Is the Crowdsourcing Debate Finally Over?

By all accounts, 99designs has been a runaway success. The company’s biggest problem is the pesky “debate” that will just not die, over whether crowdsourcing is an evil phenomenon that puts designers out of work. An unpaid workforce cranks out designs for free, creating a race to the bottom on price, while designers don’t get what they’re worth. These sentiments come up over and over again.

Naturally, 99designs has a stake in this game. The company, which raised $35 million in venture backing last year after bootstrapping it since 2008, has paid out more than $35 million to designers (now topping $1.5 million per month), hosting 143,000 contests with one design uploaded every five seconds. It continues to grow at a rate of 70 percent to 100 percent a year.

I asked CEO Patrick Llewellyn if he expects to fight with crowdsourcing-haters for the rest of his company’s existence, and he thinks we’re at the tail end of the debate. Five years in, the idea is gaining increasing mainstream support.

“If you look at guys like iStockphoto or Shutterstock, for the first five years of their existence there was lots of discussion around their crowdsourced model, and today, you don’t hear that so much,” he says. “In the early days, there was a small noisy minority. But now they’re doing hundreds of millions in revenue and paying out hundreds of millions in payouts, and people view it as a legit way to make money.”

99designs is hoping for the same for the design industry. So it makes sense the company wants to stay on top of sentiment toward the idea.

99designs has exclusively shared with PandoDaily its first survey of 1,500 small businesses, some which have used 99designs and some which have not, and the results not surprisingly support the company’s thesis.

But here is the other thing the survey shows: 99 Designs is so perfectly positioned to capitalize on so many economic and cultural sea changes that the debate has become meaningless. In other words, crowdsourcing is a thing — it’s infiltrated video, advertising, photography, and design. And it will not be going away.

The first trend: Small businesses of all kinds are running lean.

Within the startup world, lean is a euphemism for “smart,” or “pragmatic.” If you ask designers, you’d think “lean” translates to “cheap.” A custom logo can cost anywhere from $5,000 to $10,000, and yet 57 percent of the small businesses surveyed by 99designs said they’d pay just $500 for a new logo. Only 14 percent would top $1000, the minimum price for a contest on 99designs.

The second trend: Design is damned important.

We all read that designers are the new rock stars, so much so that venture firms are hiring in-house designers as a perk for their portfolio companies, and design shops are sourcing startup ideas. (Or at least one is: design shop Fictive Kin is now formally working with Betaworks to think up ideas. Likewise, 49 percent of the companies surveyed said design was “very important” and 31 percent said it was “moderately” so. Nearly 70 percent said it would become an increasingly important in the next five years, and a third of them said they’d plan to spend more on design this year than they did last year.

As the demand for design rises, it is difficult to find a good designer. Only 18 percent of those surveyed had tried crowdsourcing; 27 percent do it in-house and another 27 percent go DIY.

Startups especially know how important good design is. It can make or break a mobile app. It’s why app builders worship Path, even if they don’t find it very useful. Startups know this, and they aren’t shy about using crowdsourcing: Task Rabbit, Yardsellr, Cloudera, and many others have sourced their very first logos from the company. In fact, 39 percent of the companies hosting contests on 99designs are Internet, tech, or computer-focused.

The third trend: Local businesses are increasingly image-centric.

Even if you’re just a single location restaurant, you better have a presence on Twitter, Facebook, Tumblr, and Foursquare. And that Menupages website is just not gonna cut it. Your competitors interact online with customers every day, so you better do it too. That online presence requires a look and feel that is different on each network and certainly different from your menu and front door. As the online requirements for small businesses increase, so do their design needs. Without a cheap option, they would do it themselves. Again, crowdsourcing is the best option. 99designs is seeing an increase contests for things like Twitter backgrounds and Facebook cover images.

Ultimately, Llewellyn sees his platform as a way to introduce designers to new avenues for their work. Anecdotally, 30 percent or 40 percent of contests lead to freelance work, he says. “There are people making $10,000 a month as freelancers incorporating contest work and freelance they’ve gotten from us.”

This piece provided through our content partnership with Pando Daily.

Erin Griffith covers New York startups for PandoDaily. She’s worked as staff writer for Adweek and a private equity blogger for peHUB. Her writing has appeared in VCJ, Time Out New York, Huffington Post, FT.com, and BUST. She plays keyboard in a band called Team Genius and Tweets as @Eringriffith.

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