Crowdsourcing As A HIGHLY EFFECTIVE E Commerce Strategy Business Essay


With the growing tendency of communal websites and their utilization for e-commerce activities, "crowdsourcing" has become an innovative strategy to carry out e-commerce. The newspaper is designed to explore on its success as an e-commerce strategy, first of all by trying to understand the history of crowdsourcing. Second of all the paper will look at the methodology and definitions of various types of crowdsourcing. Finally, the paper will establish how crowdsourcing can be used in e-commerce. Next, some circumstance studies of business that uses crowdsourcing are reviewed, with analysis on its success and failures. Finally, the paper will provide recommendation on how crowdsourcing can be an effective strategy.


Introduced by Jeff Howe and Tag Robinson in the June 2006 problem of Wired magazine, the term crowdsourcing describes an activity of how new web-based businesses organize labor, by outsourcing jobs, typically performed by contractors or employees, to a community (usually online) through what portions to an wide open demand proposals. Howe offers the following description

"Simply defined, crowdsourcing represents the work of the company or institution taking a function once performed by employees and outsourcing it to a undefined (and generally large) network of people in the form of an wide open call. This may take the form of peer-production (when the work is conducted collaboratively), but is also often performed by sole individuals. The key prerequisite is the utilization of the available call format and the top network of potential laborers. " (Howe, 2006)

Howe further explained that true crowdsourcing involves a company recognizing the idea received, finalizing it and producing for sale; and the theory provider being compensated, generally, monetarily. This is to differentiate crowdsourcing from "open sourcing", which is a cooperative activity initiated and voluntarily performed by participants of open public.

In other words, crowdsourcing happens when a company posts an issue online, individuals locally offer solutions to the situation, the being successful ideas are awarded some type of a monetary praise, and the company mass produces the theory because of its own gain.

In another article, entitled "Power of Crowdsourcing", by Matt H. Evans, he says that "Crowdsourcing taps into the global world of ideas, aiding companies sort out an instant design process. "

From both definitions, it can be comprehended that crowdsourcing requires a channel that is able to reach out to the masses to work, and the most apparent choice is the internet. This is further complimented by the surge of Blogging platforms 2. 0 technologies, whereby individuals are able to communicate and define the web somewhat than being passive browsers of the net. This makes crowdsourcing even more attractive as it allows companies to utilize the potential great collective intelligence of the masses to accomplish their business strategy. Therefore, e-commerce businesses (businesses that uses the internet to take care of the investing of products or services) are the most likely adopter of crowdsourcing technique for their e-commerce strategy.

E-commerce strategy is the program and courses of action a company undertakes to offer its products and services on the internet to achieve its business goal. For companies that have existing offline operations, e-commerce strategy will likely be focused on integrating its offline functions into an online business. This includes how to best represent the business online, the infrastructure and framework required to do it and the number of activities had a need to promote the business's central activities on the internet.

Another reason that crowdsourcing is gaining popularity is because in today's globalised market, competition in creativity is very brutal and in-house research and development gets more costly. As stated in "The Global Brain", by Nambisan & Sawhney, 2008, "These pushes - rapidly decreasing product life cycles, lowering internal innovation efficiency, and global competition - mutually are setting up a Red Queen effect in technology: Companies have to get more and more just to maintain their market position. " This make crowdsourcing a viable option, as it allows the experiencing the vast intellect of the people, like what ex - Sun Main Scientist, Bill Enjoyment says, "A lot of the smart people on the planet don't be employed by your company. " More importantly, this intelligence can be obtained at relatively low priced.


To understand the current acceptance of crowdsourcing, this newspaper has described PBworks ( http://crowdsourcingexamples. pbworks. com/ ), one of the world's most significant specialist of hosted collaboration solutions for business and education, that includes a wiki that provides a comprehensive list of companies that uses crowdsourcing. As well as the wiki, as the list provided by PBworks is strictly textual, this paper has also referred to Offer Silverstone's article, "Friday Simple fact Container - Crowdsourcing" ( http://www. gottaquirk. com/2010/01/29/friday-fact-box-crowdsourcing/ ), for visual representation of the list. Extracted are two visual breakdowns of industries that use crowdsourcing, one group using simply crowdsourcing as their business strategy, and the other using crowdsourcing as an add-on initiative to their current business, without disrupting their own primary business strategy.

In the graph (Fig 1. 1), it shows the current industry break down of companies using Crowdsourcing as their main business strategy. Corresponding to PBworks, out of the posted 141 companies, the majority, or 43% belongs to standard business, such as marketing, sales, advertising and money. This is accompanied by Design (15%) and then Media (13%), while Tourism accocunts for minimal at 1%.

Fig 1. 1 (Source: Give Silverstone, Friday Simple fact Field - Crowdsourcing)

In addition compared to that, in Fig 1. 2, it shows that of these 141 companies, an enormous majority comes from USA (65%), European countries (13%) and UK (6%), while Brazil, Africa and Russia only make up 1% each.

Fig 1. 2 (Source: Offer Silverstone, Friday Fact Container - Crowdsourcing)

From both of these charts, it can be derived that majority of companies using crowdsourcing initiatives are those in business that traditionally requires large community systems (such as sales, news and marketing) and creativeness capacity (such as design, advert, mass media). While establishments that will require specific skills (such as Education) and are usually more systematic (such as Knowledge and IT) are less favored by companies to consider using crowsourcing as a small business strategy. In addition, crowdsourcing is mainly engaged in traditional western countries, which the overall economy and infrastructure are a lot more developed. That is an important factor as mentioned earlier that a good networking route is necessary for the success of crowdsourcing.

Next in Fig 1. 3, it shows the industry break down of companies that initiated crowdsourcing efforts to complement their current business strategy, with the majority from IT at 33%. Additionally it is interesting to note too that almost each one of these companies in the list are big players on the market, such as Adobe, BMW, Nokia and so on.

Fig 1. 3 (Source: Offer Silverstone, Friday Reality Package - Crowdsourcing)

From the graph and the list, it can be seen that currently, crowdsourcing continues to be a fresh idea and not attractive enough to get companies to project involved with it as a match process with their existing business strategy. However, big companies, with huge resources, do start to see the probable of crowdsourcing and are able to invest involved with it. That is also the reason why IT industry is the major contributor to crowdsourcing initiatives, as they have the knowledge and experience to touch on the internet to maximize crowdsourcing probable.

3. Examples of Business using Crowdsourcing

To know how crowdsourcing is currently being used in businesses and its effectiveness, it is necessary to check out real conditions. The paper will look into 3 companies, each with distinctive ways of engaging crowdsourcing, particularly Threadless, Amazon Mechanical Turk and Cambrian House.


Threadless is a community-centered online outfits store launched in 2000 by Jake Nickell and Jacob DeHart, with $1, 000 in seed money after entering and meeting in an Internet t-shirt design contest. They wanted to get started on their own design competition, but rather than hiring a jury, they decided to allow designers themselves select the winner.

Source: Threadless: http://www. threadless. com

How it works

In the start, people of the Threadless community will send their t-shirt designs online, where the designs are then put to an associate vote. The success would get free T-shirts bearing the earning design, while everybody else would get to buy the top.

Currently, Threadlesss obtains on average, one thousand designs in virtually any given week, of which, only ten designs from the voted top hundred to print out and sell through an web store. DeHart and Nickell also increased the bounty paid to these winners to $2, 000 in cash, a $500 surprise certificate ($200 in cash if indeed they operate in the license), as well as an additional $500 for each and every reprint. This is because limited batches are imprinted and sold-out shirts is only going to be re-printed when there is enough demand from customers requesting for a re-print.

On occasion, special contests will run in colaboration with various sponsors. These contests place a style for designs, with a selection of additional awards, often related to the sponsor, being honored to the chosen champion.

How Successful was Threadless

The Threadless community happens to be 1000 thousand strong, producing about 1000 designs for voting each week. In 2006, Threadless possessed managed to create $17 million in earnings which is still growing rapidly.

Threadless boasts, corresponding to Jeffrey Kamikoff (Threadless Key Creative Official), "extraordinary profit margins". Each shirt that provides for between $12 to $25 is produced at a cost of just $5. Moreover, Threadless do not need to do any advertising or marketing, as the city itself will self-perform such functions. The designers will persuade friends and community members to view and vote for his or her work. Threadless will also rewards the community for many who submit photographs of themselves putting on a Threadless shirt or refers a pal who purchases a shirt with store credits (worthy of $1. 50 and $3. 00 respectively). This crowdsourcing strategy helps Threadless to sell an average of ninety thousand T-shirts a month.

However, Threadless had also suffered by their own success. Their spring and coil sales in March 2008 led to serious server downtime, resulting in the offer of $50 vouchers to inconvenienced customers and the guarantee ". . . to never ever before let this happen again forever ever. " Eighteen weeks later, a particular one day deal to tie into the 09/09/09 date saw Threadless pummeled again by insane amounts of traffic, with users reporting inability to gain access to the site for extended periods - some never getting through. The customer experience was influenced by such a lack of planning of traffic that was to be expected from a corporation coping with such huge social community. It was only from these encounters that Threadless possessed begun to look into better taking care of their wildly fluctuating levels of traffic in their infrastructure.

Amazon Mechanical Turk

Amazon Mechanical Turk is something launched on November 2, 2005 by Amazon. com, which was initially invented for in-house use by Peter Cohen as something to find duplicates among its webpages explaining products.

As of 2010, though still in beta, Mechanical Turk is continuing to grow to be a crowdsourcing internet market for work where businesses (known as Requesters) publish duties (known as People Intelligence Duties or HITS), and employees (known as Providers) complete them for a economic payment that was place by the Requesters. Amazon Mechanical Turk provides businesses immediate usage of a diverse, global, on-demand, scalable labor force and gives Workers an array of thousands of jobs to complete whenever and wherever it's convenient.

Source: Amazon Mechanical Turk: https://www. mturk. com

How it works

Amazon Mechanical Turk, as stated is a market place for duties that computer and machines cannot do, or cannot take action precise enough. These responsibilities can only be achieved by human brains, such as writing reviews or detecting specific objects in images.

The process of Mechanical Turk is first of all, companies will post careers (HITS) at MTurk (Amazon Mechanical Turk Market Place), then deposit the HITS payout amount into their MTurk consideration. Next, workers, who are signed up people of MTurks, can look for duties that they believe that they can perform. After they take up the task, they'll be allocated to it, but there will never be any agreement. These Visits are jobs that are simple enough and quick to perform, with almost all of them having the ability to be completed under 20 to 30 seconds or less and payout at about 10 to 50 cents. After the Strike is completed and published, Amazon Mechanical Turk will automatically copy the money from the Requester's prepaid Strike balance to the worker's Amazon gift idea certificate account. With the payout, workers can choose to either copy the money to their bank account or to their amazon. com surprise certificate balance. For every activity performed, Amazon will take a cut. In addition, Requesters can also give reward to employees whom they like the duty done.

Besides the Official MTurk website, you can find another website, Turker Land (http://www. turkernation. com ), a forum for personnel and requestors to meet and discuss the task at hand. Problems with Hits are mentioned here. The website is independent from Amazon, and it is not related to Amazon at all.

How Successful was Mechanical Turk

Since its unveiling in 2005, the amount of worker members in Amazon Mechanical Turk experienced grown in numbers. By March 2007, there were apparently more than 100, 000 employees in over 100 countries. MTurk is popular with companies as they realize that HITS are an extremely affordable way to outsource large groups of similar duties that are very simple to complete. Companies find the MT "task public sale" model attractive because it reduces payroll costs of experiencing to hire normal workers to execute such jobs.

However, while Companies or Requesters find the price of engaging MTurk to complete HITS attractive, there are numerous criticisms. As HITS are usually simple, repetitive jobs and users are paid often only a few cents to complete them, many have criticized Mechanical Turk as a market place for "slaves". Furthermore, staff are paid as contractors somewhat than employees, requesters enjoy tax advantages and low cost, plus they also avoid laws and regulations regarding minimum wage, overtime, and workers compensation. Personnel, on the other hands, must article their income as self-employment income. In addition, some requesters have taken advantage of workers by having them do the responsibilities, then rejecting their submission in order to avoid paying. Amazon. com will not monitor the service and pertains all grievances to the poster of the Strike.

Nevertheless, because of such criticism, MTurk continues to be attracting employees, especially those living in second and third-world economies, because the impact of earning those few extra dollars will be magnified often over.

Cambrian House

Launched in 2006, Cambrian House started out as a crowdsourcing community that pioneered the thought of harnessing the energy of the audience to generate ideas for websites and software products. Its mantra is ""You imagine it; crowds test it; crowds build it; you sell it; you profit".

Source: Cambrian House: http://www. cambrianhouse. com

How it works

Cambrian House phone calls itself "a community of men and women with broad abilities and interests to set-up web-based products that the world wants, markets those products, and shares in the gains. " They focus on people with no time to follow new ideas or anyone with a eye-sight and motivated to post ideas.

The way Cambrian House works is, firstly, Individuals register and create a profile of their features in its website. They can then get involved within the city by initiating ideas. The community will test these ideas and present the authorization on those that are feasible. Next, Cambrian House staff will create a "brochure site" to test the winner's recognition and usability within the community. If the idea survives, the contributor will then seek people with interest and skills locally to create or co-develop the commercial version of the idea, by awarding them with Royalty Factors (the total amount you receive for coming up with a genuine idea) or Cambro (Cambrian House's currency, 1 Cambro = $1 USD). Cambrian House will account the project and if needed, they can also seek additional funding from the city. Once the product is established, the project champions can then seek marketers, business development pros, and or SEO (Search Engine Optimization) experts in the Cambrian House community to cope with the promoting, advertising and delivery of the merchandise. Finally, once the product starts to market, every member that contributed will earn Royalty Items or Cambro that had been negotiated with the business champion.

In short, every member in the Cambrian House community can take part by not simply offering ideas but also in delivering members' ideas to life. A couple of no limits to volume of projects users can sign up for. During every development stage, everyone included will also take part as peer-reviewers at go for "decision gates" on the way to gauge the individual's contribution.

Although Cambrian House crowdsources the conception and creation of its products, ideas are at the mercy of editorial review by way of a main team and genuine production is at the mercy of a set of quality guidelines. In the case of conflicting code or design contributions, the community chooses which the best is.

An example of how Cambrian House entails in every project is its first product (a gaming) that was emerged from the community forums and appeared popular, so it risked $8, 000CAdvertisement on an initial website to market the game. It sailed through the "market test" reselling hundreds of pre-orders at half-price ($9. 95CAdvertisement) in a single weekend. That response encouraged Cambrian House to invest more for the next development stage.

Cambrian House's eventual goal is to carefully turn each job into another, independently funded organization, but only after it's been market-validated.

How Successful was Cambrian House

The original Cambrian House community was regarded successful as it were able to achieve the most important element of crowdscourcing by getting 50, 000 plus customers and much more than 7000 ideas from the crowd.

However, Cambrian House did not realized that although the crowd was great at considering and evaluating, it was less interested when it emerged to the building component of Cambrian House's model. Additionally, there are weaknesses in the idea-community model such as the challenge of convincing users to review and vote a speedily growing pool of ideas, which some are of relatively low quality, the management difficulty of sent out development, and the large number of duplicate submissions.

After unsuccessfully trying to raise a fresh round of capital, in May 2008, Cambrian House released the sales of much its possessions to the brand new York-based venture capital company Spencer Trask. While Cambrian House will carry on as a seller of Crowdsourcing software, its existence as a crowdsourcing community got come to a detailed.

In reflection, Cambrian House CEO Michael Sikorsky areas in a notice (excerpt)

"Indeed, our model failed. In a nutshell: we became a vacation spot people enjoyed to bookmark more than they cherished to actively visit. The limiting reagent in the startup formula is not ideas, but amazing founding groups.

A key assumption for all of us, which proven out NOT true: given a great idea with great community support and great market test data, we'd be able to find (crowdsource) a team eager to execute it OR we're able to execute it ourselves. We needed amazing founding teams for each and every of the ideas - that's where our model fell short.

What we learned: it could have been better to back great teams with unpleasant ideas because almost all of the heavy lifting stored falling back on us, or a few go for community participants. A vicious cycle was made leading all of us to get more plus more diffuse.

Hence: the knowledge of crowds worked well well in the model, but it was our contribution of crowds aspect which broke down. Looking for people prepared or competent to take on the offspring (our outputs) of the Cambrian House model was hard and/or extremely time consuming. " (Michael Sikorsky, 2008)

The lesson from Cambrian House would be that the group only is insufficient as it requires to be supervised and needs an inspiring head to steer it.

6. How do Crowdsourcing be a highly effective E-Commerce Strategy?

After looking at this is and situations of crowdsourcing, it is comprehended that crowdsourcing has the potential to help e-commerce businesses gain competitive benefit, but like all business strategies, it is does not assure success. Nevertheless, crowdsourcing can be effective as an e-commerce strategy by aiding companies in 5 ways.

Crowdsourcing, first of all, can help companies to do market prediction utilizing the crowd to understand market dreams. Companies may use the crowd to test the appeal of any home based business ideas. Besides that, companies can are based on the crowd, rising market wants and trends.

Secondly, in addition to the understanding of market desire, companies can pull information from crowdsourcing for product and business invention. Predicated on information attracted from the masses, companies can prioritize home based business ideas, execute product tests, get ranking next best enhancements with existing products and uncover methods to keep your charges down and improve service.

Thirdly, as stated, the knowledge of the masses is very powerful. As such, crowdsourcing is a good option to resolve problems that are difficult to solve internally with the companies' current resources, by welcoming answers or solutions from the audience. Companies can also collaborate with the masses to find new scientific discovery.

Fourthly, besides resolving inner problems, crowdsourcing can also help tackle exterior issues, such as marketing. Companies can request crowd to help in the creation of campaigns.

Lastly, crowdsourcing is relatively much cheaper than hiring workforce for doing similar jobs. As companies just need to prize those who had added in the crowd, and it is usually not of huge amount, crowdsourcing can help companies to cut cost.

With the aforementioned it mind, crowdsourcing effectiveness will depend on how and under what environment it can be used. Based on everything gathered, the newspaper has come up with a few tips to effective crowdsourcing.

Firstly, the group that crowdsourcing wishes to tap into must be of large size. For example, if Threadless has only a member bottom part of 100, and keeps its process of choosing ten receiving designs every week, it'll come a time whereby members might weary or doubt the integrity of these winning designs. Furthermore, one of the characteristic of crowdsourcing is that the audience is to stand for the market, consequently, the larger the community or audience, the better the representation it'll be.

Secondly, companies must understand the crowd. When companies use crowdsourcing, they're usually targeting a particular community, which is made by the common interest. Therefore, if companies want to crowdsource, they'll need to know the community talents and weaknesses. For example, if Threadless decides to request its community to submit education works, it might not get anything or the works might be of inferior qualities.

Thirdly, companies need to really know what they need and need from the masses. That is one essential aspect that determines the potency of crowdsourcing. For instance, in Amazon Auto mechanic Turk, if requesters post HITs with ambiguous requirements, the employees may have difficulty understanding what's needed of these and offer works that are irrelevant or never to the intended requirements. This may cause many rejected duties, which is a waste materials of time of the companies and masses, thus creating inefficiency.

Next, companies need to identify the efforts of audience. Monetary pay back is ways to recognize the crowds contribution, but usually audience works mainly not for economic reason. Participants of crowdsourcing are often leisure users, whose main inspiration to participate is usually to be recognized and feel they can be area of the community. The more associated they feel towards the community, the more inclined they'll be in providing assist in tasks shown.

Lastly, companies have to have adequate resources to manage the public and support the output from the group. This is one mistake that lots of companies make when they do crowdsourcing, as they thought the group can contribute atlanta divorce attorneys part of their business plan. That is generally not the case, as experienced by Cambrian House. As mentioned in the previous point, the crowd is usually made up of leisure individuals, as such, they'll be more willing to engage in task that requires less effort like providing ideas and suggestions, when compared with more tedious process like building the genuine product which will be avoided.

7. Conclusion

The above talk has shown that crowdsourcing, when used effectively can be highly effective as an ecommerce strategy. With the ability to tap into the power of the crowd for knowledge which is almost unlimited at suprisingly low cost. Just like Threadless, by keeping the group encouraged, business will grow as knowledge from audience grows.

However, it's important to note that there are situations where crowdsourcing is not possible or impractical. First of all, careers that are confidential in mother nature, such as legal professionals and accountants, and high level jobs, like business process planning, aren't possible to be crowdsourced.

As shown by Cambrian House, the masses must be watched by the company and provide resources when needed for successful manifestation of ideas. So, it is not possible to fully crowsource a business process to the group. Internal workforce continues to be needed as the group might not grasp the companies' business models and goals and these inner employees have the ability to monitor and ensure the crowds contributions are within the companies' guidelines and process. Moreover, too much reliance on the masses could be construed as unethical and wide open the business up to criticism about the real characteristics of its social mission. Through the use of Amazon Mechanical Turk, many companies have been seen as operating "virtual perspiration shops". Therefore, physical workforce is needed to balance the image of the business.

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