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. Donation-Based Crowd Funding

    Donation-based crowd funding is seeking small amounts of money ...
  3. COTI (Cryptocurrency)

    COTI, the currency of the Internet, speeds up digital payment ...
  4. Social Payment

    Social payment is the use of social media to transfer money to ...
  5. Assembly Line

    An assembly line is a production process that breaks the manufacture ...
  6. Apple App Store

    The Apple App Store is a digital distribution platform where ...
Related Articles
  1. Tech

    The 8 Best Alternatives to Kickstarter

    Learn about Kickstarter, a popular crowdsourcing website. Additionally, learn about eight crowdsourcing companies that are alternatives to Kickstarter.
  2. 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.
  3. 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.
  4. Financial Advisor

    The Most Successful Brands On Social Media

    What major firms have managed to take advantage of the massive monetizing potential presented by social media?
  5. 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.
  6. Insights

    The Rise of Alternative Economics

    Alternative economics has provided businesses, borrowers and lenders with the opportunity to overcome restrictions such as tight credit and low interest rates.
  7. Small Business

    Equity Crowdfunding Sites Disrupt Banking and VC

    Equity crowdfunding is poised to revolutionize the way companies are funded and disrupt the traditional private equity, banking and venture capital industries.
  8. Investing

    Crowdfunding for Non-Accredited Investors

    JOBS allows non-accredited investors to participate in crowdfunded investments, learn how crowdfunding platforms can work to your advantage to be funded.
  9. Small Business

    Crowdfunding Rule Lets Anyone Invest in Startups

    As of Monday, a belated provision of the 2012 JOBS Act goes into effect, allowing anyone and everyone to participate in fundraising for private companies and receive stakes in potentially high-growth ...
  10. Small Business

    Get the Best Freelance Rates for Your Work

    Smart strategies for estimating costs, researching fees, pricing projects and getting your rate for a range of clients.
RELATED FAQS
  1. How reliable are Glassdoor salaries?

    Glassdoor salary information may or may not be accurate, as the website offers users an opportunity to enter salary information ... Read Answer >>
Trading Center