Introduction
A crowdfunding method of financial information exchange is to provide a service or a required product in exchange for a monetary investment. This method of capitalist exchange occupies an increasingly prominent position in the world, becoming a multibillion-dollar market. Through crowdfunding, the direct market thrives without large investment agents, allowing small and independent businesses to thrive. In this paper, the strengths and weaknesses of this market are characterized through analytical tools, and the prospects for its growth are outlined based on qualitative and quantitative data.
Discussion
Speaking about the political aspects that affect the trends of the modern crowdfunding industry, it should be noted that the features of the state system can affect the main tasks of this market segment. Thus, in modern China, crowdfunding platforms are more of a means of existence for non-profit social service organizations associated with the state. The authors of a study on crowdfunding in China point to the need to diversify this industry to go beyond medical care and social services (Liang and Chen, 2021). A comparative analysis of the Chinese and Italian crowdfunding industries demonstrates the difference in the diversity of orientation of these markets. On the one hand, the austerity of China’s ruling elite and the close relationship between donation and social policy characterizes the crowdfunding industry in China (Sabato, 2018). On the other hand, in Italy the connection between the political regime and the given industry is not so strong at all, due to the democratic but inactive political apparatus.
That is why there is thriving reward-based crowdfunding backed by individual investors with no business or philanthropic goals. Thus, the political regime can largely determine the content of the market in a particular country. In addition to crowdfunding agents in the form of a separately interested private person as a personal investor, political power can be the real driver of these major processes.
Reward-based crowdfunding does not come from the logic of an investment, and rather, contributors are interested in artistic purposes without expecting a financial return. This defines the economic principles of this type of crowdfunding, which cannot be fully measured in monetary terms. The social aspect of this crowdfunding is expressed in the special attitude of investors as driving forces in relation to the product. The work turns out to be extremely valuable for a particular group of people, while it may represent zero value for others. The social and economic aspect is thus closely linked, expressing a general individualization of the value imparted to the product.
The technological aspect of crowdfunding is directly expressed by the form of existence of this market, that is, the Internet platforms that provide almost every person with access to investment in the creator. Promoting information about platforms and projects hosted on them finds its audience through social networks (Bi et al., p. 17). It should be pointed out that the largest reward-based platforms in France exist with Facebook as the main means of communication. The exchange of funds using cryptocurrency also characterizes crowdfunding on the Web, which, however, poses a risk for transaction hacks and money leaks. Thus, social media determines the way information is disseminated, and the economic aspect is partially represented by the crypto exchange.
In most countries, crowdfunding is absolutely legal, and this business is protected by a single regulatory mechanism for transactions. However, in some countries, such as Russia, this mechanism is complicated by the amount of fraud, for example, poor-quality services (Tsvirko, p. 160). There are frequent examples of creating low-quality content without the ability to return the money spent in the event of a low level of reward (Machado et al., 2021). The environmental aspect of crowdfunding does not require detailed coverage, since these platforms are not energy-intensive or produce large toxic or carbon emissions. The growth of this market due to the pandemic, however, is an important factor. The global lockdown has led to the need to absorb and create more material on the web, which has led to the rise of the market.
Applying the analysis of Porter’s basic Forces to this industry, it should be noted that it is sufficiently represented in the modern economic sector. Reward-based crowdfunding is just one of several forms of existence in the industry, yet it accounts for 40% of the total crowdfunding market (Amedomar and Spers, p. 150). The competitiveness of the market is extremely high due to the large number of disparate manufacturers receiving individual support from many investors. This same heterogeneity determines the chances of the emergence of all new players within the industry, which is Porter’s second Strength. The power of suppliers turns out to be just as unstable an element in the economic equation as the power of customers (Steigenberger, p. 338). Business realizes itself depending on the willingness of investors to invest in it – they mutually support each other, being equally dependent. Probably, it can be said that it is the consumer who takes the greatest risk, since the declared pitches for which the amount is collected may remain unfulfilled.
Porter’s remark about the Threat of Substitutes is also hard to accept as a real threat to the market. Despite the fact that large platforms like Kickstarter already have sufficient economic stability, the launch of independent platforms is extremely relevant in modern times (Shneor and Munim, 2019). At the same time, it is important that these indie platforms are neither a competition nor a replacement for large corporations. They represent a replenishment in an ever-expanding and diversifying crowdfunding market. At the moment, the reward-based crowdfunding market is only expanding, and therefore new players can find a place in it without taking a share from large sites.
A key trend in this industry is the increased influence of the individual contributor and the sense of individual influence in content creation. Of course, at the same time, reward-based crowdfunding can also be used in progressive developments and inventions (Bitterl and Schreier, p. 680). This type of fundraising may be necessary in order to attract the attention of large investors to a scientific project. The megatrends in this industry at the moment are the extensive growth and diversification of services, as well as the increased attention of large angel investors to such sites (Roma et al., p. 1609). This industry has several drivers: each private investor, and the creators of platforms with a unique vision, and large investors proving the possibility of the random explosive growth of a separate low-impact business. All this encourages creators to interact with the audience through crowdfunding platforms.
Conclusion
Thus, the key trends are the impact of social media, the growth due to the pandemic, the influence of political factors on crowdfunding in individual states, building the base of contributors before the launch of the project itself, the individual role of the contributor. This industry is closely related to the development of technology and its impact on the decentralization of business. Despite the influence of large crowdfunding platforms and their growing revenues, first of all, the economic growth of this sector speaks of the supreme importance of the individual developer and consumer.
Reference List
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Tsvirko, S. (2021) Crowdfunding as a source of financing in Russia: PEST analysis’, Integrated Science in Digital Age 2020, pp. 154-163.