FirstGiving’s Thoughts on Service Fees

Published
by
Shawn
on January 25, 2010
in News, Personal, Poverty and Save the Children
. 18 Comments Tags: , , , .

Yesterday I wrote a blog post about how sites like FirstGiving (and JustGiving, Facebook Causes, etc) are a great way for web savvy people to raise money for their favorite charities and non-profits. What most people might not know, is that such sites charge a service fee for every dollar donated. I’m not at all against people earning a living from innovative services – even if those services are meant for charitable uses.

Rather, I was hoping to start a discussion on what is a reasonable service fee for being a middle man. In my original article, I pointed out charities like Save the Children (a vast international charity with staff in thousands and offices around the world) takes only 8% for their overhead costs. Sites which act like a fundraising middle man, like FirstGiving for example, can sometimes charge service fees as high as 7.5%.

Many of you left great comments – both on the original blog post and in the version of this that is attached to my facebook profile. I’m honored that FirstGiving also decided to make an official comment, which I’m including here:

Hi Shawn, this is Beth, Marketing Coordinator at FirstGiving. It’s good to see so many people concerned about donors’ money getting to nonprofits as efficiently and transparently as possible. All of us at FirstGiving are concerned about that as well.

Both FirstGiving and JustGiving’s fee are structured the same way and are under 5% (plus credit card charges). In the UK, tax payers can claim Gift Aid. This covers the cost of our fee and automates the tax rebate directly to the nonprofit.

With the fee FirstGiving earns on donations, we provide our nonprofit partners with secure donation processing, unlimited customer support for staff, supporters and donors, fundraising planning and strategy sessions, event management, data management, and a product that constantly evolves with the market and in response to our client’s needs. Average costs of professional fundraising can be upwards of $0.20 on the dollar, so many nonprofits are willing to partner with FirstGiving for the exceptional value we offer. Additionally, we frequently hear that the costs of building and supporting their own their own system in-house far outweigh the benefits of using FirstGiving.

FirstGiving’s product is not the right fit for every organization, but for thousands of small and mid-sized organizations, FirstGiving pages have allowed them to benefit from the support of people like John and Sarah Green. We’ve helped nonprofits to exceed their fundraising goals and garner donations from networks they would only have access to through our fundraising pages. And we’re really proud to have helped thousands of people like John and Sarah raise over $120 million online for causes they care about in our mission to expand the world of giving.

If you’d like to speak further; please feel free to contact me. I’d be happy to speak to any additional questions you may have.

Warmly,

Beth Pickard

What are my thoughts? Find out after the jump.

First, I think this blog post demonstrates just how committed the staff at FirstGiving are to delivering a great service. If you’ve ever @replied a charity on Twitter – you’ll realize a great many of them don’t even bother to respond. FirstGiving isn’t some faceless company – it’s a way to fundraise that’s very personal. And, it should go without saying, it’s not a scam. This is a transparent service that’s a member of the Better Business Bureau.

Beth’s response also makes a great point: just because there is a service fee doesn’t mean 100% of the service fee goes into the pocket of the company charging the fee. Part of the fee goes to cover things like credit card transaction fees. At the same time, these intermediary (or “middle men”) service fees mean that part of your donation ends up somewhere other than the charity you are trying to support.

So my advice? Shop around. Here are the current service charges that various sites offer (these are total service fee charges):

  • FirstGiving: Of a donation, 7.5% will not reach the charity.
  • JustGiving: Of a donation, 5% will not reach the charity. Except for UK citizens where 100% of your original donation goes to charity.
  • Facebook Causes: Of a donation, 4.75% will not reach the charity.
There are also some charities that have custom donation pages such as Charity: Water and Partners in Health. In these cases, 100% of your donation goes straight to the charity (or rather it’s no different than donating using their “non-interactive” donate button). When such a service is available, it doesn’t make sense to use anything but those pages.

I also want to thank FirstGiving to responding to my blog post. I was very worried that my blog post would be seen as needless bashing – which is all too common on the internet.

Post to Twitter Tweet This Post Post to Facebook Post to Facebook

  • UK

    Shawn,

    Thank you for all your hard work and for this great discussion.

    I too am a donor and I like to give regularly. I wanted to raise the following issues:

    The percentage a middle man takes is less important than what they actually do with the money. Just like in the debate on charity salaries – people forget that while that is important it is often less important than other issues. I am willing to pay more to get more. Without FirstGiving, for example, who knows how much of that 120 million would have been donated and how many mosquito nets purchased.
    Furthermore, you keep comparing Facebook Causes to other websites but that is like comparing mom and pop stores to Walmart… It seems to me a billion dollar company can waive its fees altogether and use Facebook Causes for marketing purposes. Then again, just like in the Walmart debate, maybe smaller sites have no legitimacy because they give the same service but charge more (why doesn’t Google come to out rescue?).
    Most importantly, we should be careful when voicing opinions like those in this blog. People can use such arguments not to give anything at all. Are we not hurting the causes we fight for?
    Finally, what we need in terms of diclousre is more than detalis about fees, we need something more along the lines this website offers: http://www2.guidestar.org/Home.aspx.

  • UK

    Shawn,

    Thank you for all your hard work and for this great discussion.

    I too am a donor and I like to give regularly. I wanted to raise the following issues:

    The percentage a middle man takes is less important than what they actually do with the money. Just like in the debate on charity salaries – people forget that while that is important it is often less important than other issues. I am willing to pay more to get more. Without FirstGiving, for example, who knows how much of that 120 million would have been donated and how many mosquito nets purchased.
    Furthermore, you keep comparing Facebook Causes to other websites but that is like comparing mom and pop stores to Walmart… It seems to me a billion dollar company can waive its fees altogether and use Facebook Causes for marketing purposes. Then again, just like in the Walmart debate, maybe smaller sites have no legitimacy because they give the same service but charge more (why doesn’t Google come to out rescue?).
    Most importantly, we should be careful when voicing opinions like those in this blog. People can use such arguments not to give anything at all. Are we not hurting the causes we fight for?
    Finally, what we need in terms of diclousre is more than detalis about fees, we need something more along the lines this website offers: http://www2.guidestar.org/Home.aspx.

  • Johan Mattson

    Hey Shawn,

    Have you heard about Wikileaks? Well they’ve leaked a lot of corrupt documents from governments and corporations all around the world. But now they’re out of money and need our help. It would be awesome if you could make a YouTube video about their cause, or at least plug them on your blog.

    Check it out.

    http://wikileaks.org/

  • Johan Mattson

    Hey Shawn,

    Have you heard about Wikileaks? Well they’ve leaked a lot of corrupt documents from governments and corporations all around the world. But now they’re out of money and need our help. It would be awesome if you could make a YouTube video about their cause, or at least plug them on your blog.

    Check it out.

    http://wikileaks.org/

  • http://uncultured.com Shawn

    Hey UK – great points. Just thought I’d address them one-by-one

    First, while it is a good question as to how much of that 120+ million that FirstGiving has helped raised would have otherwise been donated, the majority of the people donating probably didn’t know that 9+ million of those donations would never reach the charity they were supporting.

    Second, comparing “Facebook Causes” to “FirstGiving” isn’t like comparing “a mom and pop” to “Walmart”. Because, Facebook Causes isn’t owned by Facebook. How do I know this? I have a good friend who works there. Facebook Causes (or “Causes” as they are more formally known as) is a small company based out of Berkeley and independent from Facebook itself. If anything, given their location, they have more overhead given higher rent there.

    Finally, I’m all for free speech – so I don’t at all agree with your sentiment that we need to “be careful when voicing opinions like those in this blog”. People donate and they should know where there money goes – it’s their right as a donor. I do, however, agree that we can sometimes debate the timing of when we talk about such things. Like, now is not the time to debate efficiency in the Haiti emergency while there are people dying. But, no charity topic should be taboo – and all should be discussed, addressed, openly and in good time.

  • http://uncultured.com Shawn

    Hey UK – great points. Just thought I’d address them one-by-one

    First, while it is a good question as to how much of that 120+ million that FirstGiving has helped raised would have otherwise been donated, the majority of the people donating probably didn’t know that 9+ million of those donations would never reach the charity they were supporting.

    Second, comparing “Facebook Causes” to “FirstGiving” isn’t like comparing “a mom and pop” to “Walmart”. Because, Facebook Causes isn’t owned by Facebook. How do I know this? I have a good friend who works there. Facebook Causes (or “Causes” as they are more formally known as) is a small company based out of Berkeley and independent from Facebook itself. If anything, given their location, they have more overhead given higher rent there.

    Finally, I’m all for free speech – so I don’t at all agree with your sentiment that we need to “be careful when voicing opinions like those in this blog”. People donate and they should know where there money goes – it’s their right as a donor. I do, however, agree that we can sometimes debate the timing of when we talk about such things. Like, now is not the time to debate efficiency in the Haiti emergency while there are people dying. But, no charity topic should be taboo – and all should be discussed, addressed, openly and in good time.

  • http://www.enterprisecometh.com Will

    The First Givings etc. aren’t non-profits for tax purposes and they don’t hide this fact. It’s true that the average person who uses a site like this doesn’t think to himself, “hmmm… in essence what this site is doing is exploiting people’s desire to donate to charity for some easy money.” If they did think that, they would be correct, but exploitation is in abundance in business, so these sites aren’t a special case. There’s also no real alternative if you want to easily raise money for charity.

    But as you pointed out, you’re not against the premise of these for-profit sites, just exuberant service fees. And I would argue that a reasonable service fee is whatever the site feels is reasonable since these sites weren’t founded based on noble principles to begin with. So any fee, 7% to 40% seems reasonable to me. They’re private, for-profit companies.

  • http://www.enterprisecometh.com Will

    The First Givings etc. aren’t non-profits for tax purposes and they don’t hide this fact. It’s true that the average person who uses a site like this doesn’t think to himself, “hmmm… in essence what this site is doing is exploiting people’s desire to donate to charity for some easy money.” If they did think that, they would be correct, but exploitation is in abundance in business, so these sites aren’t a special case. There’s also no real alternative if you want to easily raise money for charity.

    But as you pointed out, you’re not against the premise of these for-profit sites, just exuberant service fees. And I would argue that a reasonable service fee is whatever the site feels is reasonable since these sites weren’t founded based on noble principles to begin with. So any fee, 7% to 40% seems reasonable to me. They’re private, for-profit companies.

  • John Highbarger

    Late comer to the conversation here, but you might want to check out Piryx.com. Met the CEO at a bay area event a while back, and they’re doing some really amazing things in the charitable payments space. I was surprised to find out how big they actually were. From what I remember during my conversation their platform is free, but has a tiered payments structure similar to paypal. Would be a good one for you to research at some point.

    thanks for the great insight!

  • John Highbarger

    Late comer to the conversation here, but you might want to check out Piryx.com. Met the CEO at a bay area event a while back, and they’re doing some really amazing things in the charitable payments space. I was surprised to find out how big they actually were. From what I remember during my conversation their platform is free, but has a tiered payments structure similar to paypal. Would be a good one for you to research at some point.

    thanks for the great insight!

  • Hexacat

    I think you need to read Beth’s comment very closely…

    “Both FirstGiving and JustGiving’s fee are structured the same way and are under 5% (plus credit card charges).

    the way I read this is that FirstGiving charges 5% ON TOP of credit card charges. so if a typical credit card company charges 7% per transaction then FirstGiving charges 5% on top of that for a total of 12% fee.

    I could be wrong but I tend to scrutinize EVERYTHING.

  • concerned

    I think it is outrageous that FirstGiving charges 7.5% per transaction. A typical credit card transaction is about 1.5%, and with large volumn the charge can be smaller. So FirstGiving is taking at least 6% of every donation into their pocket. A typical charity will have a 10%-30% administrative cost, meaning that every dollar donated, only .70-.90 cents will go to the source of the fundraising effort. Now if you add FirstGiving to the mix, all of a sudden for each dollar you give only .625-.825 goes to the charity. No thanks! I will send my checks to the charity directly. Best yet, charities should use PayPal and that is a perfect way to elminiate this uncessary overhead!

    Thank you for making this post. People need to be informed and not accept outrageous fees.

  • Scott

    what you’re missing is that with peer-to-peer fundraising sites, the charities are not spending ANY money to recieve those donations. The legwork is being done by the person who creates the event on firstgiving / causes, etc. I say this recpectfuly: Your math is, well, off. Ask someone at a non-profit about your logic – You’re comparing apples to oranges. Fistgiving and peer-to-peer fundraising sites are NOT ‘making money from charity that would be happening anyway’, they are helping grow the pie. Make sense?  

  • http://uncultured.com Shawn Ahmed

    Hi Scott – I actually think the original commenter had it right. 

    And, bottom line, the fact of the matter is it’s cheaper to setup your own PayPal account and collect donations peer-to-peer than it is to use FirstGiving. 

    And, many nonprofits I’ve talked to actually are simply setting up their own versions of FirstGiving’s site. So you can do your peer-to-peer fundraising without this kind of overhead.

    Keep in mind many charities like Save the Children have 10% overhead – and they use that to run a massive international aid and development program across the globe. It’s hard to say peer-to-peer fundraising is so valuable it’s worth 75% of what it costs to administer an international aid institution.

  • Scott

    I hear ya. 

    mycharitywater.org is a great example of what you’re talking about (charities setting up their own platforms). 

    My point was simply that the average US NPO’s fundraising expense % is 25%, every NPO out there is looking to better engage MORE donors and YOUNGER donors, and so the P2P model taking a <10% cut for NOVEL donations (novel meaning wouldn't happen otherwise) is a pretty good deal, especially when you consider the fact that their org's brand is being spread amongst one's own network (i.e. lots of new people who trust the source). 

    That said, you make a very good point about the fact that many NPOs are setting up their own P2P functionality, and I agree, if this shaves off 2-4%, then that's great. But, once again they are then responsible for engaging the individual who will be doing the fundraising. This costs $, too. 

    You obviously know what you're talking about and I completely agree that NPOs doing the P2P thing themselves is a better solution, but only IF they can do so effectively, as charity:water has been able to (and there are a bunch more, as you pointed out, like Skip1.org and others). The thing I worry about is that I've found that most NPOs can't engage as successfully as charity:water, especially in the context of getting supporters to fundraise FOR them (ie that's a big 'ask'). 

    Anyway, your points are solid and well said. At the end of the day, I just hate seeing those who are trying to bring some innovation to the NPO sector (firstgiving, causes, etc) vilified as trying to 'take money from charities' (I don't mean you were doing this, btw! or even 'concerned', but just in general). The fact of the matter is that the average fundraising expense of 25% has not changed since the web's emergence (source: phone convo I had with charity navigator), and I do think that having more people / websites / companies emerging to launch different fundraising methods is overall a good thing, and that more competition in any space leads to more efficiency and innovation. I also think that posts and discourse like those here are also a critically important part of that process. 

    Thanks for the reply Shawn! Happy weekend,   

    Scott

  • Scott

    I hear ya. 

    mycharitywater.org is a great example of what you’re talking about (charities setting up their own platforms). 

    My point was simply that the average US NPO’s fundraising expense % is 25%, every NPO out there is looking to better engage MORE donors and YOUNGER donors, and so the P2P model taking a <10% cut for NOVEL donations (novel meaning wouldn't happen otherwise) is a pretty good deal, especially when you consider the fact that their org's brand is being spread amongst one's own network (i.e. lots of new people who trust the source). 

    That said, you make a very good point about the fact that many NPOs are setting up their own P2P functionality, and I agree, if this shaves off 2-4%, then that's great. But, once again they are then responsible for engaging the individual who will be doing the fundraising. This costs $, too. 

    You obviously know what you're talking about and I completely agree that NPOs doing the P2P thing themselves is a better solution, but only IF they can do so effectively, as charity:water has been able to (and there are a bunch more, as you pointed out, like Skip1.org and others). The thing I worry about is that I've found that most NPOs can't engage as successfully as charity:water, especially in the context of getting supporters to fundraise FOR them (ie that's a big 'ask'). 

    Anyway, your points are solid and well said. At the end of the day, I just hate seeing those who are trying to bring some innovation to the NPO sector (firstgiving, causes, etc) vilified as trying to 'take money from charities' (I don't mean you were doing this, btw! or even 'concerned', but just in general). The fact of the matter is that the average fundraising expense of 25% has not changed since the web's emergence (source: phone convo I had with charity navigator), and I do think that having more people / websites / companies emerging to launch different fundraising methods is overall a good thing, and that more competition in any space leads to more efficiency and innovation. I also think that posts and discourse like those here are also a critically important part of that process. 

    Thanks for the reply Shawn! Happy weekend,   

    Scott

  • Scott

    PS – I was googling ‘firstgiving’ this morning and that’s how I got here. I decided to chime in on the topic, and then got an email with your reply and came back. I didn’t realize this was your site:)

    Just watched the video and read about what you’ve done. 

    Very very cool stuff. Congrats – this is awesome. 

    As you can probably tell, I’m a bit passionate about charitable innovation. I really love the ‘this isn’t a charity’ message, and I think this line of thinking is critical to seeing real innovation in the space. Makes me think of other ‘un-charities’ that are doing amazingly charitable work (Toms shoes, etc., although I know that’s not a direct comparison…)

    Anyway, awesome work. 

  • Melissa

    Shawn-

    I came across your site in research that I’m doing for a similar start up idea. After recently training for a marathon with Team in Training, I realized how many friends I had that were interested in running an endurance event to raise money for a cause they are passionate about but didn’t find TNT to be a good fit for them. I wanted to create a site that allows friends to train for events in a group while each raising money for different causes. (Ie: I raise money for the Leukemia and Lymphoma Society, my friend raises money to cover hospital costs of their cousin who is being treated for breast cancer and my sister raises money to build a well in a 3rd world country) I wasn’t anticipating making a profit off fees to fundraising pages but maintaining the site through sponsorship in run-related categories, retail, food & beverage etc. My question is, is this possible? Are there barriers to entry that force companies to charge service fees to fundraisers? What are the legalities that are holding these sites back from operating as non-profits? I’ve started out with a blog but am hoping to get a full fledged site with fundraising pages at some point. Let me know if you can shed some light on my research. I can be reached at melissa@runraiser.org