Crowdfunding ☆

When starting projects, all you need is creativity and planning.. right? Sadly, this is not the case because you'll always need money! Crowdfunding is one of the solutions to earn that money to support your project/cause.

Before we get into this, let's lay down some definitions first to familiarise ourselves with this topic.

SOCIAL MEDIA

Social media refers to the ways by which individuals connect in virtual communities and networks to create, share, and/or exchange information and ideas. (Tufts University 2021)

CROWDFUNDING

Crowdfunding entails soliciting small sums of money from a large number of individuals, generally through the Internet and social networks, in order to fund a project. (Borst et al. 2017)

THE ONLINE WORLD

In general, the internet or everything related to computers and technology. (PCMag n.d.)

DEMOCRATISING

To introduce a democratic system or democratic ideas. (Oxford Languages n.d.)

In what ways can crowdfunding be considered a democratising force?

Economic value: Successful crowdfunding projects create economic value by providing access to monetary resources. (Lehner 2013)

Social value: Social value in crowdfunding consists of, for example, the formation of an ad hoc community or the extension of an existing community around a given project (Hui et al. 2014)

Cultural value: Nonetheless, for most projects, the realization of social and cultural value hinges on access to value created by monetary resources. (Borst et al. 2017)

Which parties benefit from its emergence?

It aids creative entrepreneurs because it is a significant source of economic value generation. It also benefits funders who are driven to contribute because of the project's aim. Furthermore, the emergence of crowdfunding benefits crowdfunding platforms by providing a forum for project creators to display their ideas and funders to support them. (Borst et al. 2017)

What limitations and/or problems are found in crowdfunding practices that makes it not a democratising force in all cases?

Limitations/Problems

• Social media have a rather ambiguous role in the community building process. (Lehner, 2013)

• Social media have also been shown to stimulate “herding,” where new donors are likely to copy the behavior of prior donors through peer influence, an important driver of crowdfunding success. (Agrawal et al., 2015; Zhang and Liu, 2012)

• Social media also amplifies the “bystander” effect. (Agrawal et al., 2013; Mollick, 2014)

The "bystander" effect is when potential donors delay funds because they believe that others who have also received a fundraising request will offer funding, the project performs poorly.

The algorithm used by GoFundMe to display fundraisers can be unjust at times. Fundraisers that are shared more frequently or made by more popular individuals, for example, are more likely to be viewed by potential donors, which may mean that financing from the crowd does not go to some extremely important causes.

As a result of this example (GoFundMe) and important principles, I was able to gain a better understanding of crowdfunding as a democratizing force and the impact it has on the parties involved.

References

Borst, I., Moser, C. and Ferguson, J. (2017). From friend funding to crowdfunding: Relevance of relationships, social media, and platform activities to crowdfunding performance. New Media & Society, 20(4), pp.1396–1414. doi:https://doi.org/10.1177/1461444817694599.

Brabham, D.C. (2017). How crowdfunding discourse threatens public arts. New Media & Society. 19. 10.1177/1461444815625946.

Gerber, Elizabeth & Hui, Julie. (2014). Crowdfunding: Motivations and Deterrents for Participation. ACM Transactions on Computer-Human Interaction. 20. 34-32.

PCMAG. (n.d.). Definition of virtual world. [online] Available at: https://www.pcmag.com/encyclopedia/term/virtual-world#:~:text=(1)%20In%20general%2C%20the [Accessed 30 Aug. 2023].

‌Tufts University (2021) Social Media Overview, Communications. Available at: https://communications.tufts.edu/marketing-and-branding/social-media-overview/#:~:text=What%20is%20Social%20Media%3F,Instagram%2C%20LinkedIn%20and%20YouTube%20accounts.(Accessed: 23 August 2023).

Louise Gaille (2019) GoFundMe Pros and Cons. https://vittana.org/17-gofundme-pros-and-cons