Start-ups typically have a variety of design needs including logo design, brochures, stationery, and business cards. Traditionally the most important design work, like a business’s logo, is either done by the business itself or contracted out to a professional designer. While professional designers can create good work, they often charge upward of $1,000 to create a logo, which may exceed many start-ups’ budget.
In early 2008, 99designs introduced a business model that disrupts this process. The company, started by Matt Mickiewicz, launched in Australia and opened a U.S. office in late 2008. 99designs features a “crowdsourcing”
model for getting design work done. Here’s how it works. A business or individual posts a design request on the site, with details of what they want designed and how much they’re willing to pay. The listing fee is $39. Over a week or less, designers from all over the world submit design concepts. During the week, the person who submitted the design request provides feedback and ratings for the submitted designs. At the end of a specified period, the person who submitted the design request selects a winner. The designer is then paid through 99designs. Once payment is made, all rights to the winning design are transferred to the person who bought the design.
There are two things that are particularly disruptive about 99design’s business model. First, it shifts the risk from the person wanting a design to the designer. Think about how design work is traditionally done. A business needing a new logo or a brochure hires a designer, for a prespecified price, and then holds its breath hoping the design is something that will meet its needs. 99designs reverses the process. The business needing the logo or brochure pays nothing, other than the $39 listing fee, until someone shows it a design it wants. The second reason 99design’s business model is disruptive is that it produces the opposite result than freelance Web sites like Elance.com and Guru.com. When someone needing a logo designed goes on Elance.com, for example, the person needing the logo is trying to get the lowest price from a single designer. On 99designs, the motivation is the opposite. Although good quality designs can still be obtained inexpensively, the more money that’s offered the more designers will submit designs and the quality will go up.
For its part, 99designs makes money via the $39 listing fee and a 10 percent commission on the designs that are sold through its site. The majority of the designers are freelancers, students, and professional designers working in their spare time to make extra money. The clientele is primarily small businesses that don’t have graphic designers in-house. The freelance model helps 99designs minimize costs because it doesn’t actually employ the designers.
To demonstrate how actively its service is being used, 99design posts a running list of interesting statistics on its Web site. As of April 2011, it had 94 designs submitted per project, 977 open projects, 71,878 projects completed to date, $305,642 currently on offer, and paid designers $937,708 the previous month. The company also posts numerous examples of designs that have been created via its site.

Questions for Critical Thinking
1. Who loses as the result of a service like 99designs?
What does your answer tell you about the nature of business model innovation?
2. How does a service like 99designs gain its initial traction for users and designers?
3. Compare and contrast the business models of 99designs, crowdSPRING, and LogoWorks. If you were looking for a logo to be designed, which service would you try first? Explain your answer.
4. Do you think 99designs should stick to what it’s doing or should the company expand into other areas, such as allowing businesses to submit proposals for software development?