Online Auctions Raise Big Bucks for Charity

Nonprofits can raise more money in less time by offering their Warren Buffett lunches and Michael Jordan sneakers for bidding on the Web

It used to take Cynthia Thomashow as long as six months to raise the $100,000 or so her nonprofit organization needs to run for a year. But with the help of an online charity site, she can raise that sum in as little as a month. "It changed our lives," says Thomashow, executive director of the New Hampshire Center for Environmental Education, a group that provides environmental educational tools to schools. "It's a quick and efficient way to raise an operating budget." Since 2004, Thomashow has raised about $500,000 with the help of online charity sites.

The Web has wrought a sea change in the way nonprofits raise funds through auctions. Charities have long hawked donated items through live auctions, where bidders try to outbid each other publicly, often with the help of a fast-talking auctioneer, or through so-called silent auctions that let potential donors browse through items, then submit bids in writing.

But with online auctions, nonprofits say they can raise more money in less time, selling a coveted item or service, often donated by a celebrity or socialite—say, a meal with Warren Buffett (BusinessWeek, 6/8/06) or Michael Jordan's sneaker collection—to the highest bidder from across the Web.

Monkeys, Yachts, and Warren Buffett

Online charity auctions have raised at least $250 million, according to figures provided by the largest sites, including eBay (EBAY), which runs a program called Giving Works. Others include Charity Folks and Charitybuzz. The biggest player, eBay, has raised $150 million for charity since 1999. Of that total, $50 million was raised in the last year alone. Its Giving Works helps more than 84 million eBay users "support the causes most important to them" and gives 15,000 nonprofits "direct access to this key constituency," says Kristin Cunningham, general manager of eBay Giving Works.

No item, it seems, is off-limits for auction. Online casino site placed the winning bid for the right to name a new species of titi monkey discovered in Bolivia by the Wildlife Conservation Society. With $650,000, the casino outbid Ellen DeGeneres to name the monkey callicebus avrei palatti, or "Golden Palace." Other prizes that have been auctioned for a cause include a 90-foot Ferris wheel and five days on a 157-foot private yacht. Two auctions have even reached seven figures: The most recent lunch with Warren Buffett fetched $2.11 million, and a letter signed by 41 Senate Democrats demanding that Rush Limbaugh apologize for calling antiwar veterans "phony soldiers" hauled in $2.1 million.

The auction-hosting sites get a share of loot, too. CMarket's started in 2003 and has raised nearly $46 million for nonprofits through 4,500 online auctions. Similar to other hosts, cMarket gets 9% of sold items, up to $4,500; the rest goes directly to the charity.

Fund-Raisers Tap Facebook

Besides helping nonprofits save time and money, online auctions often attract a broader audience—and they can build buzz for weeks as bids rise. Best of all, the money is typically unrestricted, so it can be used for operational costs; direct donors often favor specific programs.

As successful as online auctions are, though, most charitable giving still happens off-line. The $1.1 billion in gifts on the Web last year made up just 1% of overall fund-raising, according to a 2008 survey by the Chronicle of Philanthropy. And the online total includes giving through all charity Web sites, not just online auctions. But charity auctions aren't the only new way the Web is being used to raise money. Fund-raisers are increasingly tapping social-media tools and sites (BusinessWeek, 2/14/08) such as Facebook, and Presidential candidates Barack Obama and John McCain have sophisticated Web fund-raising operations (BusinessWeek, 6/27/08).

This month, Charitybuzz is auctioning a painting of Obama by artist Shepard Fairey with the word "hope" beneath it. Proceeds will benefit the Rush Philanthropic Arts Foundation, a group founded by hip-hop mogul Russell Simmons that exposes disadvantaged urban youth to the arts. The current high bid? $108,000 and counting.

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