‘Tis the season for philanthropy–when the twin spurs of holiday cheer and end-of-year tax planning create a bulge in charitable donations.
Over the next two months, money will flow to charities via the Internet like never before. Many nonprofits are reaching out directly through their web sites and E-mail lists to solicit donations. A growing number of for-profit startups are developing cause-related marketing plans that will funnel a portion of your online spending to charity.
But before you rush to your computer with credit card in hand, be sure that rose-colored intentions aren’t clouding your decisions. Any site that claims it will direct money to charity should be fully accountable for how that money is handled. We’ve outlined the main steps you should take to ensure your dollars are benefiting your intended cause.
First, research the charity you want to donate to. Learn as much as you can about its programs and the percentage of money raised that actually reaches these. Fund-raisers such as direct mail and pledge drives can gobble up from 15% to 30% of a charity’s annual budget. You’ll also want to confirm that the group is a qualified nonprofit organization if you plan to take a tax deduction. (For online resources that offer help with such research, see: “Before you give
There’s been a burst of new shopping sites and web auctions that promise to direct some share of revenue to charity. For tax purposes, any purchase that you make at a charity-oriented web mall is not deductible. But if you pay more than fair market value for an item at a charity web auction, you may deduct the difference. For instance, a guitar played by Courtney Love valued at $300 fetched $1,200 on auction at WebCharity.com. The buyer could deduct $900 as a charitable donation.
Roughly 75 shopping sites claim to help you direct part of the money you spend online to charity. GreaterGood.com and Shop2Give, for example, link to web-based retailers who have agreed to pay them for referring shoppers.
But be aware that the amount of the referral fee that a cause-related mall will pass on to charity differs from site to site. It’s best to comparison shop using the retailers you’re most likely to buy from. Forbes.com has cross-checked comparative figures listed on 4charity.com, a site that claims to pass along a higher portion of the referral fee to charity. See “Window shopping
Some cause-related malls fall short of being ideal in other ways. They let money designated for charity linger in their own bank account for months, collecting the interest. And some have set a minimum dollar figure before they will cut a check for a given charity. Though this figure is typically low, it may hold up funds earmarked for more offbeat charities such as Bat Conservation International or the American Canoe Society. (No, we didn’t make those up.)
“You need to be an informed consumer,” says William P. Massey, president of New York-based National Charities Information Bureau, which provides information on nonprofits to potential donors. “Cause-related marketing is not charity. As long as the consumer understands that, then these for-profit sites are not necessarily a bad thing because they direct money to charities.” He predicts the number of cause-related web malls could skyrocket to around 500 by next year.
Although many of the shopping sites do not have written agreements with the nonprofits listed, Massey says they should in order to avoid the charge that they are trading on a charity’s good name. For instance, executives with the American Red Cross (redcross.org
) are still deciding whether they should partner with the cause-related shopping sites, according to Jennifer Dunlap, American Red Cross’ head of corporate services.
But this nonprofit is one of the most successful organizations at raising money on its own web site, particularly during an emerging crisis. The American Red Cross has increased their share of online donations from 1% to 3% of total fundraising between fiscal year 1998 and fiscal year 1999, which ended June 30.
Another fundraising heavyweight–Goodwill Industries (goodwill.org
)–has figured out a way to capitalize on the web auction craze. Its new site, shopgoodwill.com, allows it to get top dollar for items it might not even be able to sell in a local thrift shop. The biggest surprise so far: an ugly yellow vase painted with a big bug, which fetched $280 at auction. “We probably would have priced it at $5 to $10 in one of our stores,” says Joan Dornbach, Goodwill’s marketing chief in Orange County, Calif., where the auction site was launched.
Lesser-known charities are better off turning to an intermediary site like WebCharity.com to auction donated items. Like most e-commerce sites with the word “charity” in its URL, this site is for profit. The Connecticut-based company has modeled its business plan after
WebCharity has dispersed over $150,000 to 50 nonprofits at no cost to the charities, according to Ross Kudwitt, the company’s chairman. “One of the common messages we get from the nonprofits we meet with is that WebCharity is a no-brainer. It’s an incredibly efficient way to raise money, so why wouldn’t they want to be involved?”
All kinds of causes–including the very obscure–have turned to the web for fundraising. And that’s not just because the cost of raising money online is much less than it is with direct mail and cold calling. Online donors tend to be far younger and diverse than those reached by more traditional fundraising efforts, according to a recent study by Craver, Mathews, Smith & Co., an Arlington, Va.-based fundraising consultancy.
While 85% of online donors are under 60 years old, only 34% of direct mail donors are under 60, according to the Craver study, which placed the mean age of online donors at 42 compared with that of direct mail donors at 66. Ideological differences between the two groups are even more dramatic. Of the direct-mail donors, 74% identified themselves as liberal, with 11% calling themselves conservative. But online activists were evenly split, with 43% calling themselves liberal and 44% saying they are conservative.
It’s not hard to see why nonprofits view the web as a great vehicle to shore up future donations. One place they can reach these young freethinkers: the Gerri Halliwell charity page. Launched this week to reach an audience of 5- to 19-year-old shoppers at iCanBuy.com, the page awards contributors with various tchotchkas donated by the former Spice Girl. Average donation size: under $20. Anyone moving a donation in excess of that across the Internet should invest a little more time and thought than the average Halliwell fan.