How many of you donate money to charity? And if so, how much? In 1999, on average, Dutch people donated 0.96 per cent of their income on charity. In 2015, this has dropped to 0.77 per cent (Pama, 2017). This shows a clear trend that people in The Netherlands are spending less and less on charities while the charities still need donations. Companies such as 4MORGEN and Sponsorkliks try to solve this problem by providing a new way of fundraising. These companies are examples of affiliate websites which donate part of the received commission to charity. 4MORGEN was founded in 2015 and went out of business earlier this year. Sponsorkliks still exists which makes the business models interesting to examine.
How does it work?
As mentioned, the business model of Sponsorkliks provides a new way of fundraising for charities. Sponsorkliks works with affiliate marketing which is defined as ‘a type of performance-based marketing in which a business rewards an affiliate for each visitor or customer brought by the affiliate’ (Murray, 2017). In this case, the web shops pay a certain commission for every order that gets placed via Sponsorkliks. In other words, if an individual clicks on the link that is shown on Sponsorkliks.nl and buys something on the linked website, Sponsorkliks receives a commission. This commission is often a certain percentage of the total purchase amount. Next, part of this commission (75%) is donated to a charity and the other part is revenue for Sponsorkliks (25%) (Sponsorkliks, 2017). The customer can decide which charity they want to donate to. In this way, people can donate money and support a charity without it costing them any money.
The business model of Sponsorkliks is based on joint profitability since both the company and the customers benefit from the platform. Of course, Sponsorkliks receives part of the commission as revenue for every order placed. However, the revenue is not the only benefit Sponsorkliks receives. The company is a social enterprise. A social enterprise is a business that applies a commercial strategy to maximize improvements in social, environmental and financial well-being. Furthermore, social enterprises can be structured as for-profit or non-profit. In this particular business case, for-profit applies since they keep part of the commission (Martin & Osberg, 2007). Since it is a social enterprise, Sponsorkliks contributes to the social well-being by motivating their customers to donate. This results in a positive feeling of contribution to society. Besides, the business model also provides value for their customers because donating money to charity will make them feel better. Therefore, the joint profitability is considered to be high.
Furthermore, Sponsorkliks meets the feasibility required arrangements criteria. If we look at the institutional environment, Sponsorkliks mainly corresponds to the social dimension since they actively participate in providing more donations to charity.
As mentioned, there are benefits for all the parties involved in the platform. However, 4MORGEN unfortunately went out of business this year. Sponsorkliks still exists but what about their future? A potential risk that could be seen at 4MORGEN is the low revenue if there are only few customers. The platform is a two-sided market where each side attracts more of the other. If there are more customers that buy via the website, more charities and web shops will join. If more web shops and charities join, it will attract more customers. Therefore, a low number of customers will result in little revenue. Besides, some customers of 4MORGEN showed concerns about the money actually arriving at the charity. If Sponsorkliks wants to succeed, they should be very transparent and clear in the way the donating works.
Concluding, there are still some challenges to overcome but the business model definitely provides value for all the parties involved. If everyone would shop via such a website as Sponsorkliks, the current lack of donations to charities could be resolved.
Martin, R. L. and Osberg, S. (2007). Social Entrepreneurship: The Case for Definition. Retrieved from: https://ssir.org/articles/entry/social_entrepreneurship_the_case_for_definition
Murray, J. (2017). Affiliates and affiliate agreemens in business. Retrieved from: https://www.thebalance.com/affiliates-and-affiliate-agreements-in-business-398119
Pama, G. (2017). Nederlanders geven steeds minder uit aan geode doelen. Retrieved from: https://www.nrc.nl/nieuws/2017/04/20/nederlanders-geven-minder-uit-aan-goede-doelen-8274772-a1555259
Sponsorkliks (2017). Hoe werkt Sponsorkliks. Retrieved from: https://www.sponsorkliks.com/products/howdoesitwork-sk.php
4MORGEN (2017). Het verhaal van 4MORGEN. Retrieved from https://qa.4morgen.org/overons