for crowdfunding is an undeniable trend that will continue to grow as new platforms are developed and others are expanded. Spirer goes on to say that there is a risk for every kind of investment and a return on investment could be detrimental. He continues by saying that following the crowd can lead to losses (Spirer, 2014). I know Spirer means capital losses but I believe the fans lose more than that at times, and I will discuss this in more detail. As Spirer says in his book, we need to be cautious and aware before investing. I hope we can remember that issue when we are investing our money into a crowdfunding campaign.
Brabham, D. (2013). “Crowdsourcing.” MIT Press, Cambridge, Mass. Retrieved from http://site.ebrary.com.libproxy.utdallas.edu/lib/utdallas/reader.action?docI D=10692208
Levy, P. (1997). “Collective Intelligence: Mankind’s Emerging World in Cyberspace.” Persius Books, Cambridge Mass.
Wikipedia.com (2015). “Crowdsourcing.” Retrieved from https://en.wikipedia.org/wiki/Crowdsourcing