Boosting Revenue By Virtually Hugging Donors

How much is a hug from Joel McHale, the host of the now cancelled cable-TV show The Soup, worth? To the Screen Actors Guild (SAG) Foundation, it was worth several hundred dollars. And, that was from a first-time donor.

The SAG Foundation, based in Los Angeles, hosted an online auction this past December to benefit its Children’s Literacy and Assistance programs. One of the auction lots, two tickets to a taping of The Soup, was languishing at $60 on Dec. 14, the last day of bidding, until McHale sent out a tweet with the lot link and a tongue-in-cheek note: “I’ll throw in a long uncomfortable hug.”

Within minutes, the bids on the lot jumped from $60 to “several hundred dollars,” said Lauren Donoghue, SAG Foundation special events coordinator. “There was no movement on it until the right people — his fan base — heard about it.”

Organizations which traditionally have relied on an annual black tie dinner or other analog fundraising events are starting to dip their toe into doing digital things, said Trevor Traina, founder and CEO of San Francisco, Calif.-based IfOnly, which offers charities an online platform from which to sell celebrity-focused experiences.

The crowdfunding trend has broadened the appeal of online auctions. “Companies like Kickstarter have moved into prominence during the past couple of years,” Traina said. “Large numbers of people adding incremental dollars can have an outsized impact. While that model is generally used for business endeavors, there has been an awareness in the philanthropic community that it has potential to help with philanthropy.”

Some organizations began exploring online auctions because of economic necessity. New York City-based Rush Philanthropic Arts Foundation began working with online auction platform Charitybuzz, also of New York City, in 2008, when “the economy was in a really tough place,” said Tangie Murray, the organization’s executive director.

“We had, prior to that time, never had an online auction,” Murray said. “[Bringing the auction online] really helped us raise the bar and get a lot more reach for our packages. We didn’t have to rely on people who had already dug deep to buy tables to our event.”

Rush initially kept a few items offline. “In the first year, we did a hybrid. We kept around 10 or 20 lots so attendees could still bid, and we put the rest of the lots online,” Murray said. Rush needn’t have bothered. Attendees were bidding for the online lots, although, “Most of the winning bids for the items on Charitybuzz were from people who had not come to the event,” Murray said.

Online auctions come with their own logistics concerns and potential pitfalls. Done incorrectly, an online auction can cost an organization’s goodwill and donations, and even create legal difficulties.

A common challenge with online auctions is a lack of human intervention, said Stuart Paskow, co-founder of Mitch-Stuart, Inc., which offers no-risk travel and experience items for auction. “They don’t have the benefit auctioneer hyping the audience to raise the bidding,” said Paskow. Many of the online platforms just go with the highest bidder. At a live auction the losing bidders can be approached and offered the same deal for their bid if there are more of the same item available.

SAG Foundation’s Donoghue starts by taking an active hand in what is offered. Calling a potential donor and asking for “something” is a fast road to nowhere, she said. Donoghue considers the unique lots a donor might offer, such as a guided backstage tour or exclusive memorabilia from a hot show, and makes a specific request.

Once Donoghue has secured a lot, she writes a detailed description of what is being offered. Memorabilia collectors are fussy about an item’s condition – even for one-of-a-kind offerings like signed objects. She notes any age restrictions on experiences. And she’s careful to include expiration dates: “You could have someone buy a vacation package. Ideally, you want that experience to happen within that year,” she said.

She’s right: If a donor offers a week’s stay at a St. Maarten home, and three years later sells that home, collecting on the experience five years later will be problematic. A bidder who successfully collects on an experience within a year will be primed to bid on another experience in the next annual auction. “That’s why important to deal with an established travel provider who can provide an alternative if the home becomes unavailable,” said Michelle Cohen, co-founder of Mitch-Stuart.

While Donoghue does much of the solicitation and promotion for her events herself, she usually works with outside firms to manage the bidding and fulfillment. Companies such as Charitybuzz, Komplot, IfOnly, and eBay provide platforms for, and bring expertise to, organizations where staff want to host online auctions. And many of these offer access to panels of individuals primed to bid in auctions. By using these platforms, a nonprofit expands its circle of potential donors.

One of these companies’ main functions might be managing expectations. “Unless you have something really unique, don’t expect to raise tons of money,” said Christopher Noble, CEO of San Luis Obispo, Calif.-based Causemedia Group, which includes Kompolt, an auction unit.

Kompolt’s most famous lot, the annual lunch with investor Warren Buffet it offers to benefit San Francisco’s Glide Foundation, falls into the “really unique” category. It routinely brings in winning seven-figure bids. These types of lots are the exception.

“What does work is using the visibility of an auction as a keystone and building other things around it,” Noble said. “If we run an auction [using eBay’s auction platform] that draws a lot of traffic and visibility, and we couple it with putting the nonprofit’s name in a [donate-a-dollar] dropdown list at checkout, we can, by that mechanism, raise an additional — depending on how many weeks it is up there — $20,000-$50,000.”

Organizations designing personality-driven auction lots should keep an open mind regarding what makes a celebrity, according to Ben Erwin, vice president of business development at New York City-based Charitybuzz, an online auction platform which specializes in experiential offerings. While the company initially focused on celebrity experiences, of late packages featuring business leaders, such as lunch dates or the opportunity to shadow them, “are bringing in, on average, 30 percent more than celebrity experiences,” Erwin said.

“The most successful auction we’ve ever done at Charitybuzz was a 30-minute cup of coffee,” Erwin added, “30 minutes at Apple headquarters with Tim Cook. We sold that 30 minutes for $610,000 in 2013.”