What Is A Crowdsourcing Business Model? The Crowdsourcing Business Model In A Nutshell

The term “crowdsourcing” was first coined by Wired Magazine editor Jeff Howe in a 2006 article titled Rise of Crowdsourcing. Though the practice has existed in some form or another for centuries, it rose to prominence when eCommerce, social media, and smartphone culture began to emerge. Crowdsourcing is the act of obtaining knowledge, goods, services, or opinions from a group of people. These people submit information via social media, smartphone apps, or dedicated crowdsourcing platforms.

Understanding crowdsourcing

Essentially, crowdsourcing describes the process of collecting input from a large group of people. This group of people is a third-party unrelated to the business seeking results and usually performs the necessary tasks on a voluntary basis.

Consumer reviews on a product or service represent the most basic form of crowdsourcing, with freelancing sites and knowledge repositories such as Wikipedia owing much of their success to the collective power of people. 

However, the strategy is also used in more complex scenarios where engineering, scientific, or other technical expertise is required. Businesses also use social media platforms like Twitter, Facebook, and Instagram to crowdsource new ideas for products and services.

Crowdsourcing types

Crowdsourcing is an industry experiencing rapid growth and innovation, with the chosen approach depending on the outcome the business desires.

With that said, here is a look at three crowdsourcing types:


Where large groups of people come together to fund a project. SeedInvest Technology is a popular platform for start-ups, while creative professionals looking to raise money prefer Patreon.


Where companies seek out the collective opinion of a group of people on a variety of topics, including election outcome predictions and investor behavior on the stock market. Crowd-wisdom is based on the idea that large groups of people are collectively smarter than individual experts in terms of problem-solving, decision-making, innovation, and prediction. Examples of platforms include Quora, Reddit, and Stack Exchange.


Where a large project is separated into smaller tasks for completion by a crowd. Starbucks employed micro-tasking when it asked fans to design a new motif for its coffee cups. Amazon’s Mechanical Turk is another example of a micro-tasking platform.

Benefits of crowdsourcing

For organizations, there are many obvious and not-so-obvious crowdsourcing benefits. We have listed a few of these below:


A problem many businesses face when trying to scale is a lack of adequate resources. Crowdsourcing enables the business to cut costs by farming out small portions of the project to remote workers who offer more attractive rates. In some cases, the work may even be done for free.

Addresses knowledge gaps

Crowdsourcing is also used to fill knowledge gaps quickly and easily. There is no need for the organization to undertake a costly and time-consuming recruitment process.

Reduces operational costs – businesses can also reduce or avoid many of the overhead costs of hiring skilled or unskilled labor. These costs include employee salaries, benefits, and training. Crowdsourcing may also obviate the need for a dedicated workspace and associated equipment and utility costs.

Better consumer engagement

When a group of people is energized and motivated to work collaboratively or share their opinion, they tend to be more engaged in the task at hand. With consumer attention spans now lasting a mere eight seconds, participating in the crowdsourcing process is likely to hold their attention for longer than a traditional marketing strategy might.

Key takeaways:

  • Crowdsourcing is the act of obtaining knowledge, goods, services, or opinions from a group of people. Information is submitted via social media, smartphone apps, or dedicated crowdsourcing platforms
  • Crowdsourcing types include crowdfunding, crowd-wisdom, and micro-tasking, with each type resulting in a different outcome for the business
  • Crowdsourcing helps organizations scale because the work is performed by remote employees or in some cases, voluntarily. The strategy also addresses knowledge gaps, reduces operational costs, and increases consumer engagement.

Connected business concepts

While the term has been coined by Andrew Lampitt, open-core is an evolution of open-source. Where a core part of the software/platform is offered for free, while on top of it are built premium features or add-ons, which get monetized by the corporation who developed the software/platform. An example of the GitLab open core model, where the hosted service is free and open, while the software is closed.
Open source is licensed and usually developed and maintained by a community of independent developers. While the freemium is developed in-house. Thus the freemium give the company that developed it, full control over its distribution. In an open-source model, the for-profit company has to distribute its premium version per its open-source licensing model.
A decentralized autonomous organization (DAO) operates autonomously on blockchain protocol under rules governed by smart contracts. DAO is among the most important innovations that Blockchain has brought to the business world, which can create “super entities” or large entities that do not have a central authority but are instead managed in a decentralized manner.

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