In June 2006, Jeff Howe, an editor at Wired, published one of the first major features that documented the newfangled world of crowdsourcing. Back then, the online labor market was still nascent--Amazon, arguably the first in the industry, had only just unleashed its Mechanical Turk Marketplace in 2005--but there was an abundant supply of optimism about crowdsourcing's potential to fundamentally alter the dynamics of the world's labor markets.

Howe wrote:

Technological advances in everything from product design software to digital video cameras are breaking down the cost barriers that once separated amateurs from professionals. Hobbyists, part-timers, and dabblers suddenly have a market for their efforts, as smart companies in industries as disparate as pharmaceuticals and television discover ways to tap the latent talent of the crowd. The labor isn't always free, but it costs a lot less than paying traditional employees. It's not outsourcing; it's crowdsourcing.

Seven years later, it's worth asking: Has crowdsourcing really lived up to all the hype? That may be a difficult and potentially premature question to answer, but let's look at what we know.

Where's the Data?

On one hand, there's the data put forth by organizations like Crowdsourcing.org, which is one of the few groups that track the financials behind the crowdsourcing market. According to Crowdsourcing.org's founder, by 2012, VCs had plowed more than $300 million into crowdsourcing companies. And by January of this year, Crowdsourcing.org was reporting that in 2011, revenue for crowdsourcing providers was $376 million--up from $215 million in 2010 and $141 in 2009. In total, the organization's research found that there were approximately 6.3 million workers spread through the crowdsourcing market. Such signs suggest it's a robust and growing market.

Of course, those stats are coming from an organization dedicated to promoting the industry's success. Felix Salmon, writing for Reuters, has taken the same organization to task before for inflating statistics on the crowdfunding industry. Salmon details how researchers left the definition of crowdfunding sufficiently vague so as to include all manner of fundraising organizations. This is just to say that the figures we're dealing with may be somewhat exaggerated--or at the very least miscalculated. But since the Bureau of Labor Statistics has yet to begin tracking the proliferation of task-based online workers, it's pretty much the only source of data on the subject. So while there's no shortage of research on the uses and implications of crowdsourced labor--there's pretty much no third-party research on how its actually affecting the U.S. labor market. (If you know of such a report, please send it my way.)

A Shake-Up Is Coming

Yesterday, one of the leading companies in the crowdsourced labor market, TaskRabbit, confirmed recent layoffs. Growth has been slower than expected. The downsizing--though couched in the comforting euphemism of a "realignment"--may indicate an ominous shift in the reality of online, crowdsourced labor: It's not as massive an opportunity as entrepreneurs and investors may have once believed. Indeed, competitors are feeling the heat, too. Zaarly has shifted from the task-outsourcing business to online storefronts. Exec recently raised its prices for errand services to improve its margins and has increasingly focused on the house cleaning business. 

Even so, there is no shortage of entrepreneurs forging ahead into the crowdsourcing space. The number of services that offer a bridge between labor supply and a customer demand has boomed. Check out this lengthy list compiled by one Quora user of the many services that do just that. 

This isn't to say that these services don't provide a utility for the seasonally unemployed (or underemployed) workers. But crediting crowdsourcing for a paradigm shift in how the economy works is more than a stretch. There simply isn't enough data to make the case, despite what the optimists say.

In 2009, for instance, one of the most detailed and sophisticated white papers on the crowdsourcing market came to the conclusion that "Paid crowdsourcing will surely be as common place in 10 years as eCommerce is today" and "Vendor revenues will pass $1B in five Years." Or as the Crowdsourcing.org report puts it:

Enterprise crowdsourcing systems allow enterprises to buy labor on a per-task basis, fundamentally changing the cost-basis of outsourced work. In place of full time equivalents, companies are now able to pay only when tasks are actually completed to a satisfactory level of performance--a paradigm shift to 100 percent output-based pricing rather than input-based.

Who knows if or when that will ever actually happen. Right now, crowdsourcing is a cost-efficient mechanism for some companies to recruit cheap workers to do simple tasks. (Some human rights critics argue the majority of crowdsourced labor is nothing more than a "digital sweatshop.") It's also a great way to earn a few extra dollars cleaning up someone's yard, as Brad Stone found out. But until there's conclusive data on how these crowdsourced start-ups have truly shaken up the labor market--not to mention whether or not they're built to last--let's curb the hype just a bit. 

Published on: Jul 10, 2013