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Written by User:Eloquence in 2006.
Fundraising on the Internet is no longer a niche phenomenon. Online fundraising campaigns are primarily held in four categories:
- community fundraising
- content-oriented fundraising
- political fundraising from the local to the national level
- organizational fundraising
Thanks to the wide acceptance of electronic payment systems such as PayPal and credit cards, virtually all charitable organizations which accept donations from the public make use of the Internet as a fundraising tool today. This brief summary focuses on online fundraising which is or was innovative because how, by whom or for which purpose it was conducted.
Online communities such as forums and collaborative blogs have, in the past, often faced different financial issues. Most common is that the growth of the community makes it impossible to run the website merely as a hobby. Millions of visitors per month lead to exorbital bandwidth and hardware costs. This problem has decreased significantly in recent years especially due to massively decreasing bandwidth costs.
It is also not common that the founders and operators of a community simply wish to generate some money from it. This is typically justified by arguing that the founder spends much of their life keeping the community "in shape" (moderating, developing software, publicizing etc.), and that, in effect, the community should pay their salary. Naturally, this often blends into content-oriented fundraising (see below).
One of the most effective early community fundraising campaign was run by Kuro5hin.org, a collaborative weblog where users vote on the stories which are posted on the frontpage. Rusty Foster, the site's founder, made essentially the argument outlined above, and also suggested turning control of Kuro5hin over to a non-profit organization, which he wanted to work on and for.
While the original fundraising goal was $70,000, Foster eventually settled for $35,000. During the campaign, a banner was displayed on all pages (see below), showing the current donation status in real time. Besides donating to Kuro5hin, users could buy so-called "text ads", similar to advertisements on Google search result pages, but bought by members of the community and usually advertising relevant content.
Foster never actually created the non-profit organization he promised, which led to a lot of bad blood in the coming months and years. Indeed, his interest turned to other project, and he has worked extensively as a consultant for Daily Kos, a political online community using the software developed for Kuro5hin. Daily Kos itself is notable as a key political fundraising website for the Democratic party, which illustrates that relatively few thinkers are dominating online fundraising.
SomethingAwful.com, an online community notable for its parody frontpage content and its highly active discussion forums, has taken a somewhat different approach. Instead of holding regular fundraisers, users who want to access the forums pay a one time fee of $9.95. The forum has over 75,000 registered users (May 2006), though it is not clear how many of them have paid the fee. This method also leads to a more exclusive community which is resilient against spammers and problem users returning under multiple usernames. Subscription-based models are of course common; however, SomethingAwful.com's method of a one-time payment is far less typical for online communities and has allowed the site to grow very large indeed. Content-oriented fundraising
Sometimes communities form around works created by single or few individuals. One example are web comics created by amateurs. Many artists have experimented with fundraising centered around the idea that without some financial support, they will either have to discontinue the comic, or publish it less frequently. It is not uncommon for fund drives related to web comics to promise some kind of "gift" for any donation, usually a wallpaper or similar image.
Some comic artists, notably Randy Milholland of Something Positive, have managed to get their entire salary paid through donations. This is also true for some bloggers; Jason Kottke is the most well known example. Typically, however, donations are combined with revenue streams from advertising and merchandising.
The most noteworthy commercial attempt at content-oriented fundraising was horror author Stephen King's novel “The Plant”, which was published online in installments. Wikipedia describes the experiment as follows:
- After hackers cracked the encryption to the e-book version of King's Riding the Bullet, the publishing of The Plant in January 2000 was reported by King's representatives to be a means to circumvent piracy by offering the book unencrypted and in installments. People could pay a one-dollar fee for each installment on the honor system. According to King's representatives, the venture was a failure. The project was ended, they claim, because of a lack of sufficient payment, and a public that could not be trusted on the honor system. Some even continued with claims that this represented the commercial infeasibility of web publishing.
- However, fans and readers claimed the idea as a success, rather, that it was made infeasible for other reasons, particularly greedy pricing for an inconsistent product. King and his publisher, citing dissatisfaction with the percentage of paying readers, raised the cost of each installment to a high of 7 dollars. King decided to use the honor system, allowing people to download the story installments, whether they paid for it or not. He threatened, however, to drop the project if the percentage of paying readers fell below 75 percent. More than 200,000 customers downloaded free copies of the story in a 24-hour promotion through the Barnes and Noble website.
- It received over the desired 75 percent for its first installment, but this fell to 70 percent after installment two. With the third installment and the bad publicity generated by King's complaints for the drop in reader payment, the numbers surged back up to 75 percent. Instead of allowing the market to determine the product's value by accepting the rate of payment people would be willing to pay, King and his publisher still held fast to their ideal rate of return at 75 percent.
- They decided to double the cost of the fourth part of the novel to two dollars. King tried to balance this by also doubling the number of pages to 54 pages for the fourth. He also promised to cap the total cost of the entire book at 13 dollars. Paying readers dropped severely to 46 percent of downloads. The number of downloads dramatically decreased overall as well. Though King's core fan base was largely loyal, they could not speak for the general public, who did not react well to King's changing of terms.
- Pricing was the main readers' grievance, but also, it was the lack of satisfaction in the quality of the work, and the natural cost-to-quality comparison by the public, was further imbalanced by the raise in cost. The last installment was published on December 18, 2000.
The high interest in King's experiment indicates that distributed fundraising efforts are still seen by the public as innovative and unusual. King's approach is similar to what has been called the “Street Performer Protocol” by John Kelsey and Bruce Schneier, releasing a work freely if a certain amount of money has been paid (in Kelsey's and Schneier's proposal, the money is paid into escrow until the threshold is reached). Many popular open source projects have donation buttons on their websites. Some, such as BitTorrent client Azureus, even integrate donation reminders into the software. The success of these solicitations is often invisible. Some open source projects are funded indirectly through organizations (see below).
A very successful open source fundraising campaign was related to the 3D software Blender. Blender was originally closed source freeware. The programmers raised over 100,000 Euros in an online donations campaign (using, again, a frequently updated progress bar that looked like a thermometer), which allowed them to acquire the exclusive rights to the source code and relicense it under an open source license. Today, Blender is a well-maintained and extremely popular open source 3D modeller and renderer.
Political fundraising using the Internet was pioneered by U.S. presidential candidate Howard Dean during the 2004 election. Dean was the first candidate to make effective use of the Internet to raise small donations (usually in the $25-$50 range) from his supporters. Dean's campaign raised a total of $50 million, most of which was spent on advertising, public events, and on administrative tasks in the key U.S. states.
Core of Dean's campaign was a mailing list, a blog, and a Meetup.com. Potential Dean supporters were put on the mailing list fairly liberally, and were informed whenever a new fundraising drive had started. The blog was used to keep tabs on the progress of the fund drive, with frequent “Why we are doing this” posts. Banners (cf. illustration) were used to convey the progress in near real time, in an emotionally appealing manner. A baseball bat was always used as a progress bar.
Some other special software was developed, including an affiliate system by which supporters could run their own “mini-bats”, gaining reputation in the community if others donated "through" them (while not receiving financial benefits). Finally, the Meetup.com service, which was still completely free at the time, made it easy for contributors to organize Dean groups in various cities. The process of scheduling a meeting and choosing a venue is very streamlined in the Meetup.com interface, and thousands of meetings happened all over the United States.
Towards the end of his campaign, Dean postulated a "$100 revolution" of 2 million Americans contributing $100 each in order to defeat George W. Bush. Ultimately, Dean was not chosen as the candidate of his party, and John Kerry stood for the election instead. However, all other Democratic presidential hopefuls adopted at least parts of Dean's strategy. The campaign of retired U.S. Army General Wesley Clark took some ideas even further. Instead of a blog written by staff members, it created an entire "community center" where users were encouraged to write their own blogs, and complex discussion threads with hundreds of messages were not uncommon. The website used "Scoop", the same software used by Kuro5hin (see below).
Communities centered around content often evolve into organizations which are meant to protect and represent both. Examples include the KDE e.V., the GNOME Foundation, or the Wikimedia Foundation (the non-profit which operates Wikipedia). These organizations not only raise funds, they also have to adequately distribute them in the interest of the stakeholders. (Typically, however, that distribution is not undertaken in a directly democratic process.)
Organizations like Wikimedia and FreeNode (an online chat network) are using many of the techniques described above in their fundraisers. For instance, Wikimedia raised 350,000 dollars in a three week fund drive at the end of 2005. A progress bar was shown during this time on every page served by the Wikimedia servers; in addition, a link to an emotional personal appeal was shown in the last days of the fundraising drive (this significantly increased the amount of donations). One problem in this particular fundraising drive was that initially, no total fundraising goal was stated. Consequently, some users were confused as to how much money was needed, and for what purpose.
Transparency and feedback mechanisms are of key importance in all online fundraising methods. Wikimedia gives every user who makes a donation the option to write a comment. These comments are published on the Wikimedia mailing lists, and contain much praise for the project. Making donor feedback more visible may be another method to incentivize donations.