Highest Bidder

From glitzy to garage-sale, online auctions net big returns for many charities

The American Red Cross netted more than $800,000 by selling a donated Harley-Davidson motorcycle signed by

more than 50 Hollywood celebrities. The Glide Foundation, a church and homeless shelter in San Francisco, fetched more than $250,000 for a lunch with the financial mogul Warren Buffett. Self Enhancement, a youth-services charity in Portland, Ore., raised more than $2-million in a single night. Though the charitable missions and sizes of those organizations are not at all comparable, they have one thing in common: They all raised that money by holding online auctions.

Not all charities do well with online auctions, but those that have say the auctions not only bring in a lot of money, but they also increase a charity’s profile. But success isn’t always guaranteed. Organizers of online auctions have met with apathy from donors, confusion on the part of participants, technical difficulties, and lower-than-expected revenue.

Despite the pitfalls, though, most charity employees who have helped organize online auctions say their benefits outweigh their risks.

A Wide Net

Online auctions are often more lucrative than off-line ones, charity officials say. Beyond saving money by avoiding the need to hold an event — and pay fees for meals, a hall, entertainment, and other enticements to attract participants — items sold online get a better sale price than items at a live event because the pool of potential bidders is so much larger.

For example, in one of its annual art auctions, the Seattle Goodwill sold a 1937 oil painting by the artist Jane Peterson for $2,400, but the winner never came to claim the piece of art. So the charity decided to list the painting in its eBay store, a customized page on the auction Web site that lists all of a seller’s items. When the painting sold for the second time on eBay, the Seattle Goodwill received $5,746, the organization’s highest-selling online item to date.

In addition, charities say an auction is a low-cost way to attract attention. Elana Viner, program coordinator at the Child Welfare League of America, in Washington, says the main benefits of the auctions her organization runs twice yearly on eBay are “talking to people and getting our name out there,” which is important for the umbrella group for more than 900 child-welfare organizations across the country. And, she adds, the auctions have helped her organization take in more than $8,000 since April 2004.

Although auctions are not simple to run, Ms. Viner says, “any organization with a committed staff who’s willing to make it happen can do this. It doesn’t matter how large or small you are.”

The eBay Option

Many charities turn to eBay when running an online sale.

At the end of the first quarter of this year, eBay reported more than 147 million registered users worldwide. EBay has helped to raise more than $40-million for charities since about 2000, says Kristin Cunningham, general manager of eBay Giving Works, in San Jose, Calif. Since the 2003 creation of the online auction company’s Giving Works division, more than 60,000 items have been auctioned for charity on eBay, garnering about $6.3-million for 5,245 charities.

Those 5,245 charities are all registered with a nonprofit group called Missionfish. In 2003, eBay asked Missionfish to administer charity auctions, vetting organizations to ensure they had legal status as a charity and accepting payments from sellers on behalf of the charities.

Charities do not pay anything to register on Missionfish and eBay, although eBay does charge a flat listing fee, known as an insertion fee, and a percentage of the final sale, both of which will eventually be returned to the organization under a new eBay policy, effective January 1, 2005. However, if an item put up for auction never sells, eBay will not donate the insertion fee to the charity. The insertion fee varies from 25 cents to $4.80, depending on the starting price of the item.

Other Auction Avenues

While eBay offers the largest audience for an online auction, some organizations have chosen to enlist the help of auction companies that will plan an online event for a charity’s specific donors, sometimes leading up to an in-person auction.

Along with several other online-auction companies that have sprung up in recent years, BenefitEvents.com, in New York, which has helped about 100 charities since 2000, and cMarket, founded in 2003 in Cambridge, Mass., with more than 800 charity auctions scheduled, offer “closed market” online sales for their nonprofit clients, a private auction that charities promote to people who have already donated to them. The companies provide charities with tools to design an auction Web page, list and describe auction items, and then notify their donors via e-mail of the online event.

Jon Carson, president of cMarket, says that a closed-market auction provides charities with a less competitive environment than eBay, suitable for auction items that are local, like a dinner at a restaurant. He adds that closed-market auctions also allow charities to keep donors to themselves. “I don’t know too many of our charity clients that would be very happy with their donors leaking out and going to the charity auction next door,” he says.

Jim Wintner, founder of BenefitEvents, says charities “go to eBay for eBay’s audience rather than focusing on developing local relationships.” For those charities that are seeking new donors and trying to build relationships in the cities or towns where they operate, “eBay is absolutely inappropriate,” says Mr. Wintner.

But Ms. Viner, of the Child Welfare League, has found that eBay bidders are interested in learning more about her organization.

“You can really engage these people and tell them about the mission of your organization,” Ms. Viner says. “I’ve had people ask to be added to our lists for newsletters and e-bulletins.” Because the league does not use an automated online payment company owned by eBay, Ms. Viner corresponds with every single winning bidder to get the money for the items.

Tips for Beginners

But working with eBay or another auction company may not come naturally to a novice. Following are some suggested practices from those who have learned the online-auction ropes:

Do research. Ms. Viner suggests testing a few items to gauge donor interest and identify any problems, technical or otherwise, that could arise during the course of an auction. “Auctions are very intimidating at first, which is why we decided to start with a small test auction,” she says.

Some charities ask a full-time staff member or volunteer who has technical skills to manage the online auction. Katie Steele, major-gifts and events coordinator at the Rainforest Action Network, in San Francisco, ran into problems when listing items for the organization’s cMarket auction last fall. “You want to make sure that your auction Web site looks right,” says Ms. Steele. “Making sure things are the right color and bolded correctly and spaced correctly, and that all of your links to your Web site work — that was difficult and pretty time-consuming.”

William Hill, online coordinator at the Seattle Goodwill, which sold 2,822 items last year, suggests perusing eBay and other charity auctions to get an idea of what kinds of items organizations are listing: “Just look for trends and be willing to try something that may not mean anything to you, but there could be someone out there who wants to buy it.”

Check out companies that provide online services. Paulette Maehara, president of the Association of Fundraising Professionals, advises nonprofit organizations enlisting a third party to host the event to read the fine print and understand what percentage of an auction’s revenue goes to the for-profit company.

“Obviously, anytime you put your brand out on the Web and you’re selling something associated with your charity,” she says. “Make sure it’s being done well.”

Sell appropriate items. Charities that are planning to maintain a constant presence on auction sites may have better luck with different items than the ones offered by groups that run auctions only in conjunction with off-line fund-raising events.

For instance, the Seattle Goodwill, which maintains a year-round auction, has done best with items like camera equipment, musical instruments, vintage toys, pottery, and other kinds of collectibles.

But when charities don’t have the luxury to pick and choose from a vast selection of goods, the choices they make in soliciting auction items can make or break an event, says Zachary P. Stahmer, online direct response manager at the Make-A-Wish Foundation, in Phoenix. When the group initially considered running an online auction, it figured that Internet sales would provide a way for its local chapters to sell items that they had left over from special events.

“When the items themselves are of low value, those auctions don’t seem to get a great return,” says Mr. Stahmer. He says unusual experiences and celebrity-themed memorabilia have fared best. “People are not going to get excited about a pen set,” he says.

Now the organization focuses exclusively on high-value items. Last August, Make-A-Wish auctioned a yacht donated by the Nascar driver Dale Earnhardt Jr. for $83,100.

Ms. Steele, of the Rainforest Action Network, suggests asking board members to use their connections to obtain items that will sell well online. The charity was able to get donations from authors and restaurant owners through board members.

When the Institute for Contemporary Art, in Boston, decided to take its annual auction online last year using cMarket, it found that online bids leading up to the live auction were lower than expected.

“The event was extremely successful,” says Karen DeTemple, a fund-raising consultant and event planner who worked at the museum at the time and oversaw the auction. “But I think art is very hard to sell online. A lot of our pieces are sculptural, three-dimensional with beautiful colors. You just can’t portray that online.” The online auction portion of the event raised more than $7,000.

Know the potential customers. Ms. DeTemple credits the computer savvy of the museum’s donors for the success of its auction. “For online auctions to be successful for another organization, they need to have a strong online group,” says Ms. DeTemple. The museum has e-mail addresses for about 75 percent of its donors.

At the Rainforest Action Network, which began with a week-long online auction followed by a live event, Ms. Steele found that many of the guests at her organization’s live auction were confused by the high starting bids for some items that had been previously bid up online.

The charity sent e-mail messages to a list of about 10,000 four times during the online auction. Of those 10,000, only about 15 people registered with cMarket to receive e-mail notifications about items of interest to them, which Ms. Steele took as a sign that her donors aren’t that interested in participating in online auctions.

Promote the auction like a live special event. After the Child Welfare League finished its first week-long online auction last year in recognition of Child Abuse Prevention Month, it decided to list five of the auction’s more successful items, a gift set with four different commemorative pins, on eBay after the official event had ended. “We found that without all of the marketing and soliciting surrounding the auction, no one was interested,” says Ms. Viner.

Mr. Stahmer, of Make-A-Wish, says, “We’ve learned that online auctions are still a special event and still require the type of activities that you have to do in order to run a special event.”

“It’s not enough to just host an item on eBay,” says Mr. Stahmer. “You have to tell your supporters that it’s there.”

Organizers of charitable online auctions also suggest sending out multiple e-mail messages to donor lists, posting links to the auction on an organization’s Web site, sending out press releases, and mailing paper notifications with the auction’s Web site address.

Says Ms. Viner: “I don’t think you can do enough marketing.”