The Business of E-Charity

The Balkans, April 1999. More than 500,000 Kosovars have fled for other countries in response to ethnic strife.

In the crisis, many turned to the American Red Cross for help. And the American Red Cross turned to the Internet.

In that single month, the American Red Cross raised $1.1 million (US$) from 8,600 online donations — an average of more than $36,000 per day that underscored the growing reach of e-charity.

Creating an Online Presence

Philanthropic organizations have just begun to reap monetary contributions online, focusing more on simply getting their message out. But there is no doubt that charities have been aggressive in using the Internet to their advantage.

“Most organizations realize they need an Internet presence,” Paul Clolery, editor-in-chief of the NonProfit Times, told the E-Commerce Times. “Some of the smarter ones, like Goodwill, have put their stores online.”

The American Red Cross (ARC) has set the standard in online fundraising. On August 20, 1999, it raised $138,508 in online donations, 20 percent higher than the previous one-day record set on April 7, 1999 during the Kosovo humanitarian relief effort. On top of that, the Chronicle of Philanthropy surveyed 252 of the largest charities in the U.S. in 1999 and found that the ARC garnered 40 percent of all online charitable donations.

Nonetheless, the ratio of online gifts to Web page visitors is low, according to Chris Paladino, ARC development communication officer.

Conventional Methods Remain

“In overall terms, [online charity] is a very small percentage of the overall funds that the Red Cross raises,” Paladino told the E-Commerce Times. Of the $800 million the ARC raised in 1999 contributions, less than $3 million arrived over the Internet.

Paladino did note that “during major disasters, the number of hits skyrockets.” But charities have not come to rely on the Internet for donations.

“You’ll never get away from direct-mail fundraising — sorry,” Clolery said. “You’ll never get away from television appeals. But it’s just another tool that’s becoming more prevalent.”

A Charity Home Page

Most nonprofits believe that improving Web site content will promote interest in the charities. Paladino said that the ARC is “in the process of revising” its public Web page “to make it a little more attractive, more news-oriented, with daily content changes to increase repeat traffic.” The ARC’s ultimate goal is to create “a page that people are going to make their home page.”

Fundraising is not the only way that charities use the Internet. Connecting with volunteers is another.

“Those [functions] are nice,” Clolery said, “and they spin out of a getting-your-message out philosophy. ‘This is who we are; this is what we do.’ It’s more of a greeting card than anything else.”

Merging E-Commerce with E-Charity

But charity and e-commerce have much more in common than trying to make a strong impression. Sites such as WebCharity.com, iGive.com and Shop2Give.com mirror e-commerce leaders such as Amazon and eBay — with a philanthropic twist.

WebCharity gives Internet users the chance to donate new and used items to be sold, either by e-tail or by online auction, with the proceeds going to the user’s favorite nonprofit cause.

Shop2Give says it offers customers the same price on goods they would get if they were to shop directly on a vendor’s Web site. But at Shop2Give, the customer chooses one out of more than 640,000 nonprofit organizations to automatically receive a percentage of the sales price. The percentage is listed on the site, next to each given vendor.

“The merchants like us because we’re a great way to get new customers and new eyeballs to their sites,” Shop2Give founder and CEO Ami Kassar told the E-Commerce Times. “Nonprofits are pleased to work with us because we’re essentially a passive revenue stream for them.”

Present and Future Hurdles

As with anything associated with the Internet, some uncertainty about the future of e-charity exists. Kassar predicts there will be a shakeout among online philanthropy companies such as Shop2Give over the next 90 to 180 days.

So, for reasons that may have as much to do with survival as with philanthropy, Shop2Give is testing a second online venture, Thecommunitysite.com, where visitors can donate on a daily basis by clicking on advertisements, choosing for themselves the nonprofit destination of the donation.

“We made the decision six months ago we weren’t going to build a business exclusively on shopping revenues,” Kassar said. “We quickly figured out that wasn’t going to be enough to build a sustaining business that we could all feed our families off of.”

Privacy Rears its Head

And here is a concern that for-profit e-tailers will recognize: privacy. Deborah G. Johnson, professor of philosophy in the School of Public Policy at Georgia Tech, told the E-Commerce Times that the online charity industry needs a legal or self-regulatory solution to protect personal information. She worries that data obtained by one organization will find its way to another, against a donor’s intentions.

At a workshop for charities she conducted last year, Johnson found evidence in the discussions that “the power of the technology is greater than we’ve developed rules for.”

She noted, “The interesting thing to me was that there certainly were a lot of people who had reservations about what was available, but they couldn’t afford not to take advantage. I think there was a sense of discomfort, but not enough to stop the momentum.”

Getting Ahead of Themselves?

Additionally, as with any commercial endeavor, charities need to make sure that their online operations keep the realities of their target audience in mind.

“There’ve been some senior organizations that went out and got a whiz-bang Web site,” Clolery said, “and had to back off because their members didn’t have anything greater than a 486 [MHz processor].”

In short, the nonprofit industry’s ventures onto the Internet have begotten the kind of excitement and growing pains that the for-profit industry is all too familiar with.

Just maybe don’t look for a Goodwill IPO anytime soon.