How Facebook, Google & Others Use Free Labor to Save Millions
With the nation’s unemployment rate hovering around 8 percent, many individuals are struggling to find solid 9 to 5 jobs as a form of gainful employment. There are several oft-discussed reasons for these figures, such as the president’s fiscal policy, the monetary policy of the Federal Reserve, and structural shifts in the foundation of the American economy. The latter is normally detailed as a decline in labor-intensive industries such as manufacturing and construction. There is truth to this, as well as to its corollary—that employers are finding less expensive labor outside the normal hiring corridors. Yet, this trend is not limited to big businesses finding cheap computer experts and phone operators in China and India. In fact, it is increasingly likely that traditional office work is being outsourced to your neighbor.
In an employment phenomenon that throws out W-2s in favor of YouTube, major corporations are looking to everyday customers to help them out through a process called crowdsourcing. Based off the model that helped Wikipedia eclipse Encyclopedia Brittanica—while paying its contributors 100 percent less—crowdsourcing allows companies to deconstruct tasks into minuscule, manageable parts that can be delegated to a large swath of electronically active people.
When one thinks of “crowdsourcing,” an alien, Silicon Valley-esque name like Kickstarter or iStockphoto immediately comes to mind. In other words, one may think that it is a concept best left to the angel investors and venture capitalists of the world. Contrary to popular belief, however, most large companies employ crowdsourcing to some degree. A wide variety of business models use the technique in some fashion, from foundational components to the platform to replacement for the obsolescent R&D teams. Here are some companies that have adopted portions of the model.
Facebook and LinkedIn are two of the online social media sites known to crowdsource the laborious task of translation—a task that used to cost companies millions of dollars. Translation companies usually charge around ten cents per word, and are wont to ask for prodigiously more when it comes to some of the obscurer lexicons (think Tatar or, perhaps, Pirate English). Five years ago, Facebook decided to look toward its broad user base for help with the project. The idea worked—4,000 eager members translated the entire site into French in under twenty-four hours. The publicly traded company now offers its services in over seventy languages, a number that continues to grow as amateur translators tackle the assignment. This method of shifting tongues removes high costs that would normally prevent a company from even bothering with languages outside a certain user threshold. While it is undeniable positive for stockholders who benefit from the ability of Facebook to expand into isolated regions, it imperils the previously irreplaceable translation business that had been booming from rapid globalization. To learn more about the troubling future that may be in store for the social media giant, continue reading here.
Facebook has attempted to patent the notion of crowdsourcing translation, but dozens of other online platforms are currently using it to improve their consumer interface. LinkedIn found itself embroiled in a public relations snafu when it asked users who listed “translation” as part of their skillset how they could be enlisted to help out the site. The company provided users with a multiple choice question that did not include monetary remuneration, presumably because the point of crowdsourcing was to save money.
Google (NASDAQ: GOOG)
Google has also jumped on this bandwagon, recently introducing a plug-in that allows website owners to control how their site is translated in other languages. While Google may have joined the translation train fairly recently, it is not new to the world of crowdsourcing. It is hard to determine how much of the Mountain View company’s work is really done by unpaid users. (This is not to say that the brains in the Bay Area are not responsible for the rate of innovation).
Google has long relied on homegrown artists to submit “Doodles” for their logo design (a practice not uncommon at the nexus of marketing and crowdsourcing), and their biggest endeavor in the field undoubtedly revolves around Google Maps. The Map Maker tool allows anyone to construct details about their surroundings and place 3D buildings in the database, a breakthrough that has impelled Google to partner with the World Bank. One does not have to try particularly hard to be a member of Google’s crowdsourcing team—if you let the company know your location on your phone, you are intrinsically providing it with traffic data (based off information such as how fast your moving) that it uses to calculate the travel estimates it gives to its users.
YouTube, a Google subsidiary predicted to bring in over a billion dollars in revenue this year, operates solely on the notion of crowdsourcing; the site’s entire content library is created by users and uploaded by users. Similar but more focused ventures include Google Art Project, which allows users to see high-resolution photographs of the world’s greatest masterpieces, and the Dead Sea Scrolls, a document that had previously been nearly impossible to access. Google employees are increasingly involving themselves with the tough stuff, while leaving the grunt work to enthusiastic free laborers who benefit from the product itself. For a better idea of how to value Google as an investment, this piece is worth scanning.
Dell (NASDAQ: DELL)
One of crowdsourcing’s most widely renowned tools for innovation is Threadless, a platform that encourages the consumer to double as the designer. The website has attracted a community of over a million members who craft products—usually T-shirts—and subsequently vote on the quality of their work. After several years mired in the hipster community, Threadless attracted some big name callers, such as Urban Outfitters and Target who both wanted the online innovators to assist in their product innovation. The decade-old e-commerce giant turned down these considerably “uncool” offers, but agreed to partner with Dell, who obviously meets the “hipness” threshold. Users can now use the site to personalize their laptops, laptop sleeves, and switch lids. Dell has been so committed to the crowdsourcing approach that it launched its IdeaForm program that seeks royalty-free brainstorming from the general public. While the winning design on Threadless warrants $2,000 and a $500 gift card, Dell values its cost-free style in replacing the research and development team with active social mediacs.
Although Dell may be unique (and somewhat envied if the clothing retailers above are any indication) in its partnership with a community T-shirt designer, it is not alone when it comes to seeking free research help from its consumers. Procter and Gamble uses its Connect + Develop program to facilitate what it deems “external collaboration,” which it cites as the inspiration for 50 percent of its products. It recently announced a 30 percent increase in marketing expenses through reinvestment in the program that produced industry gems such as “laundry detergent compaction.”
Advertising is also a component in which companies can easily seek outside assistance—PepsiCo’s Doritos famously handed responsibility for their SuperBowl commercials over to creative fans of the chip. Doritos prompts users to create a (soon-to-be) viral video about a particular flavor, share it online, and anxiously await the results. A product’s campaign is no longer left up to Madison Avenue types who claim to comprehend human psychology. Now, the average humans have a say in it too, while giving the company a cost-saving mechanism based on greater value for the consumer. The next step is for the Doritos fan to help make the chip—history suggests that day is not far away.
Disclosure: The author has no holdings in the stocks mentioned in this article and has no plans to initiate any positions within the next 72 hours. He does, however, have the intention of rating these stocks on WealthLift.com, a social media website where investment ideas are shared openly and free.