E-Commerce Disruptive Innovations in Charity and Non-Profit Fund Raising

By Lee, Chung-Shing; Berniker, Eli et al. | Journal of Strategic E-Commerce, January-July 2007 | Go to article overview

E-Commerce Disruptive Innovations in Charity and Non-Profit Fund Raising


Lee, Chung-Shing, Berniker, Eli, Van Wyhe, Glenn, Johnson, Kenneth J., Journal of Strategic E-Commerce


ABSTRACT

Philanthropic fund raising has evolved into a major business activity. Traditional models utilize one-on-one contact, direct mail, and telephone bank fund raising. Most e-giving and e-philanthropy companies' business models are simply the extension of the traditional brick-and-mortar paper-oriented processes. The transaction costs of these models are extremely high, often representing more than 50% of contributed funds. Neither are these methods very effective. The high transaction costs and limited effectiveness offer an opportune cost umbrella for e-philanthropy, web-based fund-raising systems. Many business models have evolved into a set of opportunities that promise to disrupt traditional fund raising models. This paper examines the question of how online e-giving companies can capitalize on the disruptive attributes of the Internet and e-commerce to redesign their business and revenue models to achieve high performance. Our purpose in this paper is to examine the disruptive potential of e-philanthropy. We will propose value propositions and architecture of processes appropriate for web based nonprofit fund raising. We will classify, compare, and evaluate various business models that promise to change the nature of philanthropic fund raising. Overall, the gains for the online company lie within the design and implementation of the virtual value chain and what the firm can do with the information it collects.

Keywords: philanthropy, e-commerce, innovation, charity, fund raising, and business model

INTRODUCTION

There were about 1.4 million charities, social welfare organizations, and religious congregations in the United States in 2004. Total giving to those charitable organizations rose to $248.5 billion USD in 2004, an increase of 2.3 percent from 2003 (when adjusted for inflation). The majority of that giving ($187.9 billion USD) came from individuals. (1) Before September 11, 2001, no single online group raised more the $3 million dollars (Blau, 2001a). A 1999 survey performed in the U.S. reported that 1.2% of total contributions came in over the Internet. (2) Giving steadily increased during the majority of the 1990s, slipping only in 2001. A survey in 2001 found that only 1% of those surveyed donated using the Internet. (3) Since September 11, 2001, relief charities took in online more than $215 million USD of the over $2 billion collected, or 10.8% (Wallace, 2002). One third of what the September 11th fund-raising received came in through the Internet; with an average size of $10 USD more than traditional methods (Wallace, 2002). In 2005, 63% of households in the United States had Internet access. Obviously, the potential for growth in online charity and fundraising is very significant.

In this paper we will use the term "e-philanthropy" to include e-giving, online charity or gift-giving, intranet workplace giving, or online donations; terms that are all more or less synonymous with each other. Austin (2001) describes e-philanthropy as the use of the Internet to raise money and recruit volunteers. The concept allows individuals the ability to set up donation pledges and facilitates the electronic transfer of funds to the charity or organization of one's choosing. Implementing this type of process, or service, could potentially replace time-and resource-consuming processes with an outsourced provider of gift-giving options who can expedite the movement of a donation through electronic means.

This paper first looks at the characteristics and major concerns of the e-philanthropy industry in the United States. Next, the paper argues that the e-philanthropy model is a disruptive innovation that fundamentally changes the traditional approach of gift-giving and charity donation. E-philanthropy business models are then identified and defined. In addition, a new approach to e-philanthropy is introduced in section 5. In closing, some specifics that could add value to this process and service will be identified. …

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