How your non-profit can earn revenue with Web 2.0Social media for social enterprise

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Social Signal has worked with many different non-profit organizations, of varying size and means, to create a variety of social media sites, of varying scale and ambition. One thing that just about every non-profit client (and most for-profit clients) ask is about the return on investment. How can non-profits assess the financial value of their social media investments? And perhaps even more fundamentally, how can they find the money to pay for sites that can be costly to build, and just as costly to run?

When we work with non-profits to think about the financial model behind social media projects, we encourage them to think not only about the cost of building a site, but the costs of maintaining an active online community -- which can be a much more expensive endeavour than running a conventional site. A social media site thrives on active and ongoing user contribution. That typically demands ongoing infusions of content, skilled animation, participation incentives -- all of which cost money.

The great news is that social media sites offer at least as many opportunities for revenue generation as for spending. Over the years, we've worked with our clients to identify a range of revenue-generation options for social media sites. This is the first in a series of blog posts that will review options for non-profit revenue generation using Web 2.0. Over the coming weeks we'll review:

We'll conclude by helping you think about how to choose between these different options for revenue generation -- and how to consider whether revenue generation is even an appropriate part of your site's business model.

But first, let's talk about why you might want to earn revenue from your social media venture. Here are some of the reasons that our clients have looked at generating revenue on the web:

  • To pay for the operating costs of social media (e.g. content creation, moderation)
  • To fund a new online initiative
  • To create employment opportunities for your clients (e.g. in product fulfillment)
  • To fund upgrades to your site
  • To pay for a special program, campaign or initiative
  • To support your organization's general operating budget
  • To create a model for sustainable, socially responsible enterprise

Of course, there are also some reasons to hesitate before looking to earn money from your online community. Bear in mind...

  • Revenue-generating sites are perceived differently by users and the public, particularly for non-profits. Think about potential alignment (or conflict) between your organization's mission, and your sources of revenue.
  • Tax laws in your jurisdiction may restrict the kinds of revenue a non-profit organization can generate. Be sure to get legal and/or accounting advice about how different revenue models could impact your non-profit status.
  • There's no free lunch. Most options for generating online revenue carry a price -- even if it's just the price of making your site that much better and more compelling.

These are reasons to tread carefully, not reasons to foreclose the potential opportunity of revenue generation on your site. If your revenue targets bear a reasonable relationship to your site's development and operating costs, and your revenue model maintains a responsible relationship to your organization's mission, your site's revenue model can provide a great source of financial support for your online operations, and your revenue-generating activities may even enhance the value you provide to users.

If there are specific questions or issues you want us to tackle as we work our way through the different kinds of revenue options listed above, feel free to leave a comment below. And if you want to know when the next installment comes out, subscribe to the RSS feed for our Social Media for Social Enterprise series.

Comments

Beth Kanter says

January 19, 2008 - 2:56pm
Alexandra, I look forward to reading more about what you have to say on this topic. I'm examining ROI and wondering how you might include a ROI calculation in all this. At any rate, going to link your social enterprise category to the socialmediametrics wiki http://socialmediametrics.wikispaces.com/

Anonymous says

February 20, 2009 - 10:14am

Can advertisers write off a portion of their ad on non-profit sites? 

Rob Cottingham says

February 20, 2009 - 2:02pm

You'll probably want that question answered by someone who knows more about tax law and deductions than they do about online participation. ;-)

Off the top of my head, though, I'd guess that the answer could well vary (can you count the number of qualifiers in the beginning of this sentence?) depending on which jurisdiction the company doing the advertising is based in.

But I'll throw this open to any tax lawyers or accountants in the room. Any advice for @anonymous?

Rob Cottingham says

February 20, 2009 - 2:28pm

Twitter user @AB9RF suggests that "advertising is a legitimate business expense and as such is expensible as such on business taxes same as any other expense". I'm guessing, though, that you're wondering if there's a more generous tax treatment available?

Tori says

February 20, 2009 - 2:29pm

Not an accountant or lawyer, but I used to work for charitable organization. Based on my experience - if you are advertising based on a rate card - you are buying a service and therefore it's not tax-deductible. HOWEVER: if you pay over and above the cost of posting the advertisement - the difference between the real cost and what you paid can be deducted. As always - check with your accountant first! It depends on how the non-profit is registered. Might be a good strategy for non-profits to check into this and use as a marketing tool if possible.

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