Life/Work - Issue 37

"There is a disturbing imbalance today between giving and getting."

Tell the truth: How many times during the past week have you had a conversation about money — whether you have enough, how much someone you know is making, how your stock portfolio is doing, or whether you should buy that new PalmPilot, car, or vacation home?

Now, answer this: How many times during the past week have you had a conversation about giving back — how you could contribute to a cause that you care about, or which social issues really deserve your attention and support, or which organizations are successfully addressing the world's most pressing problems?

There is a disturbing imbalance today between giving and getting. Somehow, we find it easier to focus on our self-interest than to focus on the greater good. Over the past 10 years, the new economy has created an unprecedented amount of wealth. But, leaving aside such high-profile exceptions as Bill Gates, we have not become notably more philanthropic.

While Americans contributed an estimated $115.5 billion to charity last year — more than the citizens of any other country — that figure represents an average of just 2% of our adjusted gross incomes. Worse yet, people in the lowest income brackets contributed a higher percentage of their earnings to charities than did those in the highest brackets. The Newtithing Group, a San Francisco-based nonprofit organization that promotes philanthropy, estimates that Americans could have given an additional $250 billion to charity last year — without decreasing their net worth.

Fortunately, change is under way. The same technological innovation and entrepreneurial spirit that have spawned thousands of e-businesses in recent years are prompting a new, high-tech approach to philanthropy. For starters, the Internet has created an entirely new universe of potential donors. According to the Mellman Group, more than 16 million Internet users say that they are willing to make a donation to charity online, while only about 12 million people currently respond to direct-mail solicitations from charities. The average age of direct-mail donors is 66, while the average age of online donors is 42. Finally, whereas an overwhelming majority of direct-mail donors describe themselves as liberal, potential online donors represent a wide range of ideologies.

Whatever their politics, potential Web donors are more skeptical and more demanding than traditional givers. They're more inclined to seek information about the charities they support and to insist on accountability regarding how their money is spent. Meanwhile, during the past year, more than a dozen dotcom entrepreneurs have launched for-profit Web sites that offer innovative, efficient ways to contribute time and money to charities. The W.K. Kellogg Foundation estimated that as of last December, there were 140 Web sites devoted to philanthropy, volunteerism, and social change.

Perhaps all of this is news to you. It certainly was to me. I wasn't aware, for example, that there was any such thing as an online charitable shopping mall. It turns out that there are at least 10 of them, with names like CharityMall.com, GreaterGood.com, iGive.com, and MyCause.com. When you shop at the name-brand retailers that are affiliated with these sites, a percentage of the money you spend is donated to whatever charity you designate.

Most of these sites earn revenues by negotiating a discount with retailers, keeping part of it for themselves, and then passing the rest along to the charities that their customers choose. It's hard to imagine a good reason to buy things directly from a retailer such as Amazon.com once you know that by linking to it through a charity mall, you can help a cause that you care about.

Charity-auction sites offer another way to give. They usually work by sending the proceeds of a given sale to a cause chosen by the donor of the item being auctioned. So far, the online charity-auction business has proved to be only modestly successful. For example, WebCharity.com, launched in July 1998, has generated just $172,000 in auction sales.

Then there are sites that simply give people a way to contribute to the organizations of their choice. At AllCharities.com, for example, donors can select from more than 670,000 charities. Givenation.com earns its revenues by taking a fee of $2.50 for charitable donations of $30 or less, or $5 for any gift that exceeds $30 — far smaller amounts than nonprofit organizations typically spend per donor in raising money by traditional means.

"We believe that it's a natural progression for people to start giving online, just as they're beginning to shop and do their banking online," says Susan Hackley, 53, cofounder and senior vice president of Givenation.com. "Young people are especially comfortable online. When they do AIDS walks or bike rides for cancer, we're going to make it possible for them to sign up their sponsors online. Or, when a natural disaster occurs somewhere in the world and people want to help, we'll provide information and an immediate way to contribute."

Charity sites offer the most significant advantages of the Internet: convenience, efficiency, and readily available information. No charity site, however, has yet found a way to attract large numbers of donors or to generate significant revenues — either for charities or for themselves. Why not? The most compelling explanation is that most people still aren't aware that online giving is an option. But there are other reasons as well.

One problem is that the new generation of potential donors — particularly the successful entrepreneurs among them — are skeptical about big charities. "They want more proof that the organization is working as a business, whereas the older generation of givers tend to look first for strong governance or program effectiveness," says William Massey, 54, president of the National Charities Information Bureau. The NCIB analyzes the effectiveness of hundreds of charities and makes its findings available at a relatively modest cost.

Massey believes that the concerns of newer and older donors are equally legitimate. "You can solve problems by looking more closely at a balance sheet, and it's healthy to do that," he says. "But if organizations are doing effective work for their constituencies, even if their business model is not the best, they may still deserve support. With the nonprofits, you have to speak with the heart as well as the mind."

That insight also helps explain why the convenience of online philanthropy may not be sufficient to attract new donors. Giving has an emotional component, after all, and most of the new charity sites still feel a bit bland and bloodless. Creating a sense of community and helping people connect to the causes that interest them are the biggest challenges that these businesses face. OneWorld Online (www.oneworld.net) is one example of a nonprofit site that offers lots of information about social issues, as well as online charitable shopping and volunteering opportunities. VolunteerMatch (www.volunteermatch.org) provides choices for volunteering based on people's zip codes and personal schedules.

Building trust is another critical issue for new charity sites: Prospective donors need to feel confident that the money they give will get to the charity they designate. For older charities, meanwhile, the challenge is to become more visible online. There is already evidence that well-established charities can elicit a significant response by making appeals through their own sites. During the six weeks before Earth Day 2000, for example, an aggressive online campaign by the World Wildlife Fund raised more than $416,000 — eight times more than the organization had ever raised online in any one month.

Perhaps the most clearly targeted and best-funded online giving model is the one conceived by Pete Mountanos, 50, chairman and CEO of Charitableway. Before starting Charitableway, Mountanos ran a series of high-technology businesses and was the largest stockholder in VXtreme, a streaming-media company that he sold to Microsoft in 1997 for a reported $75 million. It was while working briefly for Microsoft that Mountanos got the idea for Charitableway.

"Microsoft has a generous matching program for contributions, but I ran into a problem when I chose to give to a charity that wasn't on its list," Mountanos explains. "Suddenly, the burden shifted to me to prove that the charity was legitimate, and that problem became time-consuming for everyone involved. I realized that while it was too expensive for any one company to set up the best infrastructure, you could build some common technology and amortize the costs across lots of organizations."

Workplace giving is a $4-billion-to-$5-billion business, and it has traditionally cost a good deal of money to administer. The United Way, for example, spends from 7.5% to 15% of total contributions to run a workplace campaign. Mountanos was convinced that he could cut back-office costs by at least half. Like other sites, Charitableway intends to make a profit, and it has two mechanisms for doing so: A company can choose to pay Charitableway a licensing fee for setting up a workplace-giving center as part of its employee-benefits package, or it can allow Charitableway to keep a small percentage of what its employees give. Investors are reacting favorably to this model: So far, Mountanos has raised more than $43 million to launch Charitableway as an e-business that builds customized, automated, online giving centers for companies. The centers are designed to make it easier for employees to give at work and to cost less for their employers to administer. Charitableway also hopes to provide services to charities, and it has already made a deal to take over the back office for United Way Silicon Valley.

The advantage of Charitableway is that it becomes part of a company's culture. Ultimately, its success will depend not just on how much convenience and efficiency it provides, but also on how much its client companies encourage and support employee giving. One recent study shows that in companies that have a workplace-giving program, nearly 90% of employees feel a strong sense of loyalty, whereas in companies that lack such programs, the loyalty factor is considerably lower.

The ultimate challenge, however, is to people like you and me. The Internet can make charitable giving more convenient, reduce the vast sums now spent on fund-raising, and provide more information about the causes that we support. The threshold question is whether we are willing to step outside ourselves — and beyond the preoccupation that so many of us have with our own well-being — and give back a little bit more of our time and money.

Tony Schwartz (tschwartz@fastcompany.com) is a Fast Company contributing editor. He is also the author of What Really Matters: Searching for Wisdom in America (Bantam, 1996) .

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