Reporting from San Francisco — Gift cards are popular stocking stuffers because they take some of the guesswork out of gift giving but still seem more thoughtful than slipping cash into an envelope.
From Home Depot to Best Buy to Nordstrom, retailers offer a card for nearly every occasion and person. But an Internet company says it's tapping an overlooked market with a one-of-a-kind card to appeal to shoppers interested in a different kind of giving.
Causes, which helps donors link up with charities online, has teamed up with gift card marketer Blackhawk Network to sell $25 and $50 prepaid gift cards in 800 Safeway and Vons supermarkets in California. Givers get a tax write-off. Recipients log on to Causes.com/giftcard to choose from more than 1 million nonprofits.
"This is the only card in the world that says the person you are buying it for wants to do good for the world," said Causes co-founder and Chairman Sean Parker, the former president of Facebook Inc. who is portrayed by Justin Timberlake in the film "The Social Network." "There are no other cards on the rack that offer that experience."
It remains to be seen whether shoppers will buy that concept. In a survey of 510 consumers, Blackhawk found that 69% liked the idea of the charity gift card and 70% said they would buy it for themselves because it makes giving to charity easier, the company said.
But Daniel Horne, a marketing professor at Providence College who studies gift cards, said previous charity gift cards struggled.
"We like to teach that it's better to give than receive, but the reality is that there is a lot of pent-up demand with people wanting stuff," Horne said. "We are basically selfish animals."
Gift cards will be the No. 1 item on wish lists this year, with 57% of people asking for them, predicts the National Retail Federation. Already, contributing a couple of bucks in the checkout aisle is the most common way Americans support charity, according to a study from Convio Inc., which makes fund-raising software for nonprofit organizations.
Causes doesn't plan to make money from the gift cards and Blackhawk discounted its fees, Causes co-founder and President Joe Green said.
Green is hoping the gift cards raise money for charity and awareness of his 3-year-old company, which harnesses the word-of-mouth power of social media to increase donations to charities. Green, 27, and Parker, 30, formed Causes in 2007, one in a new wave of start-ups experimenting with alternatives to expensive direct mail and telemarketing campaigns for charities looking to get their message out and the donations coming in.
Causes, which runs one of the most popular applications on Facebook and says it has one of the largest online platforms for activism, reaches out to circles of online friends and encourages them to connect with one another to support worthy causes.
The theory: People are more likely to donate money, albeit in small amounts, to help a cause that is important to someone close to them. Friends who respond to that subtle social pressure get something in return: social recognition.
Causes has 140 million users who have given more than $27 million to nonprofit groups around the world. The company helps nonprofits raise about $1 million a month combined. It asks donors for a voluntary tip of 10% or more and partners with corporations, which pay Causes $50,000 to $300,000 to sponsor fund-raising campaigns.
This month, Causes raised $9 million in venture capital to add more engineers to the 16-person company. Investors in the latest round include New Enterprise Associates, Silicon Valley angel investor Ron Conway and Salesforce.com Inc. Chief Executive Marc Benioff. Causes has raised a total of $16 million.
Internet fundraising has generated strong interest in the nonprofit world over the last decade but still lags behind direct mail, events and other more traditional ways of soliciting donations. Of the $263 billion that Americans give to charity each year, 5.7% is given online, according to Blackbaud Inc.'s index of online giving, which tracks fundraising. Of that, less than 1% comes from social media, estimated Steve MacLaughlin, director of Internet solutions at Blackbaud.
Social media has disappointed many who had hoped it would offer an instant panacea to fundraising woes in a tough economy. It has been more effective at "friend-raising," as in gaining supporters and engaging them in dialogue about a cause, than actual fundraising. Proponents say the medium is still new and experimental, with potential to become a much more important means to solicit donations.
That effort could get a boost if Causes gift cards catch on with shoppers this holiday season, MacLaughlin said. The timing is good, he said: 46% of online giving takes place in the last three months of the year, with 30% in December alone.
Blackhawk has more than 350 retail branded gift cards in 82,000 retail locations. Parker said his goal is for Causes gift cards to eventually be offered in all of them.
Other Internet companies are also attempting to ring up sales offline. Palo Alto social networking company Facebook is expanding its footprint in the physical world by rolling out its own cards for virtual currency that can be used in social games and applications on its site. Called Facebook Credits, the prepaid gift cards are available in Target, Best Buy and Wal-Mart stores.
"It's amazing how many people study those gift cards when they are in stores," said Britt Beemer, founder of America's Research Group, a retail industry tracking group. "Anytime you can get more face time with the consumer, the more likely it is that you will be able to get them to respond."