Does 5% make Justgiving a digital friend or foe for Charity

Categorized | Fundraising, Marketing

Does 5% make Justgiving a digital friend or foe for Charity

Written by Vicky Grinnell-Wright on 02 June 2009
Tags: Charity, digital fundraising, donation, Fundraising, fundraising tools, gift aid, justgiving.co.uk, justgiving.com, london marathon, online charity, social media

I have always considered justgiving to be one of those truly inspired and yet oh-so -simple, ideas that the Internet brought with it and one that has become fairly synonymous with its sector i.e. charity.

My first words last weekend, when my sister asked me to sponsor her to do a fun run, were ‘just email me your justgiving page details’. Imagine my surprise when she said she would ‘put my name on the form’…yes, believe it or not, she actually had a piece of paper and a pen and, horror of all horrors, NO JUSTGIVING page! I had no idea that people still did that and if I my memories of calling in the debts on those forms are anything to go by, she will be years collecting up her pledges, just as I was when I attempted my sponsored silence about 25 years ago.
However, collect her cash or not, what I hadn’t thought about until a recent chat with a charity who shall remain nameless – and why would I, I usually simply tick the ‘Gift Aid’ box and move on, was the 5%. I guess if I had thought about it I would have known and indeed felt it fair enough that justgiving received some kind of admin fee for their trouble and enterprising idea, but 5%? This seemed to be a bit of a hornets nest.

5 % of the circa £25 million donated via justgiving in this year’s London Marathon is, now, let me see… yes, £1,250,000. That is quite a lot of money diverted from charity even before we move onto the admin costs of the charities themselves. And, it seems that the normal card transaction fees are outside of this charge, making the 5%, or 5.75% if you include VAT, quite a hefty sum.

So, my question is this, is it wrong? justgiving are set up as a profit making private enterprise an d in answer to their critics state that “Fundraising costs in the UK [...] between 15% and 25% (source: www.charityfacts.org). So Justgiving’s 5% represents excellent value, especially for smaller charities with limited resources.”

I don’t know what to think about this. It is a dilemma and if I am honest, if I had thought of it, I would a) be fairly well off and b) doubtless be justifying my fee on the basis that some 5000 registered charities benefit from the £340million or so channelled through justgiving.

However, it seems that the gripe from charities is that not only do they have to pay the 5%, they also have to accept the rise and rise of justgiving as a charity brand in its own right, taking limelight from their own brands and marketing efforts. A whisper tells me that there are a couple of new entrants who are charging less than justgiving and allowing charities the option of white labelling their online fundraising tools.. so who are they, does anyone know? will they be the ones to level the playingfield and is there really a problem here, or is this a storm in the charity digital tea-cup?

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Jonathan Waddingham Says:
June 9th, 2009 at 09:33
Hello Vicky, thanks for writing the article, you make some great points. However, there are a couple of things I’d like to pick up on. Describing the 5% of the £25 million raised for the London marathon (a new record online, I might add) as being diverted from charities is somewhat disingenuous. Would that much have been raised without the amazing efforts of the people who use our site, and the ways our website helps people reach out to their networks online? I doubt it.
And for us to have been able to process that amount of donations in the lead up to the marathon required an investment of £1.5 million in our world-class technology infrastructure. Our profits (which we didn’t always make – our investors put up with £5 Million in losses in our earlier years) go back into the business to make our website better, and improve the service to individuals and charities alike.

On the subject of improving our service, you mention a point about charity brands, and that is one of the things we are addressing with our new site, launching very soon. One of the developments we are working on for the new site is the allowing charities to take more control of their presence on JustGiving, to let their brand and logo be more prominent, whilst our own branding and logo fade into the background. But this is just one new development for us, as we’ve been building our new site for over 18 months so that we can constantly provide new and useful services to charities and individuals to help them raise more online.

Jonathan Waddingham, charity champion, JustGiving.
Alec East Says:
June 9th, 2009 at 10:45
On a slightly different note, the update for the iPhone enables payments to be made from within applications, directly from your iTunes account. Mobile applications, especially iPhone, have a lot of potential for fund-raising and awareness but the downside is that the App Store takes 30% of the transaction (ouch!). When push comes to shove, that’s not massively different from the fees on other mobile transactions such as SMS but it does make the platform less attractive to non-profits.
Pete Says:
June 12th, 2009 at 10:10
Justgiving take almost 10% of the net amount donated (or just over 7% of the gross amount) in charges and fees. It’s a little like booking an airflight only to find you have to pay more to check-in. From the numbers they publish I reckon they DEDUCT £4.5 million a year from UK charity donations. That is money that should have been going to help others who are less well off. The argument that the money would not otherwise have been raised is without merit. Those running JustGiving should feel shame for running this scam. They are taking money from the least well off and least able to speak for themselves.

Put another way, that is £4.5 million of fund raising (walking, cycling, collecting, etc) that does not go to the intended charity but to the fat cats at JustGiving.

Shameful.
Jonathan Waddingham Says:
June 16th, 2009 at 17:12
Dear Pete, rather than feeling ashamed of what we do, we’re really proud of the amounts raised by the amazing users of our website. Far from being ‘fat cats’, the team that started JustGiving, led by CEO Zarine, have been recognised as adding a tremendous amount to the sector. In fact, the RSA this year awarded Zarine the Albert Medal for ‘democratising fundraising and technology for charities’. http://justgiving.wordpress.com/2009/04/09/justgivings-ceo-zarine-kharas-awarded-rsa%E2%80%99s-albert-medal-for-democratising-fundraising%E2%80%99/

To answer your question about the merit of our argument that not as much would’ve been raised without our site? Well, the people who raised all that money and donated told us – consistently, 30% of sponsors on the site said that they wouldn’t have donated if they hadn’t been sent a link to an online fundraising page.

Jonathan Waddingham, charity champion, JustGiving
Ben Brabyn Says:
June 16th, 2009 at 19:25
Hi Vicky

I’m one of the founders of Bmycharity – http://www.bmycharity.com. Like Justgiving, we charge a commission on the donations we collect, though our typical charge is lower than Justgiving’s (http://www.bmycharity.com/for_charities.aspx). We’re very proud of the nearly £25 million raised through Bmycharity so far, and now that the market has matured new pricing models are emerging. We’re also pleased that some of the other organisations that help with online sponsorship are starting to acknowledge that it’s the brand of the charity that should shine through on every fundraising page – and that every page represents an opportunity not just to collect donations, but to build relationships. That’s why every Bmycharity page contains a content management system (CMS) enabling each charity to recruit new supporters, engage volunteers, provide services and much more – all for free. Charities that build relationships rather than just asking for money are rewarded with higher average donations (our current average is £38.90, 32% higher than the figure reported by Justgiving in April 09).

On the question of profiteering from charitable fundraising, we believe in keeping overheads low. My co-founder Matt Cooper and I were volunteering for Whizz-Kidz when we started developing Bmycharity, and we have never had any additional investment, so we’ve built a very lean business that does not have to repay millions of pounds to investors and lenders. We failed Oxfam’s ethical supplier questionnaire because we paid ourselves nothing and worked 80 hours per week, qualifying according to Oxfam as a “sweatshop”. (We offered them the opportunity to grant us an exemption or pay us more, and they agreed to offer an exemption!).

Now that the market for online fundraising is maturing prices will go down, and organisations with low overheads and flexible platforms will continue to ensure that charities pay low fees and benefit from great opportunities to engage with new supporters.

Ben
Ian Beningfield Says:
June 16th, 2009 at 20:30
We’ve been using Justgiving since the early days of the site. Yes we pay a fee to justgiving but in return we are able to offer a service to our fundraisers that would be impossible to replicate in house.

Over the last few years we’ve noticed that the vast majority of our fundraisers raise more by using the site, this is because the average donation from each sponsor is higher and they’re able to reach out to more people converting vague pledges of support into to actual cash. Gift Aid recovery is also much higher through justgiving meaning that each page is worth even more to us than it’s equivalent paper form.

Processing donations on traditional paper sponsor forms can be a very labour intensive process, especially to claim Gift Aid. Because of Justgiving we’re able to use this time to concentrate on other areas of our work.

As a charity we use them because they’re helping us to make the most out of our fundraising. If we felt that the service was depriving us of income or damaging our brand there is no way that myself as a fundraiser or the trustees of the charity would be using or promoting the site. The fact that justgiving bmycharity and others have support from 1000s of charities suggests the model is a good one.

Ian
Fundraising Manager, Meningitis Research Foundation
Vicky Says:
June 16th, 2009 at 20:55
Jonathan, Ben, Ian,

Thank you all for your comments – the debate goes on and it is great that everyone is using the opportunity to debate what is clearly a very important issue to charities and those who work for and with them.

I don’t profess to know the answers to the debate I raised, but welcome thoughts from other charities and indeed JustGiving and similar providers. Perhaps, like many things, the suppliers of these facilities will evolve, as Jonathan suggests that Justgiving will, to ensure that charities are able to maximise their brand equity and direct relationships with donors?

Vicky
Pilar Stella Says:
June 19th, 2009 at 20:26
I have to say that this is a subject that is near and dear to my heart as we develop our site OneGiving. I have worked in Philanthropy, Corporate Social Responsibility, Nonprofit and Social Policy Change for most of my career and I pretty much consider myself a bleeding heart, a passionate advocate for social justice and change. For much of my life, I thought to myself, I don’t need to make a lot of money, I’m on this planet to promote change and to do good. But more recently, I started realizing that there are a lot of very wealthy people out there doing good that don’t have an expertise in the arena of philanthropy. Yes, they have a lot of expertise in giving their money away, but unlike in their business affairs, they have not translated this same strategic giving and really begun to track accountability in giving. The emergence of sites like JustGiving and others (like ours to come) are taking the best of philanthropy and nonprofit experts, combining it with technical expertise to create a service. Why is it that other businesses can make money on their services but we aren’t able in ours? My goal in all my consulting has always been – to teach corporations how to give strategically to help their bottom line and to align their business goals with philanthropy to be a better fit and with foundations to be more strategic than charitable (a word I don’t like) and with nonprofits to find ways to add in elements of sustainability and entrepreneurialism so as not to remain at the mercy of donations. As we move forward further into the 21st century, it is my hope that the line between corporations and nonprofits begins to blend as both sides take on a triple bottom line approach. The giving sites and services provided, from what I can tell, have their hearts in the right place and are providing a service. Shouldn’t this be compensated? It is money that otherwise wouldn’t have been tapped as rapidly by the nonprofit world. Just food for thought.
Pete Says:
June 24th, 2009 at 15:25
Dear Jonathan,

Perhaps your CEO would like to apply for a “commercialising funding” award, as that is what you are doing. Your statistic that 30% of sponsors would not have donated misses the point. Would these people not have donated if a paper form was put in front of them? I think they would have – in truth it is a creative statistic on your part in an attempt to justify profiteering from charities and in turn from the people those charities support.

Do you feel the pride that you speak of when you see an old person who needs a Zimmer but cannot afford one? That’s where your profit came from Jonathan.

The money raised would have been raised without your business; the difference is that the worthwhile causes would have the money, not you.

Hopefully some of the big charities will get together and create a non-for-profit organisation to collects donations on the web. Then there will be absolutely no place for outfits like yours.
Alec East Says:
June 24th, 2009 at 17:51
I don’t think that’s a fair accusation, Pete, and I’m not convinced the money would have been raised without JustGiving.

I remember going round friends and neighbours, first to get sponsors and then again to collect the money. It’s bloody hard work and having to chase your mates up for a few quid is not a great way to spend your evenings. JustGiving removes that pain, provides greater reach, trust and leaves the peer-to-peer fundraiser free to concentrate on jumping out of plane, climbing a mountain or laying in a bath of spaghetti hoops….

Rule 1 of of the internet is, if you something easy for people to do, they’re more likely to do it. JustGiving.com unquestionably makes it easier for people to make donations and for the fundraisers to collect the money from them. They also handle Gift Aid and deposit the money straight into the charity’s bank account.

I’m not a big JustGiving fan, but I’m honest enough to admit that JustGiving does provide a valuable service to non-profits (by connecting them to peer to peer fundraisers) and it is only fair that it makes money from that provision. Many charities’ staff don’t work for free. Many businesses, independent fundraisers, project managers and consultants, including myself, provide services to non-profits for which we expect to be paid. That’s business and, if our services do not provide a beneficial return on investment, we don’t get hired.

The questions isn’t should they do it for free, that would be commercial insanity, but does the rate genuinely represent a good deal for charities (or is there a better alternative) and is their brand becoming more important than the charities they service.

As for the big charities, who make up less than 5% of UK charities and receive over 80% of UK funding, if they were to set up a transactional service, would it really benefit the smaller charities in the direct way that JustGiving helps fundraisers to do, or would it work, albeit benignly to grab a greater slice of the pie for themselves?
Pete Says:
June 30th, 2009 at 09:53
Justgiving have recognised that they are going to be accused of profiteering from their service. I think that is why they have been asking the question that they report the 30% statistic. It’s not a reliable statistic however. Which would you be more likely to respond to: an email with a justgiving link [delete button] or a person with a form standing in front of you? [Do you ever say no?]

Point made I think.

I have not had a problem collecting money – most people give the money up front before the event happens. Okay, I might not get the chance to boast of my achievement so much this way, but the charity does get all the money and all the gift aid too. None of it is siphoned off in fees etc.

Justgiving are NOT being honest. For example, they list their fee as 5% but then add VAT on top of that. How would you feel if your favourite chocolate bar was priced on the shelf as £1.00 and that became £1.15 at the till?

They also claim to take their spoils from the gift aid – but again that is a misleading statement since they calculate their 5% + 15% fee over the whole amount.

(it doesn’t even end there, as they are collecting fee for others too)

I agree that this could be a useful service Alec – but it’s been setup to use that “could” as an excuse to take money that would otherwise have gone to the charities into justgiving’s profits.

Look at this from another angle – lets says someone asked you to donate money for a good cause and in return she would sit in a bath of beans – but she would deduct 10% of what you give as a reward(profit) for herself. Would you think that was acceptable?

If justgiving had been setup as a charity themselves then their overhead would have been lower – the fees they collect for themselves and others would have been lower too. The charities – all charities Alec, would have got more of the cash.

But they’re not a charity – more of a parasite.
SarahB Says:
July 2nd, 2009 at 16:44
Call me ‘confused’ – I have been called that a lot ;-) but what do zimmer frames have to do with it?

I think we are losing sight that at the end of the day Just Giving are a business and not a charity. They are here to provide a service, and one that there was a definite gap in the market for. they also have staff and overheads to pay, just like any business and charity. No I don’t work for JG by the way! I can only go by personal experience of dealings with them.

Working for a charity for 12 years I have always found them open, transparent and accountable, with staff that will always go that extra mile to help if there are any enquiries. No-one has mentioned for example that JG do all the paperwork and claim all the gift aid back on behalf of the charities – that’s a lot of paperwork for a small to medium sized charity to cope with!

Again from personal experience, I truly believe that we as a charity would not have received as much revenue from fundraising events if it were not for Just Giving. We hold one huge annual event for example which is heavily attended by individuals and corporates alike. Emailing contacts with a button ‘donate now’ or similar is instant. You will find that people will remember to donate and find it easier because they simply get their credit or debit card out, leave a message maybe on the page and bosh it’s done and forgotten about.

I don’t like asking people to sponsor me. I don’t mind sending them an email though. It’s then up to them. It’s all down to personal choice at the end of the day. We issue paper sponsorshop packs and forms, but also information on Just Giving. We have a saying in that its not the challenge of doing a sponsored event that’s hard, it’s collecting the money afterwards.

If you really think 5% is bad, perhaps I should refer you to the National Lottery so called set up for good causes, which donates only 28p in the £1 to good causes, the majority of that going to opera houses, ballets or similar. Again ok if that’s what you are interested in, but better spent being given to the charities and organisations which really make a difference to this country and the people who live in it at grass roots.
Graham Richards Says:
July 2nd, 2009 at 17:13
How sad that Pete has such a Luddite view of things. The whole point is that charities can offer their supporters as wider choice as possible when it comes to making donations.

It’s not Justgiving’s fault if they need to make a charge for their services. Or is it your bank’s fault for making charges to administer your account, or an accountant for doping your book keeping? Charities are consumers too, they have the right to choose how and what they use to bring in donations.

I know a hospice that has its own Worldpay account to keep online donation charges to a minimum, but they lso use the excellent service offered by Justgiving for sponsored event donations, because they can’t beat it and it would cost more to set up their own.

Pete is sdaly wrong about paper forms for getting in donations. Sadly many charities lose a lot of £ from people who don’t cough up before or after the event. Justgiving and the other service providers offer an instant way to donate that meets the lifestyle of many younger people in particular.

Even CAF’s online service makes a charge and they are a charity!

Pete, get a life.
Steve Bridger Says:
July 2nd, 2009 at 17:49
Pete… what you say above is bordering on the libelous. I’ve never read such an ill-informed rant. You ought to be ashamed, mate.

Vicky… “charities… also have to accept the rise and rise of justgiving as a charity brand in its own right, taking limelight from their own brands and marketing efforts.” You must be confusing JG with Virgin, surely? We will see.

I talk to charities all the time. I’ve heard absolutely no zero evidence of this “taking the limelight” accusation. Those that think this (if there are any) are on the path to irrelevance, for the power shifted long ago to the donor, and donor activists. Donors as partners.

JG and Bmycharity were a godsend to charities. The web will supply the tools for people to self-organise and fundraise, allowing charities to focus on what they do best: delivery and being the gatekeepers of social impact.
Vicky Says:
July 3rd, 2009 at 20:12
Steve, All,

I posed the question..

Cmash is the forum for the debate and a valuable one too if this debate is representative. As Alec points out, many individuals/orgs benefit from their service provision to the charity sector – I am included here. The question always comes down to ‘fairness’ of terms and that is obviously a subjective area. With competition in the JG market place, it would imply that the buyer has choices?

We don’t want to censor on Cmash, so let’s keep this, and other debates, clean and worthy of our intellects.

Have a good weekend all

Vicky
Joelle Nebbe-Mornod Says:
January 17th, 2010 at 13:17
Let’s not forget that charity fundraising someone is a highly professionalised field – in most fundraising the margin taken out by the costs of fundraising is easily 10% often more – salaried and commission staff, event organisation, venues, publicity, security. Some might be donated or sponsored, but we’re still talking a lot of overhead. That’s why charities like regular direct-debit commitments, they come with a lot less overhead.

All in all services like justgiving, charitiestrust were some of the first to make it possible for individuals to raise funds in a trustworthy manner without the kind of overhead charities have. Once people realised this was a)possible b)extremely popular, hopefully a newer generation will come making it slicker, easier, and leaving more to the charity.

What would make an immediate difference at justgiving is perhaps if they were more transparent about it, and perhaps allowed the fundraiser to choose to cover the fees. They would know what the fees are, be able to offer to cover them (a bit like Kiva’s option do donate-a-little-to-them when you make a loan) – and either way know exactly the amount the charity really got.
Matthew Stannard Says:
March 18th, 2010 at 19:16
JustGiving is a brilliant wheeze for benefiting the people who set it up. It could operate without a fee and rely instead on Google ads on its pages to cover its costs, like many other websites do. Once a website is up and running, it actually costs very little to run and can become a licence for printing money, as I’m convinced JustGiving is. I do get the occasional request from worthy young people looking for sponsorship for some great endeavour in aid of charity. If they exhort me to put my credit card details into JustGiving, I’m afraid I always reply to say that giving to JustGiving is contrary to my ethics and that it should be called Just Taking. Instead I ask for the details of how to donate to the charity directly, which is far more ethical than supporting this scam. If there is, as the author suggests, a website that provides the same service as JustGiving, but does not cream off anything for itself, then that would be handy to know about.
T Wright Says:
March 22nd, 2010 at 15:32
Dear All,

There is some lively and passionate debate here!

Charities choose to use JustGiving. These charities are free to run their own fundraising or to use websites similar to JustGiving.

Any charity that wants to offer the most to those it supports will ask itself two questions. How do I generate the most money? And how do I minimise the cost incurred in doing this? Many charities believe that JustGiving offers the best (not perfect) answer to these questions, as illustrated by the volume of donations given this way.

Those of us who are keen to maximise the money going to charities need to also ask two questions. Can charities really do this cheaper themselves? And if they can’t, is JustGiving the best outsourced option? These are questions to be engaged with, not speculated or pontificated about.

Without having access to company finances it is not possible to definitely answer the first question. What we can say is that given the scale benefits JustGiving now enjoy, it is unlikely that for small and medium sized charities, internal fundraising is cheaper. There may be odd exceptions here and there but on the whole this is likely to be true.

The second question is more interesting. For a business that has very few variable costs, charging 5% + VAT sounds high. However, debating whether it is reasonable or not misses the point. If there were a cheaper way to do what Justgiving does, then why doesn’t an organisation emerge to do it? This is not a rhetorical question. Maybe it is because no one has the financial backing (JustGiving’s shareholders sustained £5m losses in the organisation’s early years). Maybe no one can bring together the right combination of charity and IT people (after all, charity types are not usally javascript types). Maybe no one can manage as well as their charasmatic CEO – or, maybe JustGiving are providing the best service at the lowest cost.

It is impossible to theorise definitive answers to these questions. What we can do though is make the market challenge JustGiving’s operating model. If there is a operating model that can service charities better, or an alternative operating model that can offer the same service at a lower cost, then those who are concerned about what they see as a JustGiving rip-off should try to create it. It is little use complaining and then doing nothing.

As a for-profit entity JustGiving will rise or fall in the face of competition. What will emerge is a either reluctant acknowledgement that financial transactions do actually have a cost – or, a serious challenger to the incumbant monopoly.

So, what I am saying? I’m saying that we don’t know whether JustGiving is expensive or not. What we do know is that it is wide open to competition from a better or cheaper operating model. So if you think you can do it better, I warmly and sincerely invite you to do so. Less of the JustTalking, please.
Ed Baxter Says:
August 15th, 2010 at 20:08
“I remember going round friends and neighbours, first to get sponsors and then again to collect the money. It’s bloody hard work…”

And so it should be! justgiving has made it far too easy to stick up a “look at me: aren’t I good” sponsorship beside every little 10k run you do. What happened to achieving for the hell of it?

And as a web developer by career, I am on the side of those who say 5% sounds excessive.
Andy Says:
August 17th, 2010 at 10:40
I am uncomfortable with JG’s 5%(+). WHere does that figure arise from and how was it arrived at by JG? What does JG do with the (substantial?) profits its makes? If it is simply lining the pockets of its shareholders I would think that the charge of profiteering may have some validity. If however it in turn uses its profits in a socially, ethicially way that may be a different matter.