HopeMob cuts fees from the online giving equation

By Michael Carney , written on December 27, 2012

From The News Desk

Imagine harnessing the power of a mob (not the kind led by Tony Soprano), with its sheer scale and frenzied passion, and channeling it for good. That’s the basic mission behind HopeMob, a flash-mob inspired crowdfunding site for charitable causes. But with the Internet littered with crowdfunding and charitable giving options, HopeMob Founder and lauded social media humanitarian Shaun King knew he had to do something radical to stand out and deliver the impact for which the site was founded.

King decided to put his money where his mouth is by making HopeMob the industry’s first online fundraising platform for charitable causes not to charge fees. This is a big deal given that all other platforms charge transaction fees ranging from 2 to 15 percent per donation to cover administrative overhead, payment processing costs, and in some cases, the profit of the donation platform. HopeMob has taken the risky position of covering these processing fees and will not take a cut of the funds raised, meaning 100 percent of all donations go directly to their respective cause. How’s that for radical transparency?

The timing couldn’t be better either. As people bask in the holiday spirit and turn to making New Year’s resolutions, many of which will likely include doing good for others. Online giving is on the rise as well, having increased more than 40 percent over the last three years.

Comparing HopeMob’s new fee-free model to a few of the largest platforms in the industry is instructive.

  • Kickstarter: Kickstarter’s all-or-nothing “incentive-based campaigns” charge a 5 percent fee on all funds raised.
  • IndieGoGo: IndiGoGo follows a dual-option model where fundraisers can opt for a Fixed or Flexible funding structure. In the former, where pledges are only collected if the campaign meets its goal, the company charges 4 percent in fees. In the latter, the company charges 4 percent on all money raised, a rate that increases to 9 percent in the case where the fundraising goal is not met.
  • Rockethub: Rockethub follows a similar model to IndiGoGo’s Flexible option, charging a 4 percent fee on all money raised in successful campaigns, but 8 percent for campaigns that do not reach their goal.
The above listed platform fees do not include any fees charged by payment processors like Amazon Payments, Paypal, and credit card companies which can range from 1 to 5 percent, or any international wire fees. Again, HopeMob covers all of these costs. (The site accepts payment by Dwolla, Paypal, and debit or credit card.)

Launched in April 2012 in Los Angeles, the HopeMob platform was built via the donations of nearly 1,000 early backers. The platform is still technically in beta, with a full-featured version due in January. Already, the social giving platform offers a number of invaluable additional services to users submitting causes. A team of filmmakers, photographers, and social workers will assist users in telling their story free of charge, and will optionally verify each story on behalf of potential donors – a first for the sector, according to King.

HopeMob manages to operate fee-free through a combination of savvy partnerships and an entirely volunteer workforce. PayPal and Dwolla have dramatically reduced their payment processing fees, for example, and the social giving platform has attracted over 2,000 active volunteers from 46 states and 25 countries on six continents. This is not to mention the “free” viral marketing of social media, supported by HopeMob’s current 550,000 Twitter followers and 120,000 Facebook subscribers.

The viral social media platform was designed to empower people globally to help those in need, focusing on the stories of individual families or individuals. Think, “Seven-year old Alice is suffering from a rare bone cancer and needs surgery.” Initially, the site launched to tell a single story and back a single cause at a time, but the early response was overwhelming and the startup now lists multiple simultaneously. Since the launch, HopeMob has reached millions of people and changed the lives of 28 individuals or families – including two in its home city of Los Angeles – from 15 states and seven countries.

There’s no denying that HopeMob, which operates as a 501(c)(3) non-profit, has an admirable mission. But even the most altruistic of charities and nonprofits collect donations and administrative fees to sustain their operations. After All, these organizations are of no good to anyone if they can’t keep their own doors open and continue affecting good. The notion that the site can stay fee-free in perpetuity seems like an idealistic one.

The other very real challenge facing HopeMob is market saturation and fatigue. There are literally tens of thousands of worthy causes and donation portals. Each offers their own compelling story, but to many potential donors it’s just noise. HopeMob is slightly late to this game and will need to play catch-up to gain the mind-share and wallet-share that many other crowdfunding and charitable giving platforms have already assembled.

King has proven to be the real deal when it comes to helping others. The humanitarian and former Oprah Winfrey Scholar has personally raised over $5 million, including through his celebrity Twitter charity auction TwitChange, and has driven more than 100 million visits to his various online social good projects. If the founder can manage to sustain his platform’s early traction, continuing to attract both worthy causes and willing donors, then HopeMob has the potential to create massive good. We just hope that he can keep the lights on long enough to see it all through.