Alex Steer

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Online giving sites: why cheaper isn’t always better

493 words

Update: Third Sector reports that Help for Heroes has not stopped recommending Justgiving as the Times article suggests. It is, apparently, trying to keep its donors better informed about the funding models used by different online giving sites.

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Just a brief post in response to this piece in the Times, which gets it right then gets it wrong about online donation websites.

It starts off by covering the decision by Help for Heroes to stop using Justgiving.com as its online fundraising site of choice. This is because Justgiving is a commercial organisation, not a charity, and takes a 5% commission on donations (taken out of Gift Aid where possible), which it uses to generate profits.

However, it then seems to take commission-taking as some sort of benchmark. It compares Justgiving with Virgin Money Giving, which also takes a commission on donations, and contrasts both of these with a third site, Bmycharity.com, which takes no commission.

But this is misleading. A quick scan of its website reveals that Virgin Money Giving is a non-profit company (though not a registered charity) operated by Virgin Money. It is therefore fundamentally unlike Justgiving, and substantially more similar to Bmycharity. Assuming you've decided that it's preferable to operate donor websites on a non-profit basis (and you should think hard even before deciding this), all else being equal, you need to decide which non-profit site to use. How do you do this?

Looking at commission rates charged is one way, but it's inadequate on its own. What matters with a donation site, I'd argue, is how much of donated money gets to the charities you give money to support. So you do indeed need to know how much money is taken out to cover the costs of operating the company. But you also need to work out what those operating costs contribute to the effectiveness of the site as a mechanism for giving. Are they hiring better staff who will maintain the site's profile and so maximise donations, or technical wizards who will make the process of online giving easier and therefore less resistible? Or paying for server hosting to ensure uptime? Or controlling their finances in a way that will make sure their cash flow never hits zero, so they will still be around to deliver money to charities in weeks or months to come?

Virgin Money operates on commission, Bmycharity is funded by donations and advertising revenue. Knowing this alone is not enough to judge by. Remember, when you give via an online giving site, you are donating money to the organisation that runs it, and trusting it to give, in turn, to the charity or cause you want to support. So check out where your money's going, and how well (not just in what quantities) it's being invested.

Here endeth today's bit of donor advice.

# Alex Steer (12/10/2009)