Crowdsourcing is a method in which an individual, company or institution uses large groups of the general public to collect data, perform tasks, raise funds, create content or provide feedback.

The application of this technique allows an entity to obtain vast amounts of data at faster speeds, cut overhead costs or gauge the opinion of the masses. The term crowdsourcing was coined in 2006 and continues to grow as a resource for both personal and corporate projects. The rise of the digital economy and the growth of social media has boosted the power of crowdsourcing, enabling a wider reach and enlarging the pool of skilled people who can be accessed.

While there are many benefits to crowdsourcing, some key factors should be taken into consideration before using this tool in your business. The speed and quantity of data that can be collected, may not produce the same quality results that smaller focus groups produce. Understanding what crowdsourcing is will give you a better idea of when to implement it and when to hold back.

Types of Crowdsourcing

There are many types of crowdsourcing that can be used to leverage the crowd for a specific purpose. Each method has its advantages and disadvantages.

  • Tasks – A company or institution can use crowdsourcing to work on both small and large tasks. Smaller tasks can be presented to a large group of people, each working on the same product to win the bid of work. Once selected, the company then pays the individual, saving time and money usually spent interviewing and hiring full-time employees to do the same work. Similarly, the public can be asked to complete numerous small tasks that are used collectively. For example, the public might be asked to submit local data for a larger conservation project. In this case, each person’s work counts separately. Additionally, larger tasks can be broken up into smaller ones and crowdsourced. Ridesharing companies and delivery apps are an example of this. Ridesharing companies crowdsource drivers as the core feature of their business.
  • Contests – competitions can be used to generate content, while simultaneously advertising the product or institute at the same time. Contests can be used in a variety of genres, from art projects to commercial film productions.
  • Opinions – Getting feedback on a product or service can prove essential for a company. Equally, charities and government organizations can crowdsource the public to help improve public sector projects.
  • Crowdfunding – Many crowdfunding websites allow participants to reach out to the population to help fund a multitude of projects and causes. These funds are subject to taxes and fees.

Starting a Business

Crowdsourcing can be used to help a new company raise capital and cut costs on initial overheads. Using business loans or traditional investors to raise capital can come with restrictions, causing some business owners to hand over portions of their control. Startups can use crowdfunding websites to cover the costs of new product launches, while also advertising their new company without paying for expensive marketing services. Crowdfunding capital from the public also gives people an invested interested in the success of a company. Additional taxes and fees may apply, so make sure you are aware of all costs before launching a crowdfunding campaign.

Crowdsourcing for initial capital can also be labor based. Some companies tap into large groups of specialists to work on a new business idea, offering stock options in return instead of cash. Regardless of the crowdsourcing tools you use to help start your business, be specific and flexible with your objectives and outcomes. Crowdsourcing is not applicable for all scenarios and it is important to know when it can be beneficial.

Medical expenses

The majority of online crowdfunding campaigns are for personal medical costs. Experts estimate that the majority of bankruptcy cases in America are related to medical bills. Those who are looking for help to pay for expensive procedures or high, out-of-pocket costs use crowdfunding sites to harness the empathy of the public. It is important to remember that crowdsourced funds are subject to income tax if above a certain amount. You must complete a 1099-k if the total amount raised is over $200,000 or 200 contributions were made to the account.

One of the benefits of crowdsourcing money to pay medical bills is the sheer number of people that online crowdfunding campaigns can reach. Traditionally, a patient would only be able to rely on his or her circle to help with unpaid medical costs. Crowdfunding allows more people to see and fund a campaign, increasing the chances of covering all unpaid bills.

Medical forums are a type of crowdsourcing that draws on the expertise of professionals and peer experiences. Depending on an individual’s insurance plans, visiting a doctor for minor issues may be a financial strain. Using online forums for medical advice is not always advisable and should be used with caution.


Crowdsourcing for Charities

Charities and nonprofit organization have relied on forms of crowdsourcing for years. Volunteering and fundraising are both useful crowdsourcing tools that help charities finance projects and rollout initiatives. The recent rise in crowdsourcing and the growth of social media has made these techniques more effective for charities looking for support.

Crowdfunding for a cause or particular development program has the potential for a global reach. These campaigns can be used to raise money and promote the mission of a charity. Canvassing the public for input and feedback is also useful for a charity that is looking to gain deeper insight into what projects they should focus on. Similarly, a charity can reach out to vast numbers of people for valuable data that might otherwise have been unobtainable. Data relating to a natural disaster or conservation project can be crowdsourced from local residents and businesses to help a charity advance their work.

Overhead costs restrict charities from spending more time and money on their core mission. Many charities are required to have a certain level of transparency. Crowdsourcing automatically opens up the processes of an organization for the public to view, while also engaging their supporters and lowering their overheads.


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