A jar full of fail: Why tipping and donations don't work on the Internet

http://monetizethis.info/post/461613405/a-jar-full-of-fail-why-tipping-and-donations-dont

by andrewmayne • 16 years ago

68 58 16 years ago

hy3lxs2• 16 years ago

A counterexample is Causes on Facebook, a for-profit entity which utilizes social pressure to drive donations to nonprofits and has its own successful "tip" system.

http://www.facebook.com/causes

andrewmayne12• 16 years ago

My post was about using this model to support blogs and podcasts. Not bona fide charitable organizations. I actually have experience in doing successful online fundraising for those kinds of groups.

hy3lxs2• 16 years ago

Agreed, I thought it would be interesting to mention the tipping strategy that the for-profit entity Causes uses at the same time they are helping out nonprofits.

sounddust2• 16 years ago

There are a lot of things in this article I disagree with.

1) Wikipedia doesn't have 5 billion unique visitors (there are only 1.6 billion internet users in the world). And they only put up banners asking for money when they need it, not all the time. So both variables in coming up with the "$.00124/visitor" estimate are incorrect.

2) Tax deduction does not make something cost-free. For most people, a donation saves them nothing (since they use the standard deduction) but even for those who itemize, it only saves them the tax they would have paid on that income, not the income itself.

3) Tipping doesn't have to create price uncertainty. As someone who has tried the donation model, it's clear that if you set the price of a donation (such as placing a banner that says "Give $5 now"), that's the exact amount that 90% of people will donate. So in essence, you do get to influence what the perceived value of your site is worth.

4) The article claims that in order to orgs like NPR to succeed on the donation model, they have to have federal grants and corporate sponsorship, etc. But this argument ignores the low barrier to entry (and low cost) of online content; it's not a valid comparison.

5) The article also mentions that those orgs can succeed because they offer physical goods and imply scarcity, but there's no reason that a donation-accepting site could do those as well.

andrewmayne12• 16 years ago

Thank you for your notes.

1.) I didn't say Wikipedia has 5 billion uniques. I said it gets 5 billion visitors. In ad sales a visitor is different than a unique. I changed it to "visits" so avoid the confusion.

2.) Tax deduction makes the perception of something's cost free.

3.) If you can still get a product without paying for something (i.e. tipping) the price is either what you ask for ($5) or nothing. That's the definition of price uncertainty.

4.) I pointed out the problem in using NPR as a model. Federal grants and family endowments are not the best model for a blog...

5.) A donation accepting site can suggest scarcity, but the questions is how compelling will it be? PBS and NPR offer content in a very limited channel space. Most blogs and podcasts do not.

Best,

Andrew

DenisM3• 16 years ago

In ad sales a visitor is different than a unique.

Source? I was under impression that a visitor means a visitor and a visit means a visit. Surprised to see it being used the other way.

Tax deduction makes the perception of something's cost free.

That's just a baseless statement. I can find you any number of people who don't perceive that way. Who are the people that bear the perception? What is their percentage among the populace? How do you know the answer?

sounddust2• 16 years ago

Regardless of what you are referring to, you are still using this number as if it were unique visitors. You say "multiply your total audience size by .00124" (total audience size is number of unique visitors). Then you say "That comes to about 8 million people" (people are unique visitors). You're still doing your math based on the assumption that 5 billion unique people visit Wikipedia each year.

Your math as it stands is impossible, and you're still using it to support your argument. Even if you assumed every internet user in the world uses Wikipedia, that means that the average donation per user would be 0.003875, more than 3 times your estimate. With more reasonable math (and taking into account that Wikipedia does not fundraise 24/7 and is not aggressive) you can see that the average visitor is likely to donate an order of magnitude more than you're claiming.

zackattack• 16 years ago

With #1 the point is that although tons of people use Wikipedia, only a microfraction of em donate. I, for example, have gotten tons of value out of it yet have never given them anything. I think that they should petition universities for sponsorships.

I just donated $5 because I realized how ridiculous my lack of patronage is.

derefr2• 16 years ago

Don't feel bad about not giving them money—they need to be free to read to sustain the level of net-positive impulse-edits they get (similar to how chewing gum needs to be at the checkouts of grocery stores to sustain its level of purchase.) Encouraging Wikipedia's free use, as a side-effect, makes more people likely to edit it, and thus makes it more valuable.

gnosis• 16 years ago

Monetary donations are only one way of helping a site like Wikipedia. Another valuable (even critical) form of help is editing, voting, and otherwise participating on the site.

I've donated a ton of my time to improving Wikipedia, so don't feel the least bit of guilt about not giving them money. If anything, they should be paying me!

Qz• 16 years ago

The article says 5 billion monthly visits.

johnohara• 16 years ago

Anybody know approximately how much is donated to OpenCourseWare for the free content they provide?

vinhboy• 16 years ago

I tip out of fear.

andrewmayne12• 16 years ago

Always the best motivator.

psyklic• 16 years ago

I'd guess that tipping is mostly a socio-cultural thing -- it is expected; it would be considered rude not to. In addition, peer pressure is a factor -- unfortunately, I doubt that I would tip as high as I do or as often as I do if I didn't have other guests at my table.

Online, you just don't feel bad if you don't tip -- there is no peer pressure and no expectation. So, of course it doesn't work out.

knowtheory• 16 years ago

Incidentally, higher tipping rates, and more honest behavior appears even in the presence of PICTURES of faces. Sure a live human is much more effective at applying social pressure, but that doesn't mean that the internet is helpless on this front (hell use an animated gif).

andrewmayne12• 16 years ago

Good point. They've done studies where just eyes draw on a tip jar get more donations.

blasdel• 16 years ago

Using the NPR model is pretty despicable if you're getting funding through more traditional means too.

For instance, Jesse Thorn (who's background is in public radio), asked for and got $15k in public donations to fund the first season of his web series: http://www.kickstarter.com/projects/1136753854/put-this-on-s... — the problem is that his show is itself advertising — NPR does pledge drives to avoid ads, and here he is using the same mechanism to fund the production of commercials!

Devilboy• 16 years ago

I still hope that http://flattr.com can prove otherwise

andrewmayne12• 16 years ago

I hope so too. I'd like to be wrong in my observation.

FluidDjango• 16 years ago

Maybe I'm just slow, but this is the first I've seen of Flattr. Model is quite intriguing, but the question is how to get enough awareness/visibility to both "donor" users and "recipient" users. Anybody knoow long have they been out there or what sort of adoption curve they're experiencing?

almost2• 16 years ago

"Makes the donation essentially cost free to the donor via tax deduction."

You what now? Either the US tax system works in some very weird way or that doesn't make any sense.

smanek• 16 years ago

Pretend I donate a hundred dollars to NPR. I get a tote, mug, and some other stuff that I might value (i.e., otherwise purchase) at $50, but is nominally valued at $10.

I then get to deduct $90 from income on my tax return, and assuming I'm in a high tax bracket, I get to pay about $30 less in taxes.

Hence, I effectively donated $20 - while the recipient effectively received $90.

Not quite cost free, but not terrible. And yes, I know it's cheating to deduct the 'value' of the gifts - but it's the only semi-reasonable thing I can think of.

lsc3• 16 years ago

yeah, you can save a lot of money cheating on taxes if you don't get audited... but I don't think NPR is selling a more effective means of cheating on your taxes.

I think that the mooch bait is much more about having a way to show off "I am a generous and wealthy person, and I gave to this worthy cause" much like tipping heavily when you take your co-workers out to lunch. I mean, I don't really need another bag.

almost2• 16 years ago

I understand tax deductible. But that doesn't make it free. Unless you really do have a mighty need for the free gifts :p

I'm kind of having a hard time taking anything else this author says seriously when he also says that.

URSpider94• 16 years ago

As a loyal NPR supporter, I feel that I have to correct the complete mis-representation of NPR's funding presented in this article.

It is true that NPR received a generous gift from the Kroc family ($200 million in 2003, http://www.washingtonpost.com/ac2/wp-dyn/A6973-2003Nov6?lang...). However, in that same year, NPR's operating budget was $100 million. Assuming a generous 5% utilization of that endowment, that would only pay 10% of the budget.

In fact, NPR's web page states that it receives a little under 10% of its annual budget from "major gifts," while nearly a third (the largest single fraction) comes from pledges and annual memberships. (see http://www.npr.org/about/privatesupport.html)

I guess your statement that listener donations are "a fraction" of NPR's operating budget is true. One third IS a fraction, after all. But to say that NPR "really doesn't need your money" is a gross factual error.

I, for one, would like to see you post a correction.

andrewmayne12• 16 years ago

You're right in that the Kroc grant doesn't cover them forever. That wasn't my point.

I think NPR is a very well run organization. When they received the Kroc grant they used it to expand and increased their annual budget by 20%.

Coming from the non-profit world, this is a sign of an efficient organization that is very good at raising money. When given a giant bequest, they increased their budget.

We could debate what "need" means, but a non-profit that can increase its expenditures by 20% in one year and easily cover it doesn't "need" money in the same way other charitable organizations I've worked with do.

FYI: The page you link to lists the average for all public radio stations in general. It's not a specific breakdown of NPR or NPR member stations.

timwiseman3• 16 years ago

The moment you put the donate button on your website you’re calling yourself a charity case.

This line caught me. Yes, if you put a donate button you are drawing a parallel between yourself and a charity case if not outright calling yourself one.

But if you put a tip button on it is a very different situation. That is more comparing yourself to say a skilled hairdresser (it comes to mind since my step mother is one) where the end user is thanking you monetarily for the good work that you have done and expecting it to encourage you to keep doing good work in the future.

andrewmayne12• 16 years ago

I hear you, but we all have a pretty good idea how to compensate hair dressers and waiters. We also agree that there's an implicit contract that tipping is part of the transaction.

When was the last time you tipped the producers of your favorite television show?

timwiseman3• 16 years ago

An interesting comparison.

I've often been interested in how some things get chosen for tipping and other things not. I think one of the criteria is how convenient it is to actually tip. It would be hard to tip the producer of my favorite television show, effortless to tip my waittress. I think the other criteria is how personalized the experience is, in most things we tip for we are receiving a very personal close to one-one interaction.

But I think most blogs come closer to the waitress side than the television side. At least on blogs set up to receive them, it is relatively easy to tip (though I think it can and should become much easier in the future!). And the experience can be fairly specialized (I tend to read niche technical blogs rather than mainstream news ones), and fairly personal. After all, if I leave a comment on most blogs, I have a pretty good expectation that author will respond directly and intelligently to me. If I write a letter to the producers of a tv show, I might, if lucky, get a form letter and maybe a glossy photo of the cast back.

As to whether there is an "implicit contract" to tip bloggers, I think that particular piece of society is new enough that those rules are still being established.

jrockway5• 16 years ago

I'm pretty sure that people tip at, say, coffee shops because they don't want to put the change back into their pocket. When people buy coffee with credit cards, they don't tip. When they buy with cash, they tip with whatever coins are left over.

(I was told once that this was rude, so I just stopped tipping for coffee all together. If I'm going to be rude, I might as well keep the money for myself.)

MartinCron• 16 years ago

I think the notion is that the tip should more closely parallel good service, so if you get just $.08 back and drop that into the tip jar, what is the message being sent, that you just don't like carrying coins around?

After getting to know some people in coffee shops and how they do rely on tips, I've started tipping around $1 per drink unless something's really wrong with the place. I do that regardless of paying cash or credit.

jrockway5• 16 years ago

These coffee shops should just charge a dollar more. I do not shop around for the best price on coffee. I want good coffee.

The time I was yelled at, btw, was for giving 3 quarters as a tip for a $3 cup of coffee. "It would have been more polite" to give a whole dollar, and not as change, but as a dollar bill, I was informed (by some other customer). OK, but I don't have another dollar bill, and I really don't care to carry around those three quarters...

I did try for a few days to have an extra dollar and tip with that (carefully saving up the change for use in wishing wells)... but nobody said thank you or anything, so I gave up. If I have to go to a lot of effort to give someone money and they don't care, eventually I am going to get tired of doing it. And I did. (Did one person ruin it for everyone? Yup.)

lsc3• 16 years ago

eh, I think people tip at min. wage places for two reasons:

1. to look generous/wealthy in front of peers (and to feel generous/wealthy)

2. in the hope that staff will be more friendly/helpful/ won't spit in your coffee.

I think you could apply 1 on line by letting people give you a name to credit publicly for the donation. (let people give you a name; some people don't want to see their real names online)

Applying 2 generally means implementing logins and some sort of 'freemium' model.

Jeema3000• 16 years ago

I think the main problem may actually be in not setting a price. If you don't specify any price whatsoever, people will be more reluctant to donate because they'll be worried that their donation will be perceived as too cheap, so instead they just choose to remain anonymous and donate nothing at all. On the other hand if you come right out and say 'even a dollar is a welcome contribution!', then who knows...maybe people will only donate a dollar, but maybe a lot more people will donate too...

anonjon2• 16 years ago

The little donate buttons we were supposed to click on to support our favorite bands as we gave the finger to the RIAA never panned out. It turns out we really were just cheap bastards that didn’t want to pay for music after all.

This is tangential and potentially destructively off-topic, but when exactly did music become something that we all need to pay for?

It seems to me that historically music has been something that people have done in addition to whatever it is that they do for their day job. (You sing while you are doing chores or you sing and dance at the pub at night).

When did we become this grotesque soulless crippled race of humans? It seems that there has been a proliferation of a myth that you need specific musical talent (and anointment by a benefactor) to create music. Why is this? It clearly isn't true... If we are all such cheap bastards, why don't we make our own damn music and give the RIAA the finger in that way?

I almost feel like there is some sort of institutional loss of music from our culture that almost warrants 'music theft' and is the real reason that people have been so reluctant to pay for their albums. It is as if everyone can make music, but there is some societal obligation that forces the majority of us to believe that we can't.

(Bonus: Why guitar hero and not a guitar? The guitar is cheaper...)

But please, feel free to ignore. Something about that phrasing simply rubbed me the wrong way and I felt the need to rant.

andrewmayne12• 16 years ago

I think it comes down to how you value what other people do. I value certain musicians and actually enjoy paying for what they do. It's not enough for me to say I like them. I feel it's only fair to spend money some money to reward what they've done for me.

I don't think it takes talent to make music. It takes talent to make good music. Talent is something I believe in rewarding.

cookiecaper2• 16 years ago

I agree that there's too much expectation that people will like your work enough that they'll support you full-time in it. People need to expect to support themselves, not to live off of album royalties.

teeja• 16 years ago

Historically, the people who made 'good' music -- by which I mean music that has been replayed and/or re-released for decades or centuries -- made music FULL-TIME, not as a hobby. The same is true today of people who have the time and talent to do filmscores (which will, again, be heard for at least decades.)

Making music that will last, not just confection, is a very intense activity. It is always technical, requires staying aware of the competition and staying ahead of it. It's a full-time job.not a hobby. I'm not arguing that good music is 'elite' music, but that most lasting music is good in direct proportion to the energy used creating it.

This would be common sense in most areas, but many people who don't make music somehow get the astonishing idea that good music is 'easy'. Look at any recognized 'genius' composer or singer/songwriter and count the number of big works they wrote that have lasted once the confection has faded away. The list is nearly always small: competition is fierce.

If listening to throwaway confection satisfies, what the here-today gone-tomorrow bands create may satisfy many consumers. Yes you'll find exceptions, but the bulk of music which is art, not just product, isn't made by weekend warriors. Like great furniture, great sculpture, great architecture, great anything: it needs support.

anonjon2• 16 years ago

But the majority of music that people listen to today is throwaway 'confection'.

The fact is that in our current system, people who produce music of genius quality starve, while the people who write about big booty women and bananas become super rich.

The problem is that the act of making music fulfills a basic human need. It isn't about making good music or making a song that will last for the ages. It is more like the need to have sex, make out and go dancing.

I just think it is incredibly sad that regular people can no longer compete with the mass market saturation of spun-sugar-pop-music. If we look at market trends it would appear that all music should be pitch-corrected, re-mixed, stamped onto plastic disks, and played as background noise to a music video. I, personally, reject the market trends as I know there is something much deeper that I actually need.

chipsy• 16 years ago

"Set your own price", on the other hand, seems to be a model with multiple success stories. It has the good vibes of donation, while also having the carrot of a specific item for sale at the other end.

Plus, you can use the data as a starting point for future pricing.

andrewmayne12• 16 years ago

Do you have some examples of where that's actually worked in a significant way? I'd love to do a follow-up post of counter examples.

cookiecaper2• 16 years ago

I think it's about context, really. At a restaurant or hairdresser, you already expect to pay and you already have money out. It's usually not too difficult to slap on an extra few bucks for the waiter. (The tipping model makes much more sense at a restaurant, by the way, where there a lot of people involved in your food prep, not to mention the food cost, vs. a barber where the one person cuts your hair and takes you to check out, and they take turns as broom jockey.)

If I want to "tip" Wikipedia, for instance, I have to go find my credit card, type in lots of numbers, possibly setup an account, worry about the individual handling of my card information by Wikimedia, etc. That's way too much effort for drive-by donations a la those at the restaurant.

I assume that's what tipjoy and some of these other startups set out to fix. I don't think simplification of and success by tipping is particularly a lost cause, I just think that it wasn't easy or prominent enough. Was there a browser extension? If I only had to enter my info once, and there was a button on my browser where I could send any registered site a tip while I was on the page without any special effort, I think I would be prone to tip more often.

By the same token, I think that you're much, much more likely to make some money if you follow the more conventional "x costs x, please pay me" model, even if you surreptitiously proliferate content outside of the paywall to increase exposure.

A jar full of fail: Why tipping and donations don't work on the Internet

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