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The Connected Web

Phil Wainewright

The Scary Economics of Crowdsourcing

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One of the emerging phenomena associated with Web 2.0 — and one of the themes of the Enterprise 2.0 conference, which I'm here in San Francisco to attend today and tomorrow — is the notion of 'crowdsourcing'. This is the use of the Web to find people to complete work projects through an open competitive auction process. Dion Hinchcliffe had a long post on its relevance to enterprise here on ebizQ a few weeks ago and as I read through and explored some of the links I started to find it all rather scary:

"... idea generation, design work, execution of business processes, testing services, and even customer support. All of these can now be connected, often programmatically, directly to a company's supply chain ... most companies have ready access to crowdsourcing across a wide set of functional areas, to the extent that it's often the easiest thing for them to try before going the more expensive outsourcing route."

What I found scary was the massive commoditization and deflation of costs that these crowdsourcing options were enabling. It's now possible to go out and find brilliant designers working from Asia who will deliver high-quality creative work for a fraction of the price you'd pay your local design shop. Electronics manufacturers and games developers can tap the skills of teenagers as crowdsourced part-time helpdesk advisers. The systems are now sophisticated enough to make sure everyone gets paid a market rate for the work they put in, but those market rates are lowered by the global and fragmented scale of competition, in which anyone with the skills and available time can offer their services.

Wired magazine recently carried an article about a company that is harnessing crowdsourcing with automation and intelligent algorithms to build a multi-million dollar business. The Answer Factory: Fast, Disposable, and Profitable as Hell has some very scary passages, such as:

"That's not to say there isn't any room for humans in Demand's process. They just aren't worth very much ... It's the online equivalent of day laborers waiting in front of Home Depot ... Nearly every freelancer scrambles to load their assignment queue with titles they can produce quickly and with the least amount of effort — because pay for individual stories is so lousy, only a high-speed, high-volume approach will work. The average writer earns $15 per article for pieces that top out at a few hundred words, and the average filmmaker about $20 per clip, paid weekly via PayPal."

If this is the future of work, it's going to ruin quite a few people's careers, even while it makes others. I don't think it's stoppable, and it's going to be a scary ride.


Phil: Always making us think deeper, as usual...

There's even a component of crowdsourcing -- being employed by telecoms and others -- in which support and customer service is dispensed FREE to the community, via the most active members of the community. Some companies are discovering that if they play their social media cards right, community members dispense much more timely and credible advice to customer questions than their own support personnel.

Of course, this is a two-edged sword, in that they can't control the opinions of community activists.

Although I am encouraged about many of the potential benefits of this product-to-market approach (i.e. "market rate" for everyone, cutting through overhead, offering a lot of opportunity to people who might not have it otherwise), I am concerned about how this process will devolve the quality of life for the suppliers (i.e. the workers).

Market rates can work well when the world is fairly uniform in terms of standard of living, benefits, etc. However, market rates can really devolve society when the needs of the workers are so different.

For example, suppose I'm just out of college, have updated skills, no family to worry about, no health issues, and I live in an area of the world where a person can survive on $5 a day. I can probably offer a wonderful price for my services compared to someone who is trying to raise a family, deal with health issues, etc.

Through time, one ends up cutting short those individuals who actually make long term contributions to society rather than grabbing a couple of bucks to feed an individual face today.

It really is discouraging. As an IT person who is not in management, it just doesn't seem to be worth the effort to create technology any more... it's much more profitable to manage the efforts of the laborers.

Phil Wainewright blogs about how businesses are using the Web to get better plugged into today's fast-moving, digital economy.

Phil Wainewright

Phil Wainewright specializes in on-demand services View more

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