December 8, 2010; Source: Knowledge@Wharton | These days, anyone with a creative streak and an Internet connection can upload a video to YouTube or otherwise post their work online. But for an artist, getting paid for that work is another matter. Crowdfunding is one solution to the problem that several websites have sprung up solve, such as IndieGoGo, Spot.Us, Pledge Music, ArtistShare, Kickstarter and others.

“The idea is to get your fans to support your work,” says Kendall Whitehouse, director of new media at the Wharton School of the University of Pennsylvania. “In some ways, it’s back to the future; it’s history repeating itself. This was how most art was funded in the 17th and 18th centuries. A wealthy patron would pay to have music composed, for example.”

Now, the funding is done by fans and supporters of the artist one click at a time. “It’s the web’s ability to communicate to a large fan base and then aggregate a significant number of small donations” that makes this work well online, says Whitehouse.

What’s more, the adoption of social networking has made crowdfunding more feasible for the average citizen with a dream and some creative talent. “These websites have democratized support for creative endeavors that had been dominated by large companies—record labels and movie studios, for example—by letting fans finance the work of artists directly,” notes the Wharton School’s online research and business analysis journal, Knowledge@Wharton.

Case in point: Libbie Schrader, a rock musician in New York, has raised $8,000 to finance her fifth album through Pledge Music. Including another $2,000 she will pitch in herself, the sum is enough to bankroll five songs and will be used to find a producer, rent a recording studio, hire backing musicians, and pay for other production costs.

Without crowdfunding Schrader wouldn’t be able to make and distribute her music. Signing with a major label is just too difficult. “It’s the most impossible thing to do on the entire planet,” she said. “It’s crazy.”

The crowdfunding sites earn money by taking a percentage of the funds raised, ranging from 4 percent at IndieGoGo to as much as 30 percent at ArtistShare. Kickstarter reportedly collects 5 percent of the total and has made an estimated $2 million in revenue this year, according to Business Insider.—Aaron Lester