Digital philanthropy: Part 10 – Market shakeout – Survival of the most useful

By Todd Cohen

The promise of serving the huge philanthropy market has fed the rush of entrepreneurs and investors to create new digital products and services.

After several years of rapid growth, however, the e-philanthropy industry has begun to experience a shakeout. Most notable has been the demise of Charitableway, which produced a Web-based system for handling workplace giving campaigns.

The industry shakeout is a healthy development. Experts worry that many e-philanthropy companies have not done their homework in developing their business models and products.

And the proliferation of companies, products and services has made it tough for charities to figure out which ones will best meet their needs.

Incompatibility between competing products also creates dilemmas for nonprofits that may want to use more than one product.

A big challenge for charities is to coax the industry to step up efforts to tailor products and services to the needs of nonprofits and donors.

Consider Community Foundations of America, a nonprofit buyers group created by some of the biggest U.S. community foundations to develop Web-based systems designed to help the foundations better serve donors.

The foundations recognize they need those products to compete with the financial services industry, which already uses software and the Web in a seamless process that makes it easy for individuals to invest their money and track their investments.

Equally critical for the e-philanthropy industry is the need to develop industry-wide standards for products geared to nonprofits, which likely will need a variety of products that will be much more useful if compatible with one another.

A big step in that direction is the scheduled release this month of OPX, an industry-wide open standard for online transactions.

Developed by the Open Philanthropy Exchange, a consortium of 30 nonprofits and e-philanthropy firms, the standard is designed to seamlessly link online fundraising data with software that manages donor data and relationships.

The nonprofit sector, like the for-profit sector, can be highly competitive. To make the best use of technology, however, nonprofits will have to learn to share resources and knowledge.

Digital technology can most productively transform the way nonprofits do business if it is easy to understand, use and adapt. Success in the information economy depends on learning that is continual and grounded in knowledge that is shared and accessible.

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