Andrew O'Brien: Should online giving platforms go on profiting forever?

30 Jul 2018 Voices

Andrew O'Brien offers his thoughts on the debate about whether JustGiving, and other online giving platforms, should continue charging fees.

David Ainsworth, as usual, wrote an erudite piece recently about JustGiving and the efforts made in Parliament to force JustGiving to drop fees for funds raised in responses to terrorism and the comments made by Minister Robert Jenrick about JustGiving “ripping off” donors.

The arguments made in defence of JustGiving are obvious ones but also reveal a lot about how we think about our economy and society.

Essentially, the idea is that JustGiving is providing a service, if people choose to use it then they should be entitled to charge a fee. There is also an argument that if people want a good service, then they have to pay for it. A further argument is that if we want to encourage innovation, then we need to reward companies that invest in it. The “profit motive” is, after all, the engine of capitalism.

However, I would like to take up the case for the prosecution. The issue at the heart of this is whether when providing a service, particularly to the social sector, are companies getting their fair reward or are they simply extracting rent from the social sector after they have engineered a dominant position? 

Should ownership equal profit?

We should start by saying that JustGiving has now been bought by Blackbaud, which is a $890m (£678m) US firm which has acquired a string of companies working with the not-for-profit sector. It made over $100m (£76m) of gross profit in 2017. JustGiving had up until that purchase been a “tech for good” company which made little in the way of profit – under £1m in 2016 and regularly made losses in the years before that. 

By purchasing JustGiving, Blackbaud is effectively piggy backing on investment made by JustGiving’s founders and the risks made in its development. Blackbaud has bought JustGiving to primarily to drive up profits and reduce competition. It may invest in it in the future, but like most acquisitions of mature products, the aim is to squeeze value not innovate. 

We accept this because there is an ingrained belief at the heart of our economy that ownership must bring gain. JustGiving’s purpose will be to generate an adequate return for the wider Blackbaud group and its shareholders. What’s the harm in that? 

Well the “harm” is that effectively we are agreeing to this company extracting profit from charities and individuals indefinitely because of an originally good idea about using technology to develop a platform to make it easier for people to fundraise for good causes. It was a good idea, but haven’t the founders and developers not now received their reward? Or perhaps the reward should simply be the kudos of doing the right thing well? 

You may laugh at this suggestion but this is the reward for most in the social enterprise and charity sectors which JustGiving is set up to serve. 

Perhaps we have been conditioned to live in a world where technology billionaires are common place to think that this rentierism is acceptable, but I think that politicians and ordinarily people are entitled to question, is this fair? Is it right that donors will see money creamed off to provide profits for shareholders and holders of NASDAQ funds? 

Should we convert these platforms into social enterprises or cooperatives? 

It will still cost money to deliver the service, but the primary motivation should be how to raise as much money as possible for the lowest possible cost for the charities and individuals.

The idea would be to steward these platforms so that they continue to run effectively but not in a way that extracts value – where ownership is seen as a responsibility to the charity sector and donors, not a means to benefiting shareholders. 

This would encourage cross-subsidisation and driving down of costs for consumers. You could argue that every private business has to give consideration to consumers, but by definition they also have to find a way to keep a slice of the pie for themselves. Social enterprises, including co-operatives, are not primarily motivated by this and are a perfect vehicle for platforms such as giving sites. 

No one is denying that investors or founders should receive some reward, but it shouldn’t be indefinite or excessive. Has the time now come to call time on profiting?

This issue isn’t about whether JustGiving should charge, but rather, for whose benefit should charities and individuals be charged? 

Giving platforms could be a test case for the wider internet economy 

Everyone is concerned about the Googles and Apples of the world, the vast profits being made and the concerns that once were legitimate rewards for successful innovations are now becoming rents extracted from quasi-monopoly positions.  

Giving platforms are perhaps a way for the government to dip a toe into new ownership models and test regulatory approaches. Perhaps once a platform achieves a certain level of market share, has generated a certain level of profit or has existed for a certain period of time the business structure should change from a for-profit model to a social enterprise or co-operative model where the users own and control the platform. Or perhaps when a pitch is made to take over a platform, the users should get adequate time to buy it out and set up a co-operative structure? Perhaps this should best tested every five years so that we regularly get a chance to transfer power from providers to consumers. 

No one wants to stifle innovation or prevent rewards for success, but that shouldn’t be an excuse for avoiding the issues presented by technological platforms and their success.

The social sector should be leading the way on these issues, not waiting to see what the rest of the economy does. I hope that the new minister, Robert Jenrick, continues to think about this issue and how technology can be harnessed primarily for the good of society, not focused on returns for shareholders. 

Andrew O’Brien is director of external affairs at Social Enterprise UK. He writes in a personal capacity. 

 

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