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Internet Fundraising in the United States
Internet Fundraising as a part of overall U.S. Philanthropy The internet is still an infinitesimal part of overall philanthropy. According to estimates by Craver, Mathews, Smith & Co., only $.14 is given over the internet out of every $100 dollars of total philanthropy in the US (0.14%). This is based on an estimate of 3.5 million on-line donors at an average gift of $55, or $192 Million in 1999 online giving.1 Since stories of individual charities raising $1 Million or more are rare and celebrated, it is a plausible estimate. This estimate is also borne out by the Commerce Department's first-ever online retail sales estimate of $5Billion in the fourth quarter of 1999, which is 0.6% of the total retail sales during the period.2 Since philanthropy usually lags behind commerce in adoption of new consumer behaviors (for example, telephone sales and credit card usage), and since this figure is a fourth quarter figure, whereas the CMS study is a second quarter figure, it adds great credibility to the CMS estimate. Direct Fundraising by Non-Profits The American Red Cross (www.redcross.org) reportedly raised over $1.2 Million during the first six months of 1999 specifically earmarked for Balkan Relief. This was during the height of the Kosovo crisis. 3 The Heifer Project (www.heiferproject.org) raised $1 Million during 1999, which is a six-fold increase from 1998. They attribute this to a very aggressive giving catalog (a catalog of giving opportunities, not of merchandise) which was created by AppNet. 4 In the political arena, John McCain (www.mccain2000.com) and Bill Bradley (www.billbradley.com) , both perceived as underdog, upstart, anti-establishment candidates (within their own parties) have used the internet successfully. McCain had raised over $2.5 Million through February 3, 2000. Over $1 Million of that was raised in just 48 hours following his surprise win in the New Hampshire Presidential primary.5 The campaign was suspended three weeks later, with total internet contributions of over $6.4 Million.6 McCain's Internet Director, Max Fose, told me that $800,000 has been received since the campaign was suspended! Even at the local level, the internet can be powerful. On October 4, 1999 Public Radio station WAMU (www.wamu.org) in Washington, DC suspended its normal on-air pledge drive for one day, called "CyberMonday". On that day 3,489 pledges totaling $227,000 were received through the WAMU web site. It was so successful that WAMU decided to repeat the event on Wednesday, October 6, with no advance publicity. They brought in an additional $77,232 from an additional 1,153 pledges. This is a total of over $300,000 in only 72 hours using only one radio station to broadcast the message in one city.7 Still, these stories are relatively few and far between. Even other public radio stations have been slow to adopt the "CyberMonday" plan of WAMU. University of Pennsylvania Development officer Adam Corson-Finnerty says "It would be a huge mistake to think that the Red Cross 'breakthrough' heralds great things for the rest of us (fundraisers)."8 Many non-profits have no web presence at all. Others have only "brochure-ware", a basic explanation of their benefits, in a web site built and maintained by volunteers or staff in their spare time. Many of these have no donation option, either for lack of technical expertise in developing them or because they do not have the ability to negotiate a merchant account with a bank. Even if they had a web site with a donation engine, who would see it? Without staff dedicated to building traffic, donations would trickle in at best. Standing on their own, web sites for all but the largest, best known charities will be trees falling in the forest. Affiliated Giving Sites Two features of the internet have given rise to a new model for fundraising: the dynamic database and the generic domain name. One example of the dynamic database capabilities of the internet is Helping.org a clearinghouse of charity information and on-line giving site created by the AOL Foundation. Every charity who has filed an IRS form 990 (those with a minimum income) is listed, thanks to an affiliation with Guidestar. Users may search by a charity based on name, type, and location. Basic financial information on each charity is available (and it can be updated by the charities). Users may also link to the Better Business Bureau and the National Charities Information Bureau for more information on wise giving. For non-profits, a basic array of useful information is provided in concert with the Benton Foundation. Volunteer positions can be posted, and users can find them arranged by zip code. This type of consolidated giving site is becoming extremely popular on the internet. One big reason is that these sites can provide a "critical mass" of viewers. They meet the needs of potential donors who either haven't been reached by the entity they want to support, or haven't even heard of them. For example, someone can find all the non-profits that care for animals near their home, then contact them individually, or just make a donation through the helping.org site. Other consolidated giving sites include charitymall.com, charitableway.com, and charitablegift.com (the Fidelity charity funds program which is the third largest charity, listed in the Chronicle of Philanthropy data above). The generic domain name allows anyone to set up a site to collect donations for any cause they decide. They become the clearinghouse of gifts for that cause. Echarity.com created edisaster.com to collect contributions for the Mozambique flood victims within days of the flood, and channels the funds to the Red Cross, Oxfam, and Americares.9 The hunger site (just purchased by charitableway), and the ecologyfund.com (operated by charitymall) are two sites where users can visit and click to support hunger or wilderness preservation causes. Sponsors agree to contribute a certain amount of food or land per click (limit one click per user per day) in exchange for a display to the user after the click. Other sites in this model include relievehunger.com, saverainforest.com, peaceforall.com, and e-activism.com's clickforthecure. There is already an umbrella site called freedonation.com, which hosts click-to-donate sites for cancer, hunger, homelessness, education, children, and AIDS. Some of these are non-profit sites, and others are commercial, keeping 5% of the half-cent fee they charge each sponsor for each click. Shop for Charity Sites There are at least thirty sites that offer shopping opportunities for on-line shoppers, with a percentage of the purchase price allocated for a charity. This is a version of the affiliate programs pioneered by Amazon.com. Many on-line merchants will rebate a percentage of sales to the site that refers the buyer to them. In this case, the referring site further offers to share all or a portion (usually 50%, but in some cases up to 100%) of the retailer's commission with a charity designated by the buyer. Some sites offer any charity the option to sign up, and others restrict the charities to their own predetermined group, in one case as few as four charities.10 Another version of this is friendswhogive.com, which does the same thing with magazine subscriptions. Speaking of fundraising, one of these firms, schoolpop.com, announced on March 7 that it has just raised $41 million in its second round of financing. This is believed to be the largest amount raised ever for a for-profit company that raises funds for non-profits.11 Since it is highly unlikely that they can spend that much money on web development or advertising, look for them to start buying competitors. Indeed, this field is already ripe for consolidation, causing more opportunities, and more chaos, within the online charity community. Mark Rovner of CMS interactive tells of the following drawback to non-profits of the typical arrangement of such ventures: But at the end of the day, the dot-coms own the names and the relationships, depriving the dot-orgs of what really matters in the long run - the opportunity to build and grow online communities of committed, engaged, and generous individuals. Some of the charity malls, by arrogating to themselves the community function, may be doing the most harm of all. It's not a great deal for nonprofits, but it's often the only one available.12 With all due respect to Mark, there are some cases, at least, where you can negotiate to get the names of shoppers that identify you as their preferred charity, or at least to get the charity mall to send your e-mail to those shoppers. Also, given the almost complete failure of charities who raise money online directly to re-solicit their donors online, there is no big advantage at the moment to having the names and e-mail addresses of donors! E-mail for Charity Viral marketing is the term used to describe the word-of-mouth effect of web users sending an idea (like a "cool site") to their friends via e-mail. Many sites try to stimulate viral marketing with "e-mail this page to a friend" buttons and other, more elaborate techniques. This is one reason why web-based e-mail and e-postcard features are popular with site owners: they spread the word to the users' friends with the implied, or even explicit, endorsement of the user. Now there are firms who have set themselves up as ad clearinghouses for firms who want to advertise within an e-mail one internet user sends to another. They recruit people to attach advertisements to their outgoing e-mails (would these people then be called "carriers"?). They offer the "carriers" a referral fee for each recipient who clicks on the attached link in the e-mail, or who actually makes a purchase on the site that is linked. The implied or express endorsement of the sender ads value to the ad. Favemail and Epidemic are the two biggest players13, but babamail is set to launch in the US on March 15.14 "Carriers" can elect to contribute a portion of their "earnings" to charity. Barnes & Noble has their own version called mybnlink, which allows users to direct their earnings to one of five preselected big-name charities. Shop2u.com has another model. They send direct rich e-mail "mini-catalogs" to donors on behalf of non-profits. A non-profit can be matched with one of several traditional catalogers, and computer analyses run to "match" each donor with the six or so products best suited to them (using a proprietary formula, of course). Shop2u creates an e-mail featuring the products that is personalized for each donor. The donor can select the products they want and return the e-mail. The non-profit supplies the donors and e-mail addresses, and the cataloger provides all the fulfillment, sending the agreed-upon percentage of sales back to the non-profit. On-line Auctions Another technology which takes advantage of the Internet's potential is "dynamic commerce," where the terms of the commerce change as inputs are received. Competing sellers who bid prices down when there is an oversupply (e.g. Priceline.com) and competing buyers who bid prices up when the supply is limited (traditional auctions) are examples of dynamic commerce. The internet allows a virtually unlimited number of such buyers and sellers in an open marketplace.15 Industry analyst Jupiter Communications estimated in January of 1999 that business to consumer auctions will move $3.2Billion worth of merchandise in 2002.16 According to an article in PC Computing in January of 2000, Sharper Image auction sales exceeded $25 Million in 1999, accounting for 10% of total revenue.17 I-Escrow vice-president Sanjay Bajaj claims that over 100 million people are now engaged in online bidding.18 Since auctions require a critical mass of products and bidders to achieve the promise of dynamic commerce, few charities have their own internal auction sites as part of their web page. Several charities link to special sections of the larger on-line public auction channels (see http://www.edeal.com/leafs_haveaheart.htmls) as an example. E-bay, Yahoo and other major auction sites offer similar services to non-profits, and buyers and sellers with charitable intent. Webcharity.com has been active since July 1998. In this model, the seller chooses a charity and decides how much of the selling price will be donated to the charity. Webcharity.com adds a 10% premium to the final bid, payable by the buyer, as their revenue source. They have raised $163,293.25 to date, according to their results page (http://www.webcharity.com/wc/chartote.cfm?sv=1&idx=1&tab=4). Communitybids.com offers fundraisers the opportunity to set up their own bids. According to auctionwatch.com, it's the "rummage sale" model. The town of Madison, Maine raised $8,917 selling 17 of the 18 excess items they would normally have sold by sealed bid (http://communitybids.com/myorg/home/home.html?orgid=7). At the other end of the spectrum is the Beverly Hills Charity Auction (bhauction.com) , run by the former Beverly Hills Country Club. They recently conducted the online auction to benefit the Dana-Farber Cancer Center, in conjunction with the Dom Dimaggio Golf Tournament. One of their "success stories" indicates they raised $9,358.31 for the ZazAngels and The ALS Association Greater New York Chapter. 19 The American Red Cross, Godzilla of fundraising of all types, just announced its online charity auction to be hosted by MSN. They hope to raise $250,000 net during a 10-day period from March 24 to April 2, 2000.20 Ten97.com is "an interactive media network dedicated to providing programming, fundraising, promotional and informational services benefiting socially responsible causes." CharityCounts.com is itself a non-profit that draws over 200 non-profits, and donors and bidders, to its auction site. It offers both the seller and the buyer the opportunity to donate to charity (the buyer can take as a donation the difference between the "fair market value" (opening bid) and the final price).21 Several online retailers have designated their own charities to be the beneficiaries of auctions they run. Ambrosia (ambrosiawine.com), e-tailer of high-end California wines, is auctioning off wines to benefit the Napa Valley Housing Authority and Farmworker Committee. What do you wear when you bid on-line for high-end wine? How about designer fashions from Designer Outlet (designeroutlet.com), whose auction site benefits the New York City chapter of the Multiple Sclerosis Society.22 These auctions are run from the retailers' own sites (the designeroutlet auction isn't even shown on their start page). This seriously limits traffic, and so they are more accurately perceived as public relations efforts rather than as fundraising techniques. The MUSE (Music Unites the Soul of Everyone) conducts Bids4Kids to benefit Cystic Fibrosis at www.bids4kids.com, as a part of their general fundraising program for a variety of causes using benefit concerts. At Charityfundraiser.com, the seller can keep all of the proceeds from their sale. The buyer pays 5% premium to purchase the product. 50% of the buyer's premium is automatically sent to the Seller's designated charity. The seller can keep the money from the sale or donate that as well. Just to describe the breadth of audiences involved in on-line charity auctions, consider the following headlines: "NYToday.com Holds Special Charity Auction to Benefit the New York Times Neediest Cases Fund" (March 6, 2000) "PeopleLink Moderates AC/DC Charity Auction Chat Event Sponsored by MTV.com" (February 21, 2000) "Auctions.com Helps 'Hockey Fights Cancer/Dodge Online Charity Auction' to Raise $418,000" (February 15, 2000) "Mark Martin and Valvoline Extend 'Caring Hands' Partnership for 2000" (March 5, 2000) "Going Once, Going Twice... America's Top Chefs Go Up for Bid in Support of Share Our Strength" (March 14, 2000) "Tommy Lee Set for Launch/Yahoo! On-Line Chat, As Methods for Mayhem Rocker Donates Cymbal to Yahoo Auction to Raise Funds for PETA" (February 16, 2000) "Fast Car Brings Fast Cash to National Charity - TheSportsAuthority.com Auctions Ferrari to Benefit the Boys and Girls Clubs of America" (February 29, 2000) "Ray Bourque [NHL star] Autographed Jersey Up for Bids Online" (March 8, 2000) The Outlook for Online Fundraising Study of "Socially Engaged" Internet Users What has to happen to further spur internet fundraising? Some of the data from the Craver, Mathews, Smith & Co. Landmark Study of Socially Engaged Internet Users is indicative of how the internet can play a key role in serving donors, and ultimately in fundraising: When asked what non-profits should do "to maintain the loyalty and support of people like you": 59% of respondents said that non-profits should offer more flexible ways to make contributions; 81% said the web can help do that 71% of respondents said there should be more opportunities besides giving more, for people to become involved; 90% said the web could do that 62% said there should be a reduction in the amount of phone calls and mail from the non-profit; 86% said the web can do that. 44% said there should be more customized communication based on what the non-profit knows about the donor; 66% said the web can do that.23 People view the internet as "about as reliable" as TV News or their local newspaper.24 Mark Rovner of CMS comments: "One of the most tantalizing findings, on the other hand, is that socially engaged Internet users may represent a new universe for e-giving, including a big chunk of baby boomers and Gen-Xers, who are increasingly direct mail-nonresponsive."25 The Internet's Challenges to Traditional Philanthropy That the internet is changing philanthropy, probably forever, is illustrated in articles in the current issues of the two top journals in the fundraising field. In the March 9 issue of the Chronicle of Philanthropy, the United Way organizations are described as loosing their grip on traditional fundraising. Among the findings: People are no longer content with giving a percentage of their income to charity in general. They want to choose where it goes, and follow up on the results of their giving. Even in United Way giving, designated giving (where the worker chooses the recipient of the gift, instead of letting United Way allocate it as their committee determines) has increased from 12% 10 years ago to over 20% now. The proportion of corporate employees who had access to a United Way fund raising campaign fell from 47% in 1989 to 35% in 1998. Partly this is due to smaller corporate workforces, people working at home offices, and the increased flexibility of workers in changing jobs. The internet allows donors not only to direct their giving to any nonprofit anywhere in the US, but also to research that non-profit and determine the non-profit's effectiveness for themselves. All of this explains, in part, why the United Way has raised 8% less, in real dollars, in 1998-99 than in 1990.26 According to the March 1 issue of NonProfit Times, Direct mail lists are suffering from the depletion of potential donors. The Polk Company maintains a list that allows people to opt-in or opt-out of mailing lists of various categories, and many mailers match their lists to the Polk Database before mailing, in order to save money. Of the 6.7 million respondents to the survey, 1.7 million opted out of nonprofit direct mailings. "In categories ranging from health to disaster relief, the percentage of people opting-out of charitable direct mail outnumbered those choosing the opt-in. And, of the 1.7 million ChoiceMail consumers who opted-out of charitable direct mail, the number of ChoiceMail consumer's opting-out in the alzheimer's and arthritis charity categories is staggering. Some 84.9 percent of consumer's opt-out of alzheimer's related charities, and 83.5 percent got out of arthritis mail. While only 5.6 percent and 6.9 percent opted-in to alzheimer's and arthritis mail respectively."27 The Expanded Role of Intermediaries Author, investment banker, and futurist Donald Libey recently spoke on the subject of "Charity Informediaries" to the Direct Marketing Association's Non-Profit Washington Conference. He contrasted efforts done by individual non-profits with those who are offering portals to a range of non-profits based on the category of non-profit or another means of segmenting the market and consolidating many non-profits, and their target audiences, into groups of sufficient size. He mentioned five different trends that work in favor of "participatory infomediaries" or entities that group together non-profits based on some common ground (geography, demographics, cause) and creates information interchange, and provides the critical mass of users that each non-profit needs to flourish: consolidated universe reach: bringing each non-profit's followers, and new prospective supporters, together to create 'critical mass' shared costs and revenues membership/support sciences: data mining to learn more about each supporter and their activities, and communicate with them based on that knowledge and inferred preferences reduction of overhead mass: non-profits will pool their resources so they can share the investment in internet technology financial effectiveness: each non-profit will gain more supporters, at less cost, and be more effective in their action program, as part of a larger group, than they would if they acted alone.28 footnotes: 1 Mark J. Rovner, Senior VP, Craver, Mathews, Smith & Co. e-mail, February 29, 2000 | ||
