e-philanthropy: Dot Zilla or e-Mancipation of Donors?

By Charles B. Maclean, PhD

PhilanthropyNow™

This article was researched and written after an earlier e-Philanthropy Conference and is offered as a recap of that event prior to the September 24 & 25, 2001 Conference in Virginia.

 Go to end of the article for info about the new “e-Philanthropy Review” on-line newsletter and for info about the 2001 Conference. 

Article Contains:

• History & Factoids
• Impact on Other Giving Methods
• Doesn’t Donor Relationship Matter Any More
• Is It Worth It?
• Do Due Diligence
• Tips For On-Line Donors
• E-Philanthropy Industry Self-Regulation
• The Challenge
• Reality Test
• Websites Worth Clicking
• Actions You Can Take Today

CHAPTER 1

Conundrum, opportunity or both?  The sellout crowd of dot-coms, nonprofits and government leaders at the White House co-sponsored “e-Philanthropy Conference in San Jose, September 25-26, 2000 felt it had elements of both.

Shirley Sagawa, former Deputy Assistant to the President and Deputy Chief of Staff to the First Lady and co-author of “Common Interest Common Good,” cited Cone Inc. research indicating that, “Today just 7% of socially engaged Internet users give online even though 80% of this population gives using traditional methods”.  She noted that, “More people are buying more online . . . but are more concerned about security.   There is more access to online services . . . but an access gap between the affluent and the poor exists.  There is more communication online . . . but more concern about privacy.”  She depicted e-philanthropy as an extension of relationship building and urged listeners to " . . . not throw out the principles of old philanthropy as they embrace the new-Philanthropy.”

History & Potential

e-Philanthropy was pioneered in Canada by United Way in 1995 and “virtually exported” to the US according to David Armour.  Betty Beene, former CEO of United Way of America believes the future will embrace “Both Bricks & Clicks Giving”.  People want to give through a relationship they trust using a vehicle they trust.   The challenge she says is to, “lend urgency to online giving decisions so that the quip, “But I already gave at the office” doesn’t become, “But I already gave online.” Dr. Harry Saal, former head of Network Associates Inc. and coiner of the “Dot.Zilla” descriptor, painted a picture of the future of e-Philanthropy.  It includes a range of efficiency options like online fundraising, grant submission online, outsourcing of nonprofit back-office services, and volunteer matching . . . to easy low cost visibility for new small niche nonprofits. 

Factoids

q       70%+ of American households gave to charity in 1998 and 84% of all charitable contributions came from households that volunteer.  1.2% of them gave over the Internet in 1999 (Independent Sector)

q       8% or 16 million adults say they are willing to give online (Mark Mellman, The Mellman Group)

q       56% of adults (109 million Americans) volunteered in 1998 and 1% found those volunteering opportunities online (Sara Melendez, CEO, Independent Sector)

q       50% of the US population is online and 25% of them said they would contribute or volunteer through the web (Forrester Research)

q       86% of those surveyed were concerned about privacy online, 80% of donors online say they want to remain anonymous, and 86% want to be asked before their personal data is used by others (Pew Internet and American Life Project)

q       By 2010 some 25% of personal dollars donated will be given online (Chronicle of Philanthropy)

q       70%+ of Fidelity Charitable Giving Fund respondents say they are giving more now than before they set up a donor advised fund (Cynthia Egan, President, Fidelity Gift Fund)

q       70% of those who volunteer also give money  (Independent Sector)  

q       There are 30,000 new nonprofits a year or nearly 734,000 total (Giving USA and the IRS)

q       A new millionaire is made every 34 seconds in the US (Cynthia Egan, President, Fidelity Charitable Gift Fund)

Will Giving On line Just Shift Money From Other Methods Of Giving?

Apparently not.  According to Brian Murrow consultant for PriceWaterhouseCoopers, World Vision attracted over $500,00 last year online and 62% of those donors were new to philanthropy.  97% of the online contributors to Mercy Corps International which raised $130,000, were new donors.  Online giving capability enables many nonprofits to find donors who haven’t given before.

Will Giving Procrastination Be More Likely Online?

Betty Beene, former CEO of United Way of America thinks so, “ . . . because e-giving has no externally imposed urgency to it unlike workplace campaign payroll deduction, it will result in a delay if not a decline in giving.”  Fundraisers must find ways to pull donors to the giving site and deliver a compelling reason to “give now”.

Doesn’t Donor Relationship Matter Any More?

Pete Mountanos, former CEO of Charitableway.com (Charitableway ceased operations during 2001) says, “While the Internet has made it possible for singles to find each other online, it hasn’t replaced the need to meet and mate face-to-face any more than e-Philanthropy has replaced personal engagement of the donor by the charity.”  

e-Reach To Collaborate & Compete

Pete Mountanos goes on to note, “While there are 700,000+ IRS registered nonprofits in the US, the majority of current giving is to some 50,000-60,000 of that core group.  It's my experience that that core receives the majority of contributions funneled by the United Way, Federal Giving Campaign and even the charitable giving funds like Fidelity and there is significant overlap of their receiving grant organization lists. While e-Philanthropy allows nonprofits to reach, engage and compete for donors all year long and do it globally, it is clear donors tend to converge on the best [nonprofits]."

The Shift From Asking To Earning

e-Philanthropy is one non-traditional innovative fund raising option that can shift nonprofits from, “begging for money . . . to earning money” says Richard Steckel, Founder of AddVenture Network.  With federal and state cutbacks in funding for social programs and proliferation of nonprofits, they will increasingly have to operate like for-profits.  The Internet provides limitless options for creative social entrepreneurism and online earning initiatives.

But Is Setting Up Or Contracting For The “Spendy” Infrastructure Worth It For A Nonprofit?

The American Heart Association reports that its average direct mail donation was about $18 while average online donations were $54.  Few nonprofits have the financial, technical and people resources to do it right alone.

The Cost Of Not Doing Due Diligence

Ken Patey, Vice-Chair of the e-Philanthropy Foundation and Founder of MyAssociation.com (now Blue Step Inc.) says, “Nonprofits have found themselves compromised by service providers who couldn’t deliver on the promise.  Promise keeping requires that service providers to the nonprofit industry invest and have available millions of dollars to service and fulfill the promise made.  Countless nonprofits have come to us because their initial service provider went out of business.  They ran out of money.  Many think all it takes to become a nonprofit service provider is a $2000 computer, a brother in-law who can build a website and a sales person who can tell a good story.  This couldn’t be further from the truth.  It takes millions of dollars, a world class team, and cutting edge technology to deliver on the promise,”

6. Are the system security procedures state of the art and is in-house security of donor credit card information and other sensitive donor data assured?
7. How much is the online donation processing fee and who is paying it?
8. Does the service provider or nonprofit recipient verify receipt of donations and tell donors how contributions are being used?
9. Does the service provider carry adequate general liability insurance to cover errors and omissions as well as unexpected loss or misuse of contributions?  At least one international insurer is marketing special e-commerce loss insurance.
10. Does the service provider use an independent third party financial accounting firm to monitor, audit and verify how quickly online contributions were distributed, to whom, how much and for what?
11. Does your service provider comply with current e-philanthropy technical standards?
12. Is frequent website update built into the working agreement and budget?
13. Is there clear agreement on where undistributed donations go if the dot-com goes under?
14. Is there clear agreement about who owns the donor database, who has access to it, can it be sold, and what happens to it when the service contract ends?
15. If it is a for-profit service provider, how much profit is it making (thus far few if any service providers have made a profit)?

How Can Donors Qualify A Nonprofit Before Giving To Them Online?

1. Legitimacy: Verify that the nonprofit is an IRS tax exempt organization and learn about its track record by going to: (see the list appearing later in this article for additional web addresses).

q       Guidestar (Searchable database of 700,000+ nonprofit organizations in the United States and insight into their operations.

q       Read the IRS 990 forms (looking for substance, not eye-wash) www.guidestar.org

q       American Institute of Philanthropy (Charity watchdog and provider of giving tips) www.charitywatch.org

q       Better Business Bureau Philanthropic Advisory Service (recently merged with the National Charities Information Bureau) (A kind of Consumer Reports for giving with access to tax forms, consumer complaints registry, standards and info) www.bbb.org then go to “Charity Reports".

2. Donor Initiated Online Giving:  Did the donor take the initiative to give online or use a passive third-party portal site to give?  Giving should not be a “push” resulting from an “uninvited ask spam” by a charity or for-profit service provider.
3. Transaction Fees:  Look on the site for a statement of contribution transaction fees and who pays them  (most top nonprofit and for profit online giving sites cover transaction costs from other revenue and dedicate 100% of your donation to the cause). 
4. Control: Can you designate which charity/cause gets your donation?  If your gift is to be used for a purpose other than the one specified, are you asked first?
5. Transparency: Are the instructions and disclosures clear and easy to understand? 
6. Verification:  Did your donation go where you directed it?  Is receipt of your donation confirmed and a thank you sent?
7.  Privacy: Review the service provider’s privacy policy as posted online.  If you want to give anonymously and/or not be contacted again, are you given that option?
8. User Friendly: Is it easy to give with just a few clicks?  
9. Info Access:  Can you hotlink to the nonprofits’ website for annual reports, volunteer opportunities, FAQs, and opportunities to give by check or credit card if you are more comfortable with those methods?
10. Passion: Do you believe in the cause and is it consistent with your values?  If not, define your giving mission before you give.
11. Peer Input: Talk to friends who are familiar with the cause and/or the giving portal.
12. Call: When in doubt, call the nonprofit and talk to a real person, ask for references and ask accountability questions.  Assess whether the NPO is adequately staffed to handle the increased work generated by e-giving traffic.
13. Site Visit:  Make an unannounced site visit to one of the nonprofits

projects/programs if it operates in your area.

 Tips and title in part from Paulette Maehara, CEO of the National Society of Fundraising Executives and from the “Protocol for Ethical Cause-Related Marketing” by Charles Maclean.

 e-Philanthropy Industry Self-Regulation

On September 28, 2000, 25 major e-philanthropy related for profits and nonprofits like the AOL Foundation, MyAssociation.com, AARP Andrus Foundation, and the American Red Cross got together.  They formed a nonprofit organization dedicated to fostering the use of the Internet for philanthropic purposes.  Their focus is on educational programs; advocacy and regulation; marketing and communication. 

CHAPTER 2  

For Major Donations

You might also engage the services of the new breed of donor coach/advocate who can do the due diligence for you.  Ask them to verify that they are only working on a fee basis with you and are not receiving any compensation or in-kind benefit from a nonprofit or for-profit.  They should help elicit your passions, values and giving mission first.  They should be able to gather and coordinate the input from your CPA, tax/estate attorney, insurance agent, and financial planner. They can make it easy and effective for you to give your way.

CHAPTER 3  

Donor Control & e-Mancipation

NPOs can react to e-Philanthropy as a threat to getting their old share of the giving pie. They can also see e-Philanthropy as an opportunity to better serve old donors and clients and gain new ones.

New generation online givers are more affluent and more savvy in their ability to do due diligence for themselves online.  Control of their gift is now more than ever in the hands of the giver who can designate how much, where and when they give online.

New generation donors are less wiling to believe charities or nonprofit intermediaries that say, “Trust me, I know the best use of your donated dollars. “  Giving online can e-Mancipate donors from being steered by fundraiser interests and loyalties.  As one interviewee put it, “Fundraiser ask me what I care about . . . before you tell me what you care about”.

CHAPTER 4  

The Challenge

Sara Melendez, CEO of the Independent Sector sees that, "Our challenge is how to use the Internet to actually increase philanthropy, not just to convert offline giving to the Internet, and to do this in a way that builds trust and strong connections with nonprofits and the people they serve." 

That challenge is reinforced by Brian Murrow of PriceWaterhouseCoopers who would like to see “ . . . participants in the e-Philanthropy sectors to work more closely together and collaborate on mobilizing resources via the Internet. There are very large

economies of scale in the area of e-Philanthropy that can help drive down

transaction costs of fundraising.  This cost reduction will ultimately result in more resources being made available to help achieve the very important strategic goals of nonprofit organizations.”

Reality Test

 New generation giver, 14-year-old Francesca Sternfeld who lives at the Wasatch Cohousing Community in Salt Lake City reflected on her experience of clicking to give at www.hungersite.com Each time she logs on the Internet, she’s made a habit of going to that site and by just clicking, knows that a site sponsor will be donating 1 cup of food staple distributed through UNESCO to the hungry worldwide.

She says, “It feels good to do it but I wonder what the immediate effect of my clicking is.   What I’d like to see is published images or stories on the website depicting the people my clicking has helped.  That way, I’d feel more of a connection.  “Then, when I have money from my job at the music store, I’d feel more compelled to give some of my own money online to causes that I respect.  Some of those might be national causes I trust like the National AIDS Foundation, Habitat for Humanity, and Boys and Girls Club of America.  It’s got to be easy to verify that a nonprofit is worthy my giving to.  I want to know what my money is going to do and how it’s going to do it.”  For me, having accessible examples will help personalize the organization and encourage me to give again and again.”

e-Philanthropy leaders, listen to the voice of this customer, she is the new generation that will you will need to serve to survive and thrive. 

Websites Worth Clicking  

www.independentsector.org for a summary of the e-Philanthropy Conference highlights

www.nasconet.org for the Charleston principles for ethical e-philanthropy

www.nsfre.org  (now the Association for Fundraising Professionals) for intelligence and standards for fundraisers

www.give.org/qrguide.cfm for reports on nonprofits

www.bbb.org for consumer reports and complaints about nonprofits

www.charitywatch.org for charity watchdog info and giving tips

www.charities.org for more reports on nonprofits

www.guidestar.org for verification of IRS status

www.charitychannel.com for nonprofit issues chat room on 45+ topics, 45,000+ visitors and for a sign-up form for the “e-Philanthropy Review” a free on-line newsletter -or-send a blank e-mail to:e-philanthropy-review-subscribe-request@CharityChannel.com

www.sea-change.org for working models and options for social venture philanthropy

www.helping.org for the AOL Foundation website for giving intelligence and options.

www.pewinternet.org for latest studies on American’s use of the Internet

www.opxinfo.net for technical standards related to e-philanthropy

www.ephilanthropyfoundation.org for ethical issues and best practices dealing with e-philanthropy

www.philanthropynow.com for giver support tools (the authors website)

Not Just Clicking To Give

As Lydia Nibley, former Director of Education and Outreach for MyAssociation.com (Now Blue Step, Inc.) says, “The joy of giving is related more to feeling a deep affinity for a cause or organization and not just a ‘mouse-movement-giving’ of dollars online.  Scan the horizon for issues you care about.  Recognize that your passions may change along with changes in your life situation. To feel most fulfilled look for opportunities to give of time and talent and not just dollars online."

Mark Mellman of the Mellman Group sums it up saying, “There is tremendous potential on the web for generating both contributions and volunteer activism that is largely untapped.”

Actions You Can Take Today

1. Visit the background research websites listed in this article and use them to do your do diligence

2. Sit down with your family and business and develop a written given mission statement . . . and then act on it.

Clicking to give isn’t enough.  Donors must be able to mature their giving savvy online via high-tech tools lined to high-touch relationships.  e-Philanthropy is in its infancy and will evolve like e-commerce did into unimaginable options and opportunities.  Nonprofits are well advised to not let this technology tail . . . wag its mission. 

Giving online must become fast, focused, due diligence driven, accountable and trusted.  Nonprofits without e-Philanthropy strategies and partners will within the decade become history . . . instead of making history.

Charles Maclean, PhD is Founder and Chief Committed Listener for PhilanthropyNow He can be reached at 503.297.1490, advocate@philanthropynow.com or www.philanthropynow.com  He is co-author of “PhilanthropyNow:  Seeding The New Generation of Entrepreneurial Gives” and author of “The Giver Mission Coaching Kit”.  He is currently beta testing Lost Donor Debriefings and PhilanthropyNow Fireside Chats.

© 2000, 2001 Charles B. Maclean, PhD & PhilanthropyNow.  Right of first US print publication granted to the Portland Business Journal.  One time electronic duplication and web posting rights granted to American Association of Fundraising Counsel, Arizona State University Nonprofit Management Institute e-Mail Newsletter and Funding Pool's e-Philanthropy Update. All other print and electronic rights reserved.  Permission is granted for download and duplication as long as the resource is duplicated in total and provided to readers at no cost. 

All other print and electronic rights reserved. September 1, 2001

“If at first the idea is not absurd, then there is no hope for it.” - Albert Einstein