Crowdfunding Development in the Social Media Marketing System

OLENA BONDARENKO

Department of Marketing, Kyiv National University of Trade and Economics,

19 Kioto Str., 02000, Kyiv,

UKRAINE

TETIANA USTIK

Department of Marketing and Logistics, Sumy National Agrarian University,

160 Herasyma Kondratieva Str., 40021, Sumy,

UKRAINE

ZORESLAVA LIULCHAK

Department of Marketing and Logistic, Lviv Polytechnic National University,

12 Stepana Bandery Str., 79000, Lviv,

UKRAINE

KATERYNA HORSKA

Department of Multimedia Technologies and Media Design,

Taras Shevchenko National University of Kyiv,

60 Volodymyrska Str., 01033, Kyiv,

UKRAINE

OLENA NAHORNA

Department of Marketing and International Trade,

National University of Life and Environmental Sciences of Ukraine,

15 Heroiv Oborony Str., 03041, Kyiv,

UKRAINE

ОKSANA STETS

Department of Marketing and Logistic, Lviv Polytechnic National University,

12 Stepana Bandery Str., 79000, Lviv,

UKRAINE

Abstract: - The relevance of crowdfunding in the context of social media marketing is confirmed by a broad

media narrative for its multifaceted potential. Media marketing is becoming a driver for the promotion of

business ideas and innovative projects in view of the growing role of social networks in shaping public opinion.

The aim of the study was the development of a model for evaluating the success of crowdfunding projects and

its implementation in the social media marketing system. Three dimensions of information description — the

information volume, attitude to information (feedback), and information quality in terms of information

communication — were considered as the components of the crowdfunding assessment model. The hypotheses

were advanced about the relationship between information description and the success of crowdfunding based

on these variables. The hypotheses were tested through the processing of data (N=544) from media agencies’

websites. The results show that the number of words in the project description is inversely related to the success

of crowdfunding (b=−0.007), and the number of videos and images is directly related to the project success

(R2=0.93). The effectiveness of social networks was confirmed allowing for the consumer loyalty to this

method of obtaining information and time spent daily on the Internet (63% in the total user activity). The

content analysis found that social networks demonstrated the best indicators in raising funds for crowdfunding,

compared to the project promotion through traditional media, and it was the main idea of the research. This

study has both theoretical and applied significance: it can be a starting point for establishing the academic

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DOI: 10.37394/23207.2022.19.152

Olena Bondarenko, Tetiana Ustik,

Zoreslava Liulchak, Kateryna Horska,

Olena Nahorna, Оksana Stets

E-ISSN: 2224-2899

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background for studying the experience of implementing crowdfunding projects through social networks; the

obtained results can be used in the practical activities of crowd marketers.

Key-Words: - Donations, Media marketing, Information quality, Social networks, Project, Crowdfunding.

Received: September 27, 2019. Revised: September 2, 2022. Accepted: September 17, 2022. Published: October 21, 2022.

1 Introduction

The rapid development of information technology

requires the transformation of consciousness and the

reshaping of traditionally established relationships

with consumers of goods and services. The

transition from offline to online interaction is

becoming the new reference point of social

marketing. According to the author, [1], there are

4.66 billion Internet users in the world as of January

2022, which is 316 million (7.3%) more people than

in 2021. This means that 59.5% of the world’s

population is connected to the Internet, and most of

them — 4.2 billion people (53% of the total

population) — also use social networks.

The global pandemic COVID-19 spurred the

creation of new business ideas and the development

of marketing technologies, such as social media

marketing (SMM), which became dominant in the

promotion of not only goods and services, but also

ideas for business (startups) or stimulating consumer

interest in the already existing product or service,

[2]. Crowdfunding is one of the methods of

communicative practice, which is a tool to assess

the commitment of media project consumers

through the addresser’s financial and content

participation.

Crowdfunding has become an important tool for

many companies, as it has allowed starting their

own business without loans and credits, investors

and partners. Crowdfunding is especially effective

and relevant for startups, as it helps to identify the

demand for the idea, and the audience’s interest in

the project. The existing companies that are having

difficulties with financing or want to still up a new

niche in their business for a challenge can resort to

crowdfunding.

In other words, crowdfunding is a way to finance

a business idea by small donations from many

people. Most of these media campaigns are realized

through online platforms, where a time frame for

raising funds are established and particular target

amounts are set.

Crowdfunding can be helpful in several areas: it

can be used to draw attention to the idea, raise the

necessary amount in convenient ways online, collect

and analyse data about potential audiences, test the

idea and project for relevance. No financial

investment is required to perform all these

operations, they only take time, enthusiasm and

striving for the goal.

This is where social media marketing is helpful,

offering a wide range of tools to study customer

feedback, promote a certain idea, or even thrust an

idea on the audience: messengers, chatbots,

targeting, viral advertising, and so on. Almost total

digitalization of all aspects of public life dictates

that social media marketing becomes a new

platform for shaping public opinion, and the number

of “likes”, “retweets”, “followers” etc. becomes an

indicator of the project’s reaching the target

audience.

In recent years, Crowdfunding has played a

crucial role in the sustainable development of

innovative projects as an innovative model of

sustainable funding, while becoming increasingly

popular and exciting academic interest. There are

about 1,250 active crowdfunding platforms in the

world, which bring together investors through social

networks for co-financing of projects in different

fields, [3].

The aim of the study was the development of a

model for evaluating the success of crowdfunding

projects and its implementation in the social media

marketing system. In this case, the media space

becomes a bridgehead for the successful

implementation of crowdfunding projects due to its

wide distribution and high number of content

consumers. The aim involved the following

objectives:

- substantiate the place of crowdfunding in the

system of modern social media marketing;

- evaluate the criteria that affect the success of

the crowdfunding project on social media;

- study the examples of successful crowdfunding

projects in Ukrainian social media.

2 Literature Review

According to researchers, [4], not only start-ups and

business idea developers, but also the economy as a

whole benefit from crowdfunding as a tool used to

finance innovation proposals, as authors in [5]

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stated. Researchers, [6], emphasized that the issue of

supporting new projects, which will increase the

potential and competitiveness of the country, is

urgent in the context of reduced investment and

innovative activity in the state economy.

But a feature of this study is the analysis of

crowdfunding from a social point of view, not from

an economic one.

Author, [7], maintains that crowdfunding is often

a more effective way to collect feedback and

valuable marketing ideas on social media sites.

According to researchers, [8], the opinions of fans

from around the world help innovators to improve

their ideas in many cases, as well as think through

their strategies and enter the market with solutions

that have more impact, as contributor, [9], indicates.

The first crowdfunding project in Ukraine is

fundraising for the construction of the Hospital of

the Future. It raised $ 1 million, the project was

launched in 2006, but in 2010 the construction of

the hospital was suspended [10].

The Ukrainian term “spilnokosht” (joint funding)

(the name of the eponymous Ukrainian

crowdfunding platform is Spilnokosht) can be

considered as the Ukrainian analogue of the concept

of “crowdfunding”, [11], which came into use after

the first crowdfunding platform in our country. The

examples clearly show that the term

“crowdfunding” should mean obtaining money from

a large number of people to finance business and

social projects. The active use of crowdfunding

demonstrates that people are able to cooperate and

are ready to contribute to the main functions of the

project, sometimes for free.

The implementation of all projects would be

impossible without social networks, because they

required the large-scale involvement of human

resources. This is why media marketing is a driver

for attracting a large audience to social projects.

Wide coverage and low communication barriers

allow social media marketing to convey information

to the end user by all available communications

(text, audio, video) to provide maximum efficiency.

The purpose of the crowdfunding project determines

the use of different methods of its promotion. In our

opinion, the crowdfunding project evaluation using

the POST method is the initial stage of its

promotion through a media resource, [12]. This

evaluation is helpful in choosing the most effective

social media marketing tools to achieve the

maximum possible project efficiency (Figure 1).

Fig. 1: POST method of implementing a crowdfunding project through social media

Source: summarized by the author based on [12]

This stage provides for a careful analysis of the

system errors in the crowdfunding project

implementation through the of social media

marketing system:

- search and implementation of cost-effective

marketing strategy before, during and after the

campaign;

- creation of a “correct” message in the

description of the campaign, which will arouse

interest in the product or service.

There are three types of the modes of

communication built into the information

description of crowdfunding projects, such as

words, images and videos. So, we determine three

dimensions of information description: the number

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Zoreslava Liulchak, Kateryna Horska,

Olena Nahorna, Оksana Stets

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of words (text area), the number of images (visual

area) and the number of videos (video area).

The text area is an effective way to convey views

and ideas. The words that are used to describe a

crowdfunding project can render fundraisers’ ideas

to sponsors. Authors, [13,] found that the number of

words influence the success of crowdfunding

positively. Researchers, [14], also supported the

positive effect of textual information for

crowdfunding through social media. So, more words

in their optimal number will help to describe the

project in greater details in order to make

information about the project more understandable

for sponsors. At the same time, authors, [15],state

that excessive information can complicate

understanding, thus further complicating project

evaluation. According to researchers, [16], the need

to process excessive information may discourage

sponsors from supporting crowdfunding projects.

Authors, [17], concluded that excessive information

will have a negative impact on the crowdfunding

success.

Researchers, [18], indicate that visual images

(illustrations, animation) are more effective tools for

storytelling than information that contains only

words. Images can provide more details about the

projects and supplement the project description.

Authors, [19], analysed the factors of crowdfunding

success, using the Customer Value Theory and

found that the number of images in the project

presentation has a positive effect on the

crowdfunding success. Scientists, [20], [21],

established in their empirical studies that the

number of photographs in the project description is

related to the crowdfunding success. Adding more

photos to the project description can help persuade

sponsors and make crowdfunding success more

likely.

Videos comprise visual (images and animation),

verbal and sound elements. Authors, [22], note that

videos are very useful for promoting goods and

services and stimulating consumption. Videos

usually contain more detailed information, thus

requiring less imagination. Researchers,[23], writes

that there is no need to use imagination to

understand all the information in the video unlike

the situation with the pure text, as the video can

provide complete information. Author, [24], found

the relationship between the inclusion of video in

the project description and the crowdfunding

success.

So, in view of the foregoing, the focus should be

on the importance of crowdfunding for society.

According to authors, [25], this innovative

fundraising tool allows companies to develop and

implement numerous projects. Considering a wide

use of crowdfunding in developed economies, it is

necessary to create conditions for its successful use

in Ukraine.

3 Methodology

Three dimensions of information description were

considered in order to study the impact of

information on the crowdfunding success, including

the information volume, attitude to information

(feedback), and quality of information in terms of

information communication. The information

volume was measured as the amount of words,

images and videos. The quality of the information

was assessed as readability using the Fog Index.

Attitudes toward information were measured by the

number of comments. These variables were used to

advance the hypotheses about the relationship

between information description and the

crowdfunding success. Data (N=544) from media

agencies’ websites (collected by authors

empirically) were processed to test the hypotheses.

So, we advance the following hypotheses:

1. The text volume in the project description is

inversely proportional to the crowdfunding success,

that is an excess of words in the project description

will negatively affect the crowdfunding success.

2. The number of photos and videos in the

project description is positively associated with the

crowdfunding success.

Based on the above hypotheses, our research

model is presented in Figure 2.

We consider three dimensions of the project’s

communicative features, including the information

volume, the quality of information, and the

perception of information. The information volume

is defined as the number of words, the number of

images and videos. Information quality includes

readability and update rate. The perception of

information is characterized by the comments and

feedback from potential sponsors of the project.

Moreover, we consider comments as a preliminary

influencing factor and a criterion for evaluating the

efficiency of a crowdfunding project.

Author, [24], states that images and videos are

more powerful tools for conveying information than

words, as they can directly represent detailed

information.

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Zoreslava Liulchak, Kateryna Horska,

Olena Nahorna, Оksana Stets

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Fig. 2: The chart of a successful crowdfunding project in SMM

Source: author’s development

In the context of crowdfunding, readability can be

used to measure the information quality. We use the

Gunning Fog Index, [25] (GFI) to record complexity

of a text as a function of words in a sentence. The

Gunning Fog Index is calculated as follows, [26]:

GFI = 0.4(𝑁𝑢𝑚𝑏𝑒𝑟 𝑜𝑓 𝑤𝑜𝑟𝑑𝑠

𝑁𝑢𝑚𝑏𝑒𝑟 𝑜𝑓 𝑠𝑒𝑛𝑡𝑒𝑛𝑐𝑒𝑠 +100 𝑁𝑢𝑚𝑏𝑒𝑟 𝑜𝑓 𝑐𝑜𝑚𝑝𝑙𝑒𝑥 𝑤𝑜𝑟𝑑𝑠

𝑁𝑢𝑚𝑏𝑒𝑟 𝑜𝑓 𝑤𝑜𝑟𝑑𝑠 ) (1)

Usually, when the Gunning Fog Index ranges from

12 to 14 — readability is ideal; from 10 to 12 —

ease of reading information is acceptable; from 14

to 18 — reading will be difficult; more than 18 or

less than 10 — the text is not readable.

4 Results

The growth of the number of social network users

has been more than 13% over the last year (480

million new users), and their total number was

almost 4.2 billion in early 2022. On average, more

than 1.3 million new users joined social networks

every day during 2020-2021, which is about 15.5

people every second.

The results of our research show that a typical

social media user spends 3 hours and 5 minutes on

social media every day, which is equivalent to about

one day without sleep each week. Having

summarized, we obtain that users of social networks

in the world in 2022 will spend a total of 3.7 trillion

hours on social networks, which is equivalent to

more than 420 million years of human existence. At

the same time, we should note the significant

differences between countries in the preferences of

social networks. Wearesocial reports that Filipinos

are still the largest group of users of social media in

the world, spending an average of 4 hours and 15

minutes a day on social platforms, which is half an

hour more than the Colombians, who rank second.

The Japanese users are at the other end of the scale,

who spend less than an hour a day on social media,

but this year’s 51-minute was 13% higher than in

2016-2019 (see Fig. 3).

Fig. 3: Indicator of time spent on social networks by country in 2021, h/day

Source: calculated by the author based on [1]

0,5

1,5

2,5

3,5

4,5

Philippines

Columbia

Brazil

Nigeria

Ghana

Egypt

Saudi Arabia

Malavsia

Turkey

UAE

Thailand

Morocco

Russia

India

Portugal

USA

China

Poland

Thailand

Ireland

Israel

Sweden

Italy

Canada

Denmark

Germany

Japan

hours/day

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The 2021App Annie State of Mobile Report also

shows that mobile phones take the lead among all digital devices in terms of time spent by users

(Figure 4).

Fig. 4: Total users’ time spent by types of media, h/day

Source: calculated by the author based on App Annie State of Mobile (2021)

The data obtained indicate that the users spend on

social media more than half of their time on the

Internet, namely: of the total 3.54 hours spent on

social networks, social networks take 63.6% of the

total time on the Internet, 8.4% is spent on

correspondence, and 28% on watching videos and

games.

We can explain such a distribution of time by the

reorientation of users’ attention from television to

social networks by the opportunity to be part of the

campaign through feedback and comments, instead

of passively consuming online advertising or videos

on TV. This is why crowd marketing should become

a way to convey information about a brand, product

or service to a wide audience, while focusing on

easy but working mentions of the company or

service promoting among a large Internet audience.

In supporting the above-mentioned, we note that

traditional media (such as printed media, television

and radio) are steadily losing ground in favour of

social media as the main source of news and

information since 2019. This is why traditional

media resources must seek their audience on social

networks in order not to lose it. Therefore, media

marketing is becoming a driver for the promotion of

business ideas and innovative ideas.

We have already mentioned the pilot project of

national importance — Hospital of the Future,

which was launched in 2006 and became the starting

point for crowdfunding to become firmly entrenched

in the lives of Ukrainians.

There are currently two domestic crowdfunding

platforms in Ukraine: the Ukrainian Charity

Exchange and Spilnokosht, but Ukrainian projects

are also successfully supported on global platforms

(Table 1).

Table 1. Development of crowdfunding projects in Ukraine

Platform

The number of projects

supported

Amount of funds raised,

USD

The average contribution

of one donor, USD

Ukrainian Charity Exchange

1,631

3,581,151.00

6.96

Spilnokosht

156

367,551.00

17.15

GoFundEd

22,165.00

40.3

KickStarter

1,458,158.00

17.78

Indiegogо

2,300

750,000.00

166.67

Source: calculated by the author based on [1]

The data obtained testify that the Ukrainian Charity

Exchange (UCE) is the leader in terms of the funds

raised. The platform has supported more than 1,600

mostly social projects and helped people in difficult

life situations through its own website dobro.ua,

which has become a brand over the years.

For comparison, amount of funds raised for

American crowdfunding leader platform KickStarter

was two times less. 2013-2016 was the period of

the UCE development, when volunteer

organizations raised funds for the needs of the Anti-

Terrorist Operation and Euromaidan through the

3,54

3,34

2,25

2,02

1,31

1,12

0 0,5 1 1,5 2 2,5 3 3,5 4

Internet (all devices)

Social Media

Printed press

Listening to music and streaming services

Games

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platform. According to Pact, the International

Organization for Civil Society Development, 55%

of Ukrainians believed that “the time has come

when everyone should care about common

interests” [10].

Spilnokosht was founded on the BigggIdea

platform and supported by Pact —the International

Civil Society Organization to implement the

UNITER project. This is how it quickly became a

leading Ukrainian crowdfunding platform for

funding social innovation and community

development, contributing to the transformation of

Ukraine. For example, the creation of Public Radio

in 2013 and Public Television in 2016 were one of

the first projects at Spilnokosht. Investors

transferred almost UAH 1 million to support the

creation of the first independent public broadcaster

of objective information in the context of public

broadcasting reform.

In the research, we analysed the media that have

pages on social networks for the information on

crowdfunding projects. Facebook was found to be

the most popular social network, 92% of the media

have their pages there (Figure 5). However, posting

of the media on social networks and on their own

websites or in printed media remains different.

Fig. 5: Posting activity of mass media in social media

Source: author’s research

The data presented above show that only a few mass

media cover crowdfunding projects on their social

media pages. TSN takes the lead, 1+1 channel has a

link to the page of the Ukrainian Charity Exchange

on its website. At the same time, Hromadske

promotes projects from the Spilnokosht platform.

We analysed the crowdfunding projects, which

are posted on official platforms, officially covered

in the media and advocate the philosophy of

crowdfunding “let’s do it together” (instead of “help

me do it”). We should note that we did not take into

account individual requests for help on Facebook

and Instagram because we were not able to verify

the accuracy of the data. According to the author`s

research in 2021 in media they were covered 196

crowdfunding projects in healthcare, 101 in cinema

and music, 90 in journalism and only 31 projects in

art and 4 in book publishing. The proposed

methodology for evaluating the success of the

crowdfunding project helped us to test hypotheses

about the impact of the number of photos and the

content of the text on the success of the

crowdfunding project (Figure 6).

We tested the hypotheses using binary logistic

regression, because the dependent variable

(crowdfunding success) is a dichotomous variable

that is 1 or 0. We standardized independent

variables in order to reduce the problem of

multicollinearity between variables.

Besides, we concluded that the “word of mouth”

has a positive impact on the sponsor’s decision to

invest in the project based on assessing the

perception of information by end users of the

project. For example, the largest number of reviews

to information (likes, posts, comments) helped TSN

to implement more crowdfunding projects.

The author`s research demonstrates that the most

part of comments (b=−0.007, p=0.001) eliminate the

direct relationship between the number of images

and the crowdfunding success. This means that

more comments on the social media page reduce the

importance of the number of photos for the

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crowdfunding success. However, the number of

comments does not significantly affect the

relationship between the number of words

(blinear=−0.003; bsquare=0.001) and the crowdfunding

success.

Fig. 6: The impact of quantitative and qualitative indicators of information on project success

Source: author’s research

5 Discussion

Our research correlates with the opinions of

researchers that have studied this issue of

determining the crowdfunding success in the social

media marketing system. The main achievement of

the study was to evaluate the success of a particular

project depending on its initial characteristics,

because failure in financing even on world-famous

crowdfunding platforms ranges from 69%

(Kickstarter.com) to 87% (Indiegogo.com). This

means that the actual percentage of funding

completion is low, and the success rate of

crowdfunding projects needs further study.

Therefore, defining the general conditions of

success was crucial in writing this article, as it can

provide project developers with additional

advantages to the success of crowdfunding. In

contrast to authors, [22], we found a negative effect

of the number of words on the crowdfunding

success. This founding refutes the assertions of

researchers, [23], who also stated the positive effect

of textual information for crowdfunding through

social media. The Fog Index that we calculated

showed that excessive information can complicate

understanding, which further complicates the project

assessment [16].

Instead, calculations have shown that visual

images (illustrations, animation) are more effective

tools for storytelling than text-only information so

we must agree with authors, [26], on this point. We

also confirm the opinion of contributors [20] on the

usefulness of video to promote goods and services

and stimulate consumption because they usually

contain more detailed information that requires less

imagination. In this case, unlike the text-only

situation, there is no need to use the imagination to

understand all the information in the video, because

the video can provide complete information, as

noted by authors, [11]. Researchers, [12], [17], also

argued that introduction of video in the project

description is related to the crowdfunding success -

we must admit this point in our research.

Summarizing the opinion of authors, [15], we

confirm that the need to process excessive

information may discourage sponsors from

supporting crowdfunding projects. Therefore, our

research directly correlates with the general opinion

of authors, [16], that excess information will have a

negative impact on the crowdfunding success.

Our authentic research allowed us to create a

model for assessing the crowdfunding success in

social media based on the impact of the quality and

quantity of source information; but it also has some

limitations and may provide opportunities for future

research.

First, there are other types of crowdfunding, such

as crowdfunding based on patronage, lending or

equity, which we have not studied. This limits the

universality of the results of our study. Therefore,

further research may cover other types of

crowdfunding and compare different factors of

crowdfunding success among them.

Second, our research focuses on the information

description of the project before it started. However,

many fundraisers often update information about the

y = 11,47x + 1,2453

R² = 0,7653

y = 7,2861x - 4,1926

R² = 0,9269

-2

0 0,2 0,4 0,6 0,8 1 1,2

The Fog Index

The average number of

photos per project

Γραμμική (The Fog

Index)

Γραμμική (The Fog

Index)

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project at the crowdfunding stage in order to reduce

information asymmetry and build trust of sponsors.

The description of information during the update

also has an impact on the crowdfunding success.

This indicates a possible extension of the study —

considering the updated content of information.

Third, we used only the number of images and

videos in the project description. Sponsors can rate

projects by content and image and video styles, such

as colour, video duration, and background music on

the crowdfunding platform. However, we do not

have information from the website because of

technical constraints.

Finally, we cannot control the personal features

of sponsors, such as age, gender, education, income,

crowdfunding experience, or interest in a category

that may also influence their decisions. Further

studies can be the expansion of the above-

mentioned aspects.

6 Conclusions

The conducted research confirmed the relevance of

crowdfunding in the context of social media

marketing given the growing role of social networks

in shaping public opinion, and the fact that media

marketing is becoming a driver for promoting

business ideas and innovative projects.

The multi-vector academic narratives of this

research have the following theoretical aspects that

may be the ground for further studies. First, the

system impact of information description on the

crowdfunding success in terms of information

communication was explored. Most previous studies

examined the impact of only one or two dimensions

of information description.

We considered the information volume, the

quality of information and the attitude to

information as influential factors. This is why the

research findings can help explain the impact of

information description on the crowdfunding

success more comprehensively and evidence-based.

The results obtained give us ground to clearly

explain how each component of information

description affects the crowdfunding success,

helping to explore relatively important components

of information description to improve project

success.

We proved the inverse relationship between the

number of words and the crowdfunding success.

This means that the number of words in a certain

range positively affects the success of

crowdfunding, but with less speed; excessive words

lead to the sponsors’ understanding burden and

reduce the crowdfunding success. The result has

rarely been described in the existing studies that

covered all three dimensions of information

description. Most previous research showed only a

linear relationship between the number of words and

the crowdfunding success. The hypothesis test

found that the number of videos and images has a

positive effect on the project success on social

media.

Besides, the results testify that the number of

comments can reduce the impact of the number of

photos on the crowdfunding success. In other words,

sponsors usually take into account the attitudes of

others and the number of comments when they

make a decision to invest in this project. This is very

useful for fundraisers when they prepare projects.

The “word of mouth” plays a key role in sponsors’

decisions, while more comments indicate the

project’s popularity and may persuade sponsors in

good project communications. This is why project

developers should also pay attention to the role of

comments and encourage sponsors to leave

comments for the crowdfunding success. Besides,

communicating with sponsors or answering their

questions through comments may be useful.

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