Crowdsourcing vs Crowdfunding: Using Both to your advantage
As you may have guessed, both of these elements involve tapping on the general public. The difference lies in what is being sought for. Crowdsourcing is the act of pooling for resources from the public; while resources can include finances, in today’s context it is usually used to refer to ideas or services. Crowdfunding is the term used today when it comes to crowdsourcing for financial resources.
Today, numerous platforms and websites can be said to rely on crowdsourcing.
Wikipedia and its community of volunteers is one such example. Fiverr is a site for people to engage quick freelance services from other users. Ridesharing platforms like Uber rely on the everyday person with their own vehicles instead of employing drivers in a professional capacity. Some brands have also used crowdsourcing in branding activities.
Meanwhile, crowdfunding has seen large gains in the past years. Indiegogo was one of the first “mainstream” crowdfunding platform, launched in January 2009 after Danae Ringelmann’s struggles with finding financing. Kickstarter appeared a few months later. Since then numerous crowdfunding platforms localized in different regions have appeared. While initially dealing primarily in “reward crowdfunding”, such as for games, creative products tech gizmos, and more – crowdfunding platforms for social good like GoFundMe and Giving.sg (local charity crowdfunding site) appeared too.
(things you didn’t know were crowdfunded)
Crowdsourcing and crowdfunding have traditionally been two discrete avenues of engagements for a specific goal. Sites like Kickstarter and Indiegogo deal specifically in crowdfunding by acting as an intermediary between creators and backers. Several big names have seen their start through crowdfunding, such as the Pebble Watch.
Crowdsourcing meanwhile has been used along a spectrum of activities – from marketing campaigns to inclusion in daily operations. Several organisations in their marketing campaigns have asked for ideas from the crowd, such as what to name their latest item, or naval vessel, to name just a few. Some organisations take it a step further, and actually incorporate crowdsourcing into their operations. Lego is known to source for designs from their customers. The most popular ideas based on a vote are put into production.
Both are not without its potential downsides – including the potential of being trolled. The Singapore Navy found its ship-naming campaign trolled, while Wikipedia has to deal with the occasional act of vandalism on their articles. Additionally, current “crowd” models however still have further room for development. Information asymmetry is a common problem, due to the inherently “top-down” approach employed. The organization is still the one making the final call on the decision. Crowdsourcing has more potential to be truly “two way” – that is, by empowering backers with decision making skills in the process.
Potential Applications and Uses
The short-term benefits of this model are already clear, particularly for crowdfunding. Crowdfunding has long had a well-documented history of delays and failures; ICOs have it even worse. In an era of trust issues, being held with much greater accountability translates to greater safety and security for backers.
The greater benefits however lie in long-term customer engagement. Giving consumers ownership of the products they interact with and the brands they love fosters loyalty. In an era where top-down advertising is weakening, this has become a way to stand out.
The growth of a business model today holds more value than the past model of “stability”. Aggressive strategies to gain market share and maintain loyalty has paid off, even beyond a marketing standpoint. Extreme examples like Grab, Uber, and Tesla have yet to turn in profits but hold their current valuations due to their huge growth.
A New Model of Business
Time and time again it has been demonstrated that the crowd forms seemingly irrational attachments to the products and brands they have come to love. Depending on their relation and perception of the brand, this is readily apparent in how they express their opinions when given a space to. Facebook’s acquisition of Oculus for instance was not received well by their community, who had come to love Oculus for its origin as a “garage side project” and felt that they were selling out. This is truly one headscratcher – how would Facebook’s acquisition of Oculus matter to the end user?
But such is the power of marketing – of forming “lovemarks”.
Crowdfunding and crowdsourcing are treated as discrete mechanisms, but perhaps it is time to start exploring ways to combine the two together. Innovation has always been the only way for businesses to survive. It is time for businesses and consumers to work together to help each other, in a safe environment where tangible contributions truly matter.