Crowdsourcing’, first defined by Jeff Howe and Mark Robinson in the June 2006 issue of Wired Magazine, is a business model that solves problems through a distributed network of people (Brabham 76). In business, crowdsourcing is utilized to increase profit through the collaboration of many people (Tarokh). Usually happening via the Internet, forms of crowdsourcing include funding or brainstorming.
Crowdsourcing is effective in business because of it’s access to resources, scale, and transparency (citation).
Although effective because of this support system, crowdsourcing may also be ineffective in business because of it’s
You can lose money trying to gain the information you need instead of increasing profits. For example, there was a company who promised participants watches if they provided them with information about the product. In the end, they didn’t even gain valid info and they wasted millions of dollars sending out products (Arora). Some people require payment for their knowledge. As an investor, you try to get the
cheapest rate possible but that can be one of the biggest mistakes you can ever make. Paying the lowest amount won’t save you money. The people who take that small amount are the ones who most likely have little to no knowledge about your work. In the long run, you lose profit for being cheap (Paul).
There are so many different ways you can lose money due to Crowdsourcing but a huge
one is lawsuits. An investor can lose the patience because you aren’t making the money you promised you would be making. They have a right to sue a business due to failure and that is a big way for you to lose even more money than you already have for failing (Arora).
Other people would argue about the validity of the data collected. Marcia Yudkin, owner of
a marketing solutions website and a marketing mentor, states that participants would more or
less state whatever comes to them off the top of their heads. The participants don’t necessarily have to know a thing about your company or what you’re even working on. Sometimes, they even ignore your criteria and just give you information on what they feel is right (Yudkin).
Based on the data you received, it can shoot you towards the other direction of what you
intentionally wanted. For example, you may have a project that has to do with growing plants that will help with cleaning our air. Another person will provide you with information like how to grow a plant that will supposedly make our air fresh. Once you believe this person and build on what they say, the end result will have nothing to do with what you were even trying to accomplish. By recieving false data and believing it to be true, it can lead to the downfall of your project and later your company (“Pitfalls”).
Another disadvantage to Crowdsourcing is your marketing place. Depending on where
you put out your business plans, people can tarnish your product or your company. Angry
customers or investors can put out negative reviews leading to other customers or investors to not want your product (Floren).
When you put your business on a site like kickstarter, for example, it does not guarantee
the success of your company. Not all of the ideas pitched there are blown up into something bigger. Only 10 percent of all the business projects put up actually succeed (“Plunder”). There are a few marketing places that have huge hidden disadvantages you don't really think about until its too late. Indiegogo will take a huge percent of your final fund if you don't reach the goal you intended to meet. Fundables monthly fees will soon add up if you you campaign. Depending on the amount you raised for your business. CircleUp will take a percentage of all the money earned (MarketingMoxie).
As you can see, marketplace can mean everything to your business. It can determine whether you succeed or you fail.
