Is Causes.com Really Cost.com?
Sean Parker, a founder of Facebook, started Causes.com last year. It is a for profit organization that has developed a fundraising and advocacy application to plug into social networking sites. In 14 months they have generated 12 million users. He spoke on a panel on Saturday at the Aspen Ideas Festival. Sean said that his motivation for Causes.com was largely driven by the inefficiency of nonprofit fundraising, where as much as 30 percent of nonprofit budgets are spent on fundraising.
He also shared two facts about his business:
1) They have generated $3 million in donations in their first year.
2) While their current revenue is generated via commissions on donations, they plan to use ad revenue from the page views on their site.
Sean Parker is a brilliant business man. He has created a new media company that will grow to gain significant page views and therefore revenue and add to his personal wealth from Facebook stock.
While I hope that I am wrong, I fear that Sean's growing wealth will be made at the expense of the nonprofit sector and the causes he intends to help.
In his pitch, Sean talked about getting a call from a nonprofit thanking them for the unexpected $30,000 donation they got via Causes. The crowd, made up largely of socialites who sit on nonprofit boards, began salivating. They lined up to ask how they could get the nonprofits listed in the application.
On Monday they will dash home and begin firing off emails to staff of their nonprofits telling them about the land of unexpected $30,000 checks. The staff will then invest their time in creating a Causes profile and engaging their volunteers and donors to build a social network around their profile.
How do I know? This is what I did last fall. We probably spent $3,000 in staff time to launch our presence on Causes.com.
Last time I checked, we had raised $30 and it was all from existing donors. That is a cost of $100 per $1 raised. Sean shared that their 12 million users gave $3 million dollars. That is 40 cents per member.
If my experience is the common one, that means that nonprofits spent $300 million dollars in staff time to generate those $3 million in donations. The Taproot Foundation is not a typical nonprofit and we don't traditionally appeal to individual donors. So, let's be generous and say that it is only a $10 to $1 ratio.
Sean is brilliant. He got nonprofits to spend $30 million dollars in the last year to drive traffic to his site. The best part is that he is being heralded as a saint for doing it.
It gets better. All professional fundraisers know that one of the reasons people give to charities is so they can be listed in annual reports or on a museum wall with their friends.
Sean lets millions of people get on the "wall" with no donation. They are free riders. He is giving away one of the few "benefits" nonprofits can offer donors. This also creates a long term cost for the sector.
If Sean's goal is to decrease nonprofit fundraising costs, I fear he is doing the opposite.
All this said, when I first heard about a start-up called eBay I thought it was a stupid idea destined for failure.
As I have said multiple times here, Sean is really a brilliant guy. I hope that he has a trick up his sleeve and/or learns as his model evolves and can address these issues to achieve his stated goal. He is much smarter than I am and has the resources to make a real positive impact on the nonprofit sector. I will be rooting for him to do so.
I somewhat agree but also want to add that the Causes platform is only (generally) effective when used by sexy, relatable nonprofits with a campaign-based approach. A brief glimpse at the top earners on the browse page on Causes confirms this. A typical local food shelter, health clinic, or volunteer organization will not have the knowledge or resources to navigate web 2.0 or have the pre-existing "fan base" that Causes' top earners have.
BUT!!!... nonprofits with the time/money to navigate web 2.0 and ability organize the masses around specific calls to action can also raise money. They also have an added secondary benefit: raising awareness to millions of otherwise passive facebook users. Carie Lewis, who operates online marketing web 2.0 activities for the Humane Society, is a perfect example of someone using these tools the right way. I guess the lesson that many of us are learning is that if you can't do it right then don't bother doing it at all.
Why would anyone bother with nonprofits in this time of so-called economic decline? Something tells me that this is a scam, or the economy isn't as bad as liberals scream.
Aaron, I think this a great post. I suppose Sean Parker isn't 'in it for the money' (I guess he has enough money). But the net effect is, I think, pretty much as you describe it. Melanie's last sentence is also very apt. The problem of course is that in the world of grasping at reeds in which most npos live, Causes seems like a potentially stout branch worth grabbing at. After all, it's $30,000 guaranteed, right? But the upshot is as you describe. Thanks for posting.
I think there are a couple of issues in all this - as I mention here
http://beth.typepad.com/beths_blog/2008/07/nptech-summary.html
We are in the very early stages of how nonprofits and social activists can leverage social networking applications for good causes and just learning what works and what doesn't. I think there are a couple of things that need to be happen before we get to best practices and knowing precisely what works.
Nonprofits need to look at objectives and resources, target their audiences, and think about multi-channel efforts before jumping on the Let's Use Facebook bandwagon. (I think this applies to all social media - see the Cute Dog Theory for more) Activists need to better understand the psychology of Facebook apps and perhaps revise their campaign strategies. Facebook application developers who want to help change the world and work with nonprofits and activists need to better understand how Facebook culture and behavior meshes with activism and fundraising behaviors and workflow.