The New Way to Give: Be Your Own Charity

The seeds of a philanthropic revolution are sprouting. Smaller donors are using the Web to pick and choose — and evaluate and criticize — the charities that matter to them.

It's not about to send shivers down the spines of executives of the local United Way. But with a few clicks of the mouse, a farmer's daughter in Iowa can spread the word about her pet cause around the world, connecting with like-minded do-gooders. On Facebook, nascent Rockefellers can click on a tool called "Causes" and enlist their friends. In the year and a half since its launch, more than $2.5 million has been raised for causes as diverse as “engineers without borders” and the prevention of “animal torture in China.”

Granted, online philanthropy is still a drop in the bucket: Web donations made up just 3% of all charitable gifts in the U.S. last year. That still amounts to $10 billion, though, and a tenfold increase from 1999, says Ted Hart, an author and founder of consultancy ePhilanthropy. Going forward, the stakes are even higher: Baby boomers and their kids are set to inherit some $15 trillion by 2017. More than a third of that is expected to go to charities, according to Boston College’s Center on Wealth and Philanthropy.

But charities are going to have to fight for that money. And they will have to fight even harder in the near term as giving gets crimped by the economic crisis, the repercussions of the alleged Ponzi scheme by Bernard Madoff and the fall of several Wall Street titans. The most recent gauge of the fundraising climate from Indiana University’s Center on Philanthropy indicated the toughest period for U.S. charities in more than a decade. As philanthropies try to do more with less, it’s possible even more will turn to the Internet for assistance.

As with media, travel, investing and, oh, just about everything else, the digital age promises to shake up the status quo for charities of all sizes. Along with that change comes lots of concerns and risks: It hurts good organizations that are slow to adapt, and it makes some people think that they’ve done their part by just clicking their mouse.

But the approach also enables individuals to take more control of their philanthropy, researching and planning their donations with as much focus as they do their investments. Some have gone even further, pushing the envelope of what philanthropy could soon look like.

For a look at the new giving, SmartMoney focused on three individuals on the vanguard of philanthropy. Below, we tell how one man started up his own Web-based charity to fight hunger . (In part two of “The New Way to Give,” we chronicle a philanthropic approach that borrows from the venture-capital world; part three examines the potential for charities to tap virtual worlds.)

When John Breen's son turned up his nose at the flashcards Breen used to help him study for the pre-SATs, the 51-year-old computer programmer decided to take another approach. He built a program that his son could use as a study tool. His son soon tired of it, but Breen opened it up to outsiders and added a philanthropic twist: For every correct answer, advertisers on the site donate the equivalent of 20 grains of rice to the United Nations World Food Program. The site lets visitors fight hunger without spending a dime.

Now Breen’s creation, a site called FreeRice.com, gets 130,000 visitors from around the world on an average day. The take so far: more than $1 million — or enough to feed two million people.

Little in Breen’s past offers signs of a philanthropist in the making, but in 1999 a story about African orphans longing for crayons struck a chord. The Harvard-educated Breen realized hunger was the root cause, and after reading economist Jeffrey Sach’s “End of Poverty,” about wealthy countries’ efforts to eradicate poverty, Breen decided to do his part. “Whenever I’m struck by that feeling you are wasting your life, I always think about what the biggest problem is,” he says. “For me it’s always the impoverished.”

Breen quit his day job and spent the summer of 2007 holed up in his sparse office on the edge of Indiana University’s campus with his border collie, inputting 12,000 words and building FreeRice.com. That left his wife, a professor of sociology at Indiana University, as the sole breadwinner. At first, his sons thought it was crazy that he was toiling away on something that wasn’t making any money. However, once they saw the site actually do some good, they became more supportive and often chimed in with tweaks. “We live a nice, middle-class life,” says wife Patricia McManus. “We’re all just not that interested in driving big, fancy cars. We would rather be doing interesting things.”

Though click-to-give sites like FreeRice.com represent just a sliver of online giving, they’re already causing something of a controversy. While few dispute that any bump in charitable giving is good, some critics say that when charitable giving is too easy — for either the organizer or the donor — it can spell long-term trouble.

“Fundraising is about building long-term relationships — and I'm not sure the commitment from these sites is there,” says Angela Eikenberry, assistant professor at the University of Nebraska at Omaha, who has looked into giving circles. She questions the ramifications of raising a generation whose idea of philanthropy may be just posting an emblem on their profile on Facebook without understanding the actual cause. World Food Program spokesman Martin Penner doesn’t see it that way, though. “We’re always asking for money to feed the hungry. It’s like a broken record,” he says. “If you can come up with a new and exciting thing to drive contributions, that’s really valuable.”

And then there’s the whole reason so many people love the web: instant gratification. With Freerice.com, every correct answer equals 20 grains of rice. Sites like GlobalGiving.com, which vets hundreds of smaller nonprofits around the world and features them on the site, provide instant feedback with reports from the field. Such a connection goes a long way toward donors feeling “like they are a part of the cause, not just a piggybank,” says Dennis Whittle, chief executive of GlobalGiving.com and a former development officer at the World Bank. That often means more giving from the little guy — which can lead to some pretty big donations.

If you’re thinking of starting a nonprofit, here are some key points to consider:

1. Qualifying for official nonprofit status (501c3) requires a good deal of paperwork, including bylaws and mission statement, to meet legal and IRS requirements. A simpler approach for some is to direct fundraising proceeds into an existing nonprofit organization.

2. Consider tapping social networks like Facebook’s Causes and online competitions like Changemakers to raise funds and awareness.

3. Check out groups like the Foundation Center and National Council of Nonprofit Associations for workshops and other guidance.