Social Media and Business Models: Morality and Ethics in Crowdfunding

The unique value of crowdfounding is not money, it’s community

Ethan Mollick

In today’s post, I will share my thoughts on how morality and ethics play a role in crowdfunding. When I think of crowdfunding, I think of how the collective effort of thousands of people can make a dream or a concept come true. Unlike other business models where the company seeks support in the form of money through loans and investments, I feel that crowdfunding has a more intimate and personal connection as each individual crowdfunder has a stake in a crowdfunding business model.

Unlike traditional businesses where a investor or loan contributes a significant amount of capital to kick-start a project, crowdfunding, as the name implies, relies on a large number of individuals, contributing anywhere from a few to a hundred dollars, depending on how invested the individual is. In my opinion, this flexibility for contributions can help a business identify who their primary persona is when building their branding through crowdfunding. This primary persona can be identified through the usage of machine-learning social media analysis on publicly available information from crowdfunders, building a representative image of what a business’s target audience persona will be.

I feel that social media and crowdfunding are closely intertwined with each other. In order to find individuals who would want to contribute to your business project, one turns to social media to find people. This is due to the immense networking capabilities and easy accessibility that social media possesses. In turn, social media helps to expand that pool of contributors through ways such as sharing and word-of-mouth.

While the prospects of crowdfunding sound very attractive to both consumers (the backers who donate funds to business projects they are interested in and want to support) and businesses (who are able to secure funding from a vast audience), I would like to address how morality and ethics play a part in getting funds.
Crowdfunding projects can be misleading, and sometimes straight out scams for backers (the crowdfunders). One such example is the Triton scuba mask, touted by its creators as the ‘World’s First Artificial Gills Re-breather’ that appeared on the Indiegogo, a crowdfunding platform in 2016.

The Trition claimed to allow people to breath underwater for extended periods of time (up to 45 minutes). This would be achieved by the two branching arms that functioned as ‘gills’ which would extract oxygen from the surrounding water to deliver breathable air to the user. The appeal behind the Trition was having a minimalist scuba gear setup as compared to the bulky equipment used by all scuba divers.

The Triton Indiegogo campaign gained over $100,000 of funding from backers in just over 24 hours from launch, and gained nearly $900,000 of funding at the end of the campaign. However, many began to point out the scientific flaws of the Triton as it was just not technically nor scientifically feasible for the product to work. The crowdfunding campaign for the Triton was canceled and campaign backers were refunded due to misleading information of the product’s claims. The Triton was then brought back onto Indiegogo with updated information and disclosed the use of ‘liquid oxygen’ cylinders which would provide the user with oxygen.

While crowdfunding can bring projects from a developmental stage to a fully realized product with the wallets of individuals., I believe that companies and businesses who opt to secure funding through this route must be ethical and moral and should not market ideas that are not feasible or are scams. As majority of a crowdfunder’s backers find these crowdfunding projects through social media, I feel that crowdfunding campaigns should take on the responsibility of presenting the information and concept the project in an educational way to show backers how their funds will be used to make the project a reality.

What stance would you take if you were a marketing manager and your company wanted you to be unethical and immoral when marketing a new product? Would you support this decision or be against it, and why? Share your thoughts in the comments!