The concept of crowdfunding has been around for a few years now, and it is gaining popularity. In this process, funds are raised for different projects, purposes or developments and it can involve billions of dollars. So accurate predictions for these types of campaigns are important. Big data and analytics play an important role in this area. With social media promotions, market dynamics and other activities, lots of data is generated, which is known to have an extremely important role in analytics. Data scientists are able to predict the success of campaigns based on past analytics results. Here we will discuss the influence of big data in crowdfunding predictions.
What Is Crowdfunding?
Crowdfunding helps individuals, groups or organizations to raise money for different purposes. Crowdfunding also helps in the development of a project or execution of an idea. Friends, relatives and other interested people can donate money for the project or idea through a variety of means. Often, crowdfunding is done through internet-based services, but other methods are available too, for example benefit events and money orders.
Crowdfunding involves three main entities: the initiator, who proposes their thoughts to the public; the supporters of the idea or project, who actually help the initiator by raising money; and the mediator, who brings the two parties together and acts as their communication channel.
This intermediary can be an organization or a platform. Often, these intermediaries operate through social media or other such online platforms. Using an online platform is very useful because they have a much greater reach than other methods of crowdfunding.
What Are the Rules for Success?
For successful crowdfunding, one must learn something from every initiator, whether they are successful in their work or not. Often, failed projects teach a hard lesson to initiators. So, to learn the rules the easy way, here are some of the golden rules for success in crowd funding:
- The project must be awesome: The project is the first thing that your future investors will see, so the project or idea must be reasonable enough for people to get interested and involved in. Also, the project page must be created beautifully to attract the highest possible number of visitors. The more attractive and exciting the project is to investors, the higher the likelihood of it being funded.
- The project must be kept up to date: After the initiator’s project is online, he/she must always fill the page with the latest updates so that the investors know about the progress of the project. If the initiators do not regularly update their pages, then people will consider it abandoned and stop funding it.
- Talk about the idea: Often, initiators prefer not to talk freely about their project with their friends or family members, as they fear that they might sound overly promotional and become annoying, like internet ads and spam. However, this isn’t true at all. If people like the ideas enough, they will definitely understand the sentiments and hard work behind the project, and will seriously consider funding it.
- Continue working until no flaws remain: Crowdfunding is actually a countdown to a deadline. Often, people aren’t very interested in the project until it is fairly well developed. So, initiators must try to continue the project until it is finished. When it is about 50% complete, they will notice a sudden surge in the number of investors in their project. So they must try not to abandon their project before the very end.
What Are the Challenges?
One of the biggest challenges in the field of crowdfunding is the success rate of the project. Initiators work very hard for their projects and ideas. They concentrate fully on their project so that it may gain momentum. However, hard work doesn’t always pay off.
If the investors do not like the project enough or are unable to understand the idea, they will not show much interest in the project. Thus, the project does not get a proper start and the realization of the initiator halts completely due to inadequate funding. This can be a heartbreaking situation, especially for a novice initiator who is extremely new to the field.
How Big Data Can Help
Big data can be very useful in the field of crowdfunding. Above all, it can help the initiators get answers to particular questions which are important for their projects. Big data can be used to gain important insights on topics like:
- What are currently the most popular types of projects?
- What are the statuses of similar projects, and have they been successful?
- If they were successful, then what method of crowdfunding did they use?
- What was the size of their supporter base?
These questions are very important and have to be answered properly before launching any crowdfunding campaign. Powerful predictive analytics can be used to eliminate the need for mere estimation and get the best insights. Thus, big data can revolutionize the world of crowdfunding by providing insights on different fields, making every crowdfunding campaign successful and useful to the public.
The Future of Crowdfunding
Big data is a perfect match for places where a large number of transactions involving money are occurring, and crowdfunding is just such a place. Big data is currently influencing crowdfunding and will continue to do so even more extensively in the future. In the future, big data will influence crowdfunding in the following fields:
Better Prediction of Success
Big data can help in better success prediction of a campaign due to its accurate insights. Many platforms have been created which use these insights to quickly determine the success rate of the given campaign. For example, some data scientists have managed to create a powerful model which can tell how successful the campaign will be within four hours. This model has an accuracy rate of about 76 percent. Thus, in the future, these types of models will be used to determine the success of the project and will help the initiator to make necessary changes in it to make it more successful.
Social media is playing a huge role in crowdfunding projects. The data from social media will be used for effective prediction of the preferences of the target audience.
The University of Illinois has revealed that social media is having a powerful impact on crowdfunding. They found that the interactions on social networking sites strengthen the communication between the target audience and the initiator. The two most popular social media sites used for this purpose are Twitter and Facebook.
Some Success Stories
Crowdfunding has created many success stories, and many people have managed to realize their dreams through crowdfunding. For example, the Ouya gaming console was a huge hit, collecting $8.5 million in just 29 days via Kickstarter, which uses big data for accurate predictions.
Another example is that of Pono Music, which raised $6 million in about 30 days. And, there are many more success stories which are driven by big data and analytics.
Crowdfunding is breathing life into thousands of projects and ideas every year. However, by realizing the potential of big data in the field of crowdfunding, many more benefits can be added. Big data will help the initiators to choose the right field and design a project which will solve problems in that field, while more and more investors can invest in their project. Thus, big data is becoming increasingly important in the field of crowdfunding.