Crowdsourcing is a term for a phenomenon that has existed in some form or another since the earliest days of the Internet, and before — but has only recently begun to realize its full potential. Crowdsourcing refers to using lots of amateurs to accomplish set goals for a company or organization.
While these amateurs might be paid a small amount, in many cases crowdsourcing relies primarily on volunteers. Usually these are fans or devotees of the product or service, or people who just enjoy solving the sorts of problems laid out for them. Big companies have realized in the past few years that they can benefit enormously from utilizing these huge pools of talent and imagination, rather than limiting themselves to small groups of professionals.
One way in which crowdsourcing can work is simply by reaching out to an existing community of fans or enthusiasts to find new ideas at no cost. Many role-playing companies, for example, have been using a crowdsourcing model for many years, finding new ideas for games and supplements by appealing to their fan communities. Rather than hiring a full-time team of a small number of idea people, these companies can instead cull through thousands of ideas from devoted fans, ensuring a much richer variation with no direct cost.
Another model for crowdsourcing is to use small prizes as an incentive for ideas from a large pool of ideas. A research and development wing of a company, for example, might post a technical problem they are having to a website. They might then offer a decent monetary prize for the best solution to this problem. The word of the contest will then spread through the ranks of those qualified to come up with a solution — in some cases companies keep directories of scientists on hand. The winner will then be paid for their work, and the company will have solved their problem much more quickly and cheaply than they could have by paying for their own research and development team.
Still another type of crowdsourcing pulls in content and sorting from its users. This allows a company to build an entire product line with essentially no production work on their end. Many online t-shirt companies follow this model of crowdsourcing, with members uploading designs for shirts, which other users then rate. The member who uploaded the design gets a portion of the profits, and the company keeps the rest. This way they have no initial outlay from paying designers, and content is quickly sorted and ranked by other users. This has been done with many things quite profitably on the Internet, including books, music, and stock photography.
The term crowdsourcing was first coined in 2006, and it seems apparent that the tapping of its potential has hardly begun. There is an enormous creative and technical population in the world, many of whom have interesting ideas or skills, and crowdsourcing allows companies to profit from their work — often giving them a healthy living in return — at a fraction of the cost of a more traditional business model.