DEFINITION of 'Crowdsourcing'

Crowdsourcing involves obtaining work, information or opinions from a large group of people who submit their data via the Internet, social media and smartphone apps. People involved in crowdsourcing sometimes work as paid freelancers, while others perform small tasks on a voluntary basis. For example, traffic apps encourage drivers to report accidents and other roadway incidents to provide real-time updated information to app users.

BREAKING DOWN 'Crowdsourcing'

Crowdsourcing allows companies to farm out work to people anywhere in the country or around the world, which lets businesses tap into a vast array of skills and expertise without incurring the normal overhead costs of in-house employees. Crowdsourcing usually involves taking a large job, something that requires hundreds or thousands of individual tasks, and breaking it into many smaller jobs that a crowd of people can work on separately.

Crowdsourcing is becoming a popular method to raise capital for special projects. As an alternative to traditional financing options, crowdsourcing taps into the shared interest of a group, bypassing the conventional gatekeepers and intermediaries required to raise capital.

Examples of Crowdsourcing

Many types of jobs can be crowdsourced, including website creation and transcription. Uber, which pairs available drivers with people who need rides, is an example of crowdsourced transportation.

Companies that want to design new products often turn to the crowd for opinions. Rather than rely on small focus groups, companies can reach millions of consumers through social media, ensuring that the business obtains opinions from a variety of cultural and socioeconomic backgrounds.

While crowdsourcing often involves breaking up a big job, businesses sometimes use crowdsourcing to assess how multiple people perform at the same job. For instance, if a company wants a new logo, it can have dozens of graphic designers assemble samples for a small fee. The company can then pick a favorite and pay for a more complete logo package.

Advantages of Crowdsourcing

The advantages of crowdsourcing include cost savings, speed and the ability to work with people who have skills that an in-house team may not have. If a task typically takes one employee a week to perform, a business can cut the turnaround time to a matter of hours by breaking the job up into many smaller parts and giving those segments to a crowd of workers. Companies that need some jobs done only on occasions, such as coding or graphic design, can crowdsource those tasks and avoid the expense of a full-time in-house employee.

The Difference Between Crowdsourcing and Crowdfunding

While crowdsourcing seeks information or work product, crowdfunding seeks money to support individuals, charities or startup companies. People can contribute to crowdfunding requests with no expectation of repayment, or companies can offer shares of the business to contributors.

RELATED TERMS
  1. Reverse ICO

    Reverse ICO offers a way for established business to raise funds ...
  2. Smartphone

    Smartphones are handheld devices that enable people to make phone ...
  3. Social Media

    Social media is a computer-based technology that facilitates ...
  4. Asset Class

    An asset class is a group of securities that exhibits similar ...
  5. Social Media Optimization (SMO)

    Social media optimization (SMO) is the use of social media networks ...
  6. Technical Job Skills

    Technical job skills refer to the talent and expertise a person ...
Related Articles
  1. Small Business

    How Apps Are Changing The World

    Apps have allowed people to replace several pieces of tech with a single smartphone or tablet and have made the data from that device much more complete.
  2. Insurance

    Which Industries Can Produce the Next Amazon-Like Stock? (AMZN)

    Learn about three industries that are ripe for disruption and have the potential to produce a company with the growth characteristics of Amazon.com.
  3. Personal Finance

    Top 10 Side Jobs You Could Start Now

    Ways to make extra cash in your spare time.
  4. Financial Advisor

    A Guide to Building a Portfolio with Crowdfunded Investments

    Crowdfunding has moved beyond fundraising for personal projects and it now represents a new frontier for beginning and seasoned investors alike.
  5. Financial Advisor

    Startup Crowdfunding Rules: What You Should Know

    A look at new SEC rules that opened up equity crowdfunding to retail investors, and the risks this type of investment may bring.
  6. Personal Finance

    The Ultimate Working From Home Guide

    Read our complete guide to working from home to learn about the industries with the top types of flexible, remote jobs available and how to avoid scams.
  7. Small Business

    Top 3 Crowdfunding Platforms of 2017

    Looking for a new way to fund your business or personal project? These crowdfunding sites may do the trick.
  8. Investing

    Pros & Cons of Investing in Crowdfunded Property

    Although the basic concept of real estate crowdfunding might sound great, it does come with a few disadvantages of which potential investors should be aware.
  9. Investing

    Real Estate and Crowdfunding: A New Path For Investors

    Real estate investing and crowdfunding - are they a good mix?
  10. Investing

    Equity vs. Debt Investments for Real Estate Crowdfunding

    Equity and debt investments offer two very different paths for investors who are interested in real estate crowdfunding.
RELATED FAQS
  1. What does a low working capital ratio show about a company's working capital management?

    Find out the significance of working capital management for a company and look at the working capital ratio analysts use ... Read Answer >>
Trading Center