Crowdsourcing as a Business Model

I have written on a few occaisons about crowdsourcing, how it works, and the benefits of it. On a tip from a commenter, I checked out a recently launched company called Local Motors. Local Motors has started their business using crowdsourcing as their main means of automobile design, in their own words, a “Web 2.0 Business Model”. They allow users to submit designs for cars based on “Competitions”. A past competition was to design “A Californian Off-Road Machine” and $1,500 (plus merchandise) went to the winner (see all entries here). The next competition is a presentation competition with a grand prize of $10,000.

Local Motors Winner

It never ceases to amaze me how great an idea crowdsourcing is. 1) Come up with something that you need designing for. 2) Turn it into a competition between amateur and professional designers. 3) Decide on a winner, either by vote or executive decision. This is all at little to no cost for the person looking for the design. For example, the average salary of a car designer is between $50K-60K per year. Local Motors just had a concept designed for $1,500. Could it be any easier?

It makes me think about the future of the graphic design idustry in general. What will be the fate of large design firms that are competing for the business of high profile clients when the clients are now paying tiny, one-time fees to amateur designers? They must be starting to feel the pressure.

So what do you think? Is basing your business on crowdsourcing a viable model? Let me know.



4 Responses to Crowdsourcing as a Business Model

  1. jrogers says:

    J here…from LM. I love the post. We agree on the sublime potential of crowdsourcing. It is not as “cheap” as you make it out to be. First we will run more than 10-12 competitions just this year, and the prize money is only one “small” part of the cost of the backend and maintaining/growing the site. Think several $100K just for a minimal site when a real product is going to be made. The real potential is not just the sourcing of the idea, but that it builds a community and a buzz while you are doing it…. this is PRICELESS. Great stuff.

  2. griffmcg54 says:

    Thanks for the extra info on your company. I do realize it takes a lot to run a business like yours, it was more of a comparative to larger corporations which can spend millions on design. I think it’s awesome that you’ve chosen to do it the way you have. Truly innovative. And I totally agree, the buzz and community that you will create is amazing. Keep up the great work.

  3. Sherif says:

    I thnk crowdsourcing is a great business model, it might need some extra modifications to get the best of it, however, It benefits both the business and the contributors as well if there are appropriate incentives and rewards for the contributors.

    Good article and research!

  4. skeptical says:

    As appealing as a user-designed car may be, why is it that a group of enthusiasts would create a better vehicle than a team of engineers specifically trained for the task? Creating cars is not like building your own burrito, it takes technical expertise. The sum of enthusiast preferences is in now way guaranteed to create a better, or even functional design. Frankly, the Panterra is a great example of this. The visibility looks so low i’d be amazed if it were street-legal a year after release. I think this production concept needs to be rethought.

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