A Derivative of Open Source: What is Crowdsourcing?

The white paper definition describes crowdsourcing as a "neologism for the act of taking a task traditionally performed by an employee or contractor, and outsourcing it to an undefined, generally large group of people, in the form of an open call."

Jeff Howe, a contributing editor at Wired Magazine, gives a much better definition and describes crowdsourcing as "the application of Open Source principles applied to fields outside of software."

I've been bringing the concept up in more conversations because I've come to believe that it's a very powerful, useful, and cost efficient model that entrepreneurs should know about. However, no matter who I talk to, whether it be a successful businessman or founder of a new tech company, I've had to repeatedly explain what it is. If it isn't already, I predict that crowdsourcing will be one of the new, hot buzzwords in 2009. (We certainly need more, the term "Web 2.0" is beginning to make me puke.)

The last couple of years were about who could create the next popular social network. Pretty soon every site will have social networking features to it, so stop trying pitch your startup as a social network. Eventually most sites will have these types of features (or be connected to social networks like Facebook with Facebook Connect), so it gives your startup no real added value proposition. However, my prediction is that the next couple of years will be about who can create the next hot crowdsourcing startup.

Jeff Howe actually coined the term, not too long ago, in a Wired article titled "The Rise of Crowdsourcing" in 2006. (I highly recommend reading this)

However, the concept of crowdsourcing isn't that new. For instance the Oxford English Dictionary was crowdsourced and written by millions of volunteer contributions from submitted slips of paper from the general public. This might remind you of Wikipedia, which grew its encyclopedia from user generated content that is continually being reviewed, edited, and added to from the general public.

[I'm going to have to write another post on some of the cool startups using crowdsourcing. There are a bunch that range from crowdsourcing designs and advertisements to crowdsourcing medical research and car development.]

In many ways, you can consider Crowdsourcing as a derivative of Open Source, which relies on a community of developers to freely contribute, alter, and use software under a general public license. (This is different from Microsoft who doesn't allow anyone but their own employees to alter the software). Drupal is one example, which is an Open Source CMS platform that enables people to build social publishing websites. [Disclosure: I work for Acquia, a startup that is commercializing the software.]

There are 3 primary benefits that are usually associated with crowd sourcing:

1. Solving problems at reduced cost.

It's similar to the eBay auction method, except in reverse. Take crowdsourcing designs on 99designs.com:

A. Post a project, such as a design for a logo, say $200.
B. Set the price that you're willing to pay for that designed logo.
C. Open the contest for designers to submit their artwork.
D. Give feedback on the designs, which turns in to a very iterative process.
E. Select the best design that fits your needs.
F.  Pay the best designer/design $200.

$200 dollars may seem expensive if you're not familiar with how much a professional logo can cost. But, it is actually extremely cheap. A high end designer can charge at least $1000-$1500 for the same level of quality that you find on 99Designs.com

2. Rewarding/Paying people only when results are made.

A new startup, uTest, is a perfect example. They just recently received a $5 million Series B to crowdsource software testing. The company enables their clients to post software that can then be reviewed and tested for bugs by developers and programmers from around the world. The people who find the bugs are rewarded. Its a different approach on quality assurance that's built on the premise "pay for performance."

3. Tapping a wider range of talent than what is available in a given organization.

The last two examples convey this perfectly well, but I'll give one more. Although the following doesn't necessarily represent "talent," it shows how the crow outside of an organization can be leveraged to solve problems that the organization by itself would not be able to solve.

We're all familiar will GPS and those life saving TomTom devices. But, what if that organization had to only rely on its own staff to update and make millions of map corrections? It would be impossible or extremely costly. To solve this problem TomTom launched MapShare earlier this year. It enables the whole community to contribute map corrections as they find them. The community has already produced over 5 million corrections!

Corinne Vigreux, the managing director of TomTom, put this milestone into perspective: "a one-hour trip made anywhere in Europe or North America will be influenced by twenty to thirty Map Share corrections."

***The past two examples were taken from Jeff Howe's crowdsourcing blog. He is also the author of "Crowdsourcing: Why the Power of the Crowd is Driving the Future of Business."