Alexis Ternoy
Alexis Ternoy 17 February 2015
Categories Content, Technology

The Good, The Bad & The Ugly: How Do Businesses Benefit From Crowd Sourcing?

You may have heard about KickStarter and other crowd funding sites. These sites help people raise money for new ventures.

You may have heard about KickStarter and other crowd funding sites. These sites help people raise money for new ventures.

The idea is that if a lot of people invest a small amount of money, a project can get funded that may not be up to the rigorous standards of venture capital investors (VCs). VCs normally want a 70% return. But with sites like KickStarter or GoFundMe, the investor may only want a T-Shirt from the project or one of the first runs of a new product. Often, this is a way to see a cool technology realised – and a chance to get in on the ground floor.

But there is a darker side or crowd sourcing – graphic design projects. Before we go down the dark path, let’s take a look at a good business example.

The good part of using a crowd, is that often the crowd gives you better information than a small group or one person would, very Lean approach some would say. For example, guessing how many beans there are in a jar. Often you see a jelly-bean jar content at fairs. Each person buys a ticket and tries to guess the number of beans in the jar. The winner is the person who comes the closest. And normally that would be the end of it.

One statistician - Michael Mauboussin - discovered, that any person trying to guess the beans in a jar is way off – no surprise. But the MORE people who entered the contest, the closer the average of the guesses was to the correct total. This is quite amazing. If only ten people guess, the average may be off by 30%. But ask 100 people to guess, and the average is only off by 10%. Get 1,000 people, and the discrepancy may only be off by one bean.

So it seems there is wisdom in crowds.

And so business started to use this idea. Threadless is a company that prints T-Shirts. But their twist, is that designers submit design ideas that are viewed online. Only if enough people say the’d buy the shirt is it printed - and the designer paid.

Example this is my Threadless Limited Artist Edition t-shirt
My Threadless Limited Artist Edition Ello t-shirt By @nopattern[/caption]

Seems fair enough. Both parties win. If the market (the people who view and rate the design) don’t like it, no shits are printed and the designer gets nothing. This is the basic risk any designer takes – no market acceptance – no money. But now the T-Shirt company is spared the expense and risk of printing shirts without orders.

If the designer has success (the market loves the design and places orders) the T-Shirt company prints the shirts knowing the sales are there already – no risk. With orders, the print shop is more than happy to pay the designer. In fact, they’ll pay $2,000 if a design results in orders.

All seems fair.

Now enter 99designs. A company that uses crowd sourcing to fulfil demand for graphic design projects (T-Shirt designs, Logos, Web banners etc.). The idea is simple. A company pays 99designs to run a contest. The contest will pay the winning designer a prize if the client likes their design. Sounds simple.

But in a bad economy, each client that wants a logo may get 30 designs. Lots of designers are desperate for work. With a prize of $300, it seems like good pay for a designer who works on the logo for three hours.

This may seem like crowd sourcing, but it’s not. It’s the dark side of the internet.

In an average design contest, the client gets 30 designs from 30 designers. In theory, more is better. But this model does not actually produce better results. It’s not like the beans, where the average is closer to the real number. More designers just produce more ... but not better. There is no cumulative effect.

Looking at the design contests, I noticed that most of the designs are very similar. The more the client specifies design colors, and fonts, the closer all the designs are.

More importantly, the numbers don’t work. Taken as a group, if 30 designers work three hours each on a logo design, you have 90 hours of work, for $300. That’s just $10/3 hour or $3.33 per hour. Economically, while one person wins, the others all loose. But the cumulative effect would be under $4 per hour for the effort.

99design published a list of their top designers. Shockingly, they published how many contests each designer entered, and how many they won. The top designers (based on the number of contests they won) showed a staggering loss. On average, the top designers, only won 10% of the contests they entered. 99Designs has since pulled this advertisement. It was meant to entice other designers to want to compete in design contests.

But anyone with basic math skills could divide the amount these designers won, over the number of contests they entered to see how little they actually earned per hour. At $300 per win, and a win rate of 10%, they averaged $30 per contest entered. Not bad pay of one hour of work. Easily it takes three hours to read the client design brief, do the design work, and make three variations in hopes of winning the contest. If so, the designers are earning $10 per hour.

This is the dark side of crowd sourcing, let’s call it slave sourcing. While it seems more people add to the quality, often one designer, paid $300 would likely do a better job, and spend more time on the client’s logo.

For good or bad, the internet makes crowd sourcing easy. And companies are trying to find ways to entice groups to lend the power of the crowd to their project.

Read More on Digital Doughnut

Please login or register to add a comment.

Contribute Now!

Loving our articles? Do you have an insightful post that you want to shout about? Well, you've come to the right place! We are always looking for fresh Doughnuts to be a part of our community.

Popular Articles

See all
7 reasons why social media marketing is important for your business

7 reasons why social media marketing is important for your business

Social media is quickly becoming one of the most important aspects of digital marketing, which provides incredible benefits that help reach millions of customers worldwide. And if you are not applying this profitable...

Sharron Nelson
Sharron Nelson 6 February 2018
Read more
Top 10 B2B Platforms to Help your Business Grow Worldwide

Top 10 B2B Platforms to Help your Business Grow Worldwide

Although the trend of a Business to Business portal is not new but the evolution of technology has indeed changed the way they function. Additional digital trading features and branding has taken the place of...

Salman Sharif
Salman Sharif 7 July 2017
Read more
Top 10 Skills to Become a Rockstar in Digital Marketing

Top 10 Skills to Become a Rockstar in Digital Marketing

Technology is continuously evolving, prompting marketers and entrepreneurs to dive into digital marketing to increase brand awareness, reach their target market, and ultimately drive sales and profit. 

Jessica Andriani
Jessica Andriani 7 September 2018
Read more
Top 7 Strategies For Improving Your Tech-Savvy Skills

Top 7 Strategies For Improving Your Tech-Savvy Skills

In today's modern world of technology it is very important to be tech-savvy. Knowing how to use technology is the key to success and great personal future developments.

Jessica Freeman
Jessica Freeman 11 May 2017
Read more
7 Tips To Increase Your LinkedIn Company Page Followers

7 Tips To Increase Your LinkedIn Company Page Followers

LinkedIn was started on May 5th 2003 and transformed the way business professionals connect worldwide. Today, it is used in 200 countries and 24 languages by over 380 million experts, consultants and professionals.

Richard Fallah
Richard Fallah 4 April 2016
Read more