Till Behnke has developed an online marketplace for small donors and citizen organizations (COs) that provides radical transparency and allows users to judge the credibility of COs and make informed donation choices. The platform also puts the responsibility and the power to rally for support in the hands of COs.
THE NEW IDEA
Rather than build another online philanthropy platform, Till has developed a transparent, self-regulating online market place, betterplace.org, for small donors and small COs that is unique because of its structural architecture, which he calls the “web of trust.” Till combines the rating systems based on “wisdom of the crowd” principles from sites like eBay or Amazon with the social networking techniques of sites like Linked-in. betterplace allows COs to gain visibility when they successfully rally the support of beneficiaries, friends, and donors, who can in turn recommend the an organization via mouse-click and comments. Like Linked-in, reviews are visible for any user and include the reviewer’s proximity to the CO and—unique to betterplace—what his or her relationship is to the organization: Be it donor, beneficiary, end user, competitor, or simply friend. This information allows users to interpret the ratings and comments in a new light. Thus, on betterplace.org, a “web of trust” and relationships visibly emerge that is radically transparent. Any user may decide whether she trusts the reviewers, which reviews she trusts most (e.g. that of end users or donors), and can thus make more confident choices about where to invest her money.
In doing this, Till not only enables thousands of small donors to become more strategic investors, he also increases the volume of donations while encouraging accountability, and lastly, he helps hidden social champions among the citizen sector to emerge: They can now actively make their voice heard in the investment market without being eclipsed by ineffective, but better-known welfare institutions.
To gain traffic and generate momentum, Till builds networks with institutions that can leverage his work: For example, companies pay a fee for referring their workforce to betterplace and for using rounding-down salary schemes to foster employees’ giving. Thus earning income, Till guarantees private users that 100 percent of the money donated through betterplace reach the target organizations, regardless of whether the sum is €5 or €500. In this way, Till systematically removes further barriers that thus far prevented small donors from strategic giving.
In Germany, private philanthropy lags substantially behind the United States. The amount of charitable giving spikes at Christmas and during natural disasters, but otherwise remains relatively low: Only 37 percent of the population donates at all. The vast majority of money donated goes to large organizations, such as UNICEF, the Red Cross, or disaster relief. Citizens are drawn into giving either through their personal networks or large charitable marketing campaigns. Levels of giving are especially low among young people—they have no personal experience of the poverty and deprivation of the years that followed the Second World War, but at the same time show the highest interest of being at the forefront of social movements. Venture philanthropy is very new in Germany but it is only understood as a concept relevant for millionaires that want to invest huge sums.
Citizens in Germany are reluctant to regularly engage in philanthropy for several reasons:
Lack of information and trust. It is difficult to find out about social initiatives that are both effective and that match one’s interests. The social sector is highly fragmented. Individual donors have to do their own research and information-gathering if they want to give strategically, without the benefit of organizations like Guide Star or a convenient central platform that helps them canvass a variety of social sector projects, and compare their relative merits. Until now, there have not been online giving marketplaces in German-speaking countries.
There is currently no trustworthy source which rates the quality of small-scale organizations by including all constituents’ views, including is investors, sponsors, volunteers, social organizations, and end beneficiaries. Expert ratings by foundations, governmental organizations, or philanthropy advisors exist, but they don’t appeal to ordinary citizens since they are difficult to understand and only represent the investor’s side.
Intransparency of social impact. When giving to the Red Cross or Unicef, donors don’t see the direct impact of their giving and therefore don’t feel part of a movement for social change. They typically have no direct personal contact with the social sector in the developing world, and they do not know which groups are trustworthy and have real impact. Even after they invest money, there is little transparency or direct communication—investors cannot see how their money is being spent, or what its immediate effects are. Consequently, they either withdraw or take on a charity-view rather than an active investor’s view.
High overhead and transfer cost. Both donors and recipients are tired of the “long tail of charity.” Much of the contributions are lost on the way to social initiatives because transmitting organizations eat 30 to 50 percent of one’s donation and international money transfers sometimes cut off an additional 30 percent. This makes it inefficient to give frequent (say, monthly) small donations, because a substantial fraction is siphoned off by the institutions and banks handling the transfers.
All these factors combined make it easy for potential donors to feel that they have good, rational reasons not to give: It is difficult to make the right investment choice, let alone enjoy it.
Another dimension of the problem concerns small-scale COs (including small, community-level projects) specifically, be it in Germany or in the developing world, which do not have the budget to command any publicity overseas. These organizations, many of which are smart and well-targeted, are typically dependent on third-party media organizations to publicize their work. Those that operate in remote areas are especially cut-off from public view. Larger, more institutional charities with well-funded public relations offices command the lion’s share of public support, while small and hidden champions have no visibility and are starved for funding.
Till understands that to create a fully self-regulating marketplace it is not enough simply to enable small COs to post information about themselves and enable community ratings. Donors give to organizations they feel they can trust. Therefore, he has developed the innovative “web of trust” technology that for the first time allows all interest groups surrounding projects to participate in trustworthiness ratings. The web of trust uses the wisdom of crowds, which is captured through satisfaction ratings such as the one used by Amazon.com or eBay.
Of course, betterplace also allows COs to showcase their profiles, upload pictures and reports, state what they need money for and why, etc. But the following is new: Projects are assessed quantitatively, on a five-point scale, and also qualitatively through annual reports posted by the organization, reports by visitors, informal comments, and connections to blogs and chats. betterplace adds to these ratings a social network system, such as the ones used by LinkedIn or Xing (for instance: Jim Miller, who endorses project A, is a close friend of your best friend, he is closely linked to ten other people in the network that you also know well and trust, so his judgment is quite likely reliable). Users can see what their friends and associates are supporting and why, and can make decisions in light of this information.
All online members linked to any CO on the site are classed into one of five categories: Experts who possess knowledge of the field, staff and end users, investors, concerned citizens, or observers. Any user can decide whether she trusts the nominators of one project. In this way, Till manages to bring radical transparency into a market that is quite obscure, not waiting for experts to develop standardized performance criteria applicable to the whole sector (some think this is possible), but crystallizing out the knowledge and wisdom of the masses.
In the future, Till will elaborate the web of trust with a “personal trust index” which will calculate a project’s trustworthiness for an individual member by looking at the user’s proximity to the recommending network. The index will further simplify users’ decisions. In order to avoid misuse, Till has created an internal monitoring scheme, which keeps track of the IP addresses used to rate and comment on listed projects, but he also expects the market itself will uncover abuse.
Till launched his platform in November 2007, with an embryonic version of his web of trust, and the site is growing quickly. After the first 12 months more than 700 projects from 95 countries can now be funded by the site’s users. In December 2008, betterplace.org was gaining 100,000 new visitors, and more than €550,000 in donations have been collected and forwarded to the projects in total since November 2007. Around 10,000 joined as members of his online community, and another 3,000 have contributed funds through his links to corporate clients.
To expand further and build a mass movement, Till pursues strategies at several levels: With the help of marketing experts from the German offices of eBay, Till is pursuing a number of marketing strategies related to his core-brand betterplace. Online, he is linking with Facebook applications, and using eBay banners and pro bono ad space from Google. He is committed to pursuing free ad space rather than using much of his startup budget on marketing. He is also encouraging users to spread the word, not just about the projects they fund, but also about the betterplace platform.
Beyond this, Till is proactively working to attract new users through intelligent collaborations. He starts with corporations since they have a natural interest to associate their brand with philanthropy and positive social change, and they can bring in large numbers of employees to his platform. To facilitate this process, betterplace.org creates for a fee a customized “portal” for the participating company, featuring the company’s own logos and design, through which employees can access betterplace.org and choose from a slate of projects. The portal is on the company’s homepage and not visible to regular users entering betterplace. The automobile company Daimler, for instance, has just started using this service. Employees at client companies can also agree to have their monthly paycheck slightly “rounded down” and channel those small sums to a designated project. Till is rolling out such round-down salary schemes during 2009 and 2010. Lastly, he is working to link betterplace.org to a scheme that would “round up” the bill consumers pay at retail stores a fraction of €1. Participating stores would save the cost of handling a great deal of small change, while offered an opportunity for positive public relations. With small amounts not feeling like a great sacrifice, consumers would find it easy to become habitual givers.
While targeting the German market for now, Till intends to spread internationally, starting with South Africa, two of his co-founders live. He has already built his platform in an English version. He is also pursuing partnerships with other online philanthropy marketplaces outside of Germany, and has had several conversations with both Globalgiving and Kiva to explore potential collaborations. He is not concerned to make betterplace the dominant brand in the market. His strategy is rather to channel users to betterplace’s project through two ways: Either by serving as a “backroom” as happens with corporate clients, where users are referred through co-branded online portals, or by serving as the “front room”—drawing citizens directly to betterplace.
On the “demand” side, betterplace.org gives social sector groups the opportunity to take active responsibility for their own public relations, cost-free, by developing and maintaining a web presence, and by supplying regular information about the projects and needs. It gives the responsibility to the CO to enlist the stakeholders’ support and help boost their project’s trust rating. Finally, it enables stakeholders, including donors, to give quick feedback to the organization. The site’s accessibility and simplicity enable any group, no matter how small, to develop a presence and a rating. Anyone can sign up to receive funds, and once a group recruits ten advocates to the site, it becomes eligible to receive donations and becomes subject to the evaluations of other users. The site is designed to give small COs that have no budget for international marketing visibility and fundraising power. While Till’s team does not interfere with the market’s own evaluation of the project’s quality, it does ensure that participating COs have definable social goals.
Beyond that, Till takes further action to remove obstacles that might prevent small users from donating small sums. betterplace transfers 100 percent of any donation to the targeted COs and does not siphon any of the money away. Till has accomplished this in two ways: First, he finances betterplace’s operation costs through his income-generating site, the service he provides to companies at a fee. This pays for salaries and overhead. Second, he allows for international money transfers without bank fees. He negotiated with the bank BNP-Paribas that they transfer donations through betterplace free of change. Given the novelty of this agreement, Till has been invited to participate at round tables with the German government on remittances.
Till plans to raise 60 to 70 percent of his operating budget through his work with corporate clients, and spends most of his time recruiting new clients and negotiating contracts with interested companies. The funds raised through this business will enable him to expand his staff of programmers and his server capacity, so that he can accommodate the growing number of betterplace users. To avoid growing dependent on a few large corporations, he is also discussing corporate responsibility projects with a number of mid-sized companies. betterplace.org worked initially out of offices donated pro bono by Daimler, but Till has since moved betterplace.org into its own space—again to avoid dependence on a single corporate patron.