'

'Crowdfunding': a classic strategy with a social media twist

Turning to the 'wallets of the crowd' for financing arts and other small projects.

Social networking has not only opened up innovation from across the Internet via crowdsourcing -- it also opened up new ways to acquire funding.  The trend, called "crowdfunding," is considered a new avenue for smaller creative projects, especially in the arts and music sphere, to access funds from contributors previously out of reach.

The crowdfunding phenomena, as recently documented in Knowledge@Wharton, helps get projects off the ground by tapping support from fans and other interested parties.  This has long been practiced by politicians and charities, but now "the adoption of social networking makes crowdfunding feasible even for the average citizen with a dream and some creative talent."

There are a number of crowdfunding Websites that offer venues for posting details about projects. Supporters can donate any amount, from a dollar up, while the donation period is open. The crowdfunding sites collect a percentage of the donations, usually up to five percent. Examples of sites, in this case catering to musicians, include IndieGoGo, Spot.Us, Pledge Music, ArtistShare, and Kickstarter. It is reported that Kickstarter made $2 million in commissions over the past year.

Kendall Whitehouse, Wharton's director of new media, reiterates that this is a time-honored idea that now has a social media twist:

"In some ways, it's back to the future; it's history repeating itself. This was how most art was funded in the 17th and 18th centuries. A wealthy patron would pay to have music composed, for example. The difference now, of course, is that instead of receiving the entire sum from one wealthy individual, the artist gets a little bit of money from a lot of contributors. In return, donors get something in kind, such as a signed CD, a T-shirt, or -- for a larger donation -- credit as a producer on a film or the thrill of having a song composed especially for them. Such deals are easier to do in the digital age. It's the web's ability to communicate to a large fan base and then aggregate a significant number of small donations that makes this work well online."

This post was originally published on Smartplanet.com