[SYNTHESIS] What online giving marketplaces might mean for philanthropy…

Written by Gabriel Kasper on Tuesday, December 16th, 2008
Filed under Network technology, Networks in action, Synthesis

Emerging “online giving marketplaces” like GlobalGiving , Kiva, DonorsChoose, and GiveIndia represent one of the most interesting intersections between philanthropy and social media that we’ve come across in our last two years of studying this space. These Web 2.0 start-ups are using online tools to connect donors to local issues, organizations, entrepreneurs, and social programs around the world. At a Stanford Social Innovation Review conference on the topic this fall, participants were introduced to many of these new giving markets and contemplated what these new models mean for the future of philanthropy.

The markets are still small—they account for less than 1 percent of all giving in the U.S. (“not even the crumbs from the [philanthropic] pie,” according to Tom Williams of GiveMeaning). But as many people have observed, what matters with these startups is not the size, but the trend line. And with some of the larger sites like GlobalGiving and DonorsChoose growing at a rate of more than 100% a year, the trend is definitely on the rise.

Much of the conversation at the Stanford conference focused on two key elements: how the online giving markets are doing as markets—and how they are working online. On the latter point, Matt Halpern of the Omidyar Network drew on his past experience at eBay to lay out four key elements of successful online marketplaces: (1) driving users to the site; (2) making the platform easy to use; (3) ensuring trust; and (4) getting incentives right so that these other elements are reinforced.

What was emphasized less at the conference though, was the other word in the title of the program: online giving markets. Although they are still early in their development, these online giving markets represent a unique entry into the increasingly diverse philanthropic environment. They’re different from regular financial markets, and they’re more than just philanthropy online: they are allowing people to make connections, learn, and take action on issues in ways that were never before possible. They are an essential part of what Joel Fleishman, in his book The Foundation, calls the “American polyarchy”—a pluralistic society with many different independent power centers.

Fleishman says that he has “No doubt that it is this characteristic of our society—the proliferation of countless points of view on all issues, the proliferation of countless independent sources of initiative—that is the bedrock of our nation’s vitality, vibrancy, power, and enduring strength.” He sees foundations as instrumental in supporting the polyarchy, and American democracy.

In many ways, I think the online giving marketplaces are the next evolution of this: democratizing philanthropy by empowering more donors to express their views and support things they care about, while simultaneously allowing nonprofits and projects around the world to get the support they need. The new tools are opening up the field so that philanthropy is no longer just the province of the wealthy. It is becoming easier than ever before for people of all backgrounds and perspectives to give at whatever level they can afford.

But with this empowerment and connection, these markets also raise many interesting questions:

• Will the “wisdom of the crowds” nature of these markets (as individual donors spread their funds across a range of individual nonprofits) add up to more than the sum of their parts? What does it mean for the “strategic” element of philanthropy?
• These online giving marketplaces have for the most part been created in a growing economy. None of them have yet reached real financial sustainability. What will this mean in the current global economic downturn? Is there a sustainable model here?
• Are online giving markets here to stay? Are they the next incarnation of foundations or community foundations, adapted to fit today’s more “connected” context? Are they a set of niche players (perhaps a designated “exit strategy” for foundations… like a “public offering” where foundations can hand off to a broader public grantees they no longer want to fund)? Or are they simply today’s pioneers of a new tool, that some day will be incorporated into other organizations?

When seen through this philanthropic lens, I’ve started to wonder if it makes sense to hold the online giving markets to a “for-profit” marketplace standard. Can we really expect them to grow at a pace like eBay or Amazon did? It’s great to aspire to that standard, but perhaps a better point of comparison for the new marketplaces would be the development of community foundations around the United States. Many community foundations have taken years, or even decades to reach scale and financial sustainability, often with significant support from mainstream funders like the Mott, Ford, Kellogg, Knight, and Packard foundations. Online giving marketplaces may have an important role to play in the field, but let’s keep in mind that they’re still very much in the early stages of their development. It may be several years before we can begin to answer the questions posed above.

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