How philanthropic is 'prize philanthropy'?

A person puts in money to donate can.


Tess Vigeland: So we know that giving is tied to a feeling of pleasure, kind of like gambling. Well, it turns out the Next Big Thing in philanthropy turns giving money into a type of contest. Prize philanthropy, if you will.

Name brands like Pepsi and American Express put up the money, millions of dollars. Then let the public decide which worthy causes should get it. Backers say it's helping smaller non-profits compete for those funds. But as Joel Rose reports, skeptics think the brands themselves are the real winners.

Joel Rose: Back in February, Pepsi announced on the "Today Show" that it was giving away $20 million through a philanthropy contest on its web site.

"Today Show" host: Pepsi, one of NBC's longtime advertisers, is launching Pepsi Refresh, a campaign to foster innovation for the social good.

Mark Neidig: I didn't even finish my cup of coffee and I thought, "We've gotta do this!"

That's Mark Neidig. He's the CEO of the Kanzius Cancer Research Foundation. It's a small organization in Erie, Penn. that supports early-stage cancer research. Pepsi is giving out $250,000 to the causes that get the most votes in any given month. So Neidig basically put the rest of his operation on hold to focus on the contest.

Neidig: When you become obsessed with the campaign, you literally are watching it around the clock. You wake up in the middle of the night, and you check it.

Neidig e-mailed his supporters every day to remind them to vote for his project on Pepsi's web site and on Facebook. But that kind of dedication can easily turn into overexposure, says Derrick Feldmann. He's the CEO of Achieve, a consulting firm that works with nonprofit organizations.

Derrick Feldmann: So organizations really need to decide for themselves: How do we make sure that our donors don't get what we call "donor fatigue"?

In the end, Mark Neidig's determination paid off. Kanzius won 250,000 bucks, and a lot more attention for its cause.

Neidig: The Pepsi Refresh project really gave us a new platform to communicate on a national scale what we're doing.

Which supporters say is exactly what contests like this are designed to do. Michael Smith works at the Case Foundation, one of the first to organize online philanthropy contests. At their best, he says these competitions help spread the wealth to organizations that wouldn't stand much chance in the traditional grant-making process.

Michael Smith: We all sit often in the same circles of people with the same thinking, the same backgrounds. And if you kind of stay in those stale silos, you're never going to innovate. So the idea is bringing new people, new voices, new talents to the table.

But skeptics think these high-profile philanthropy contests have some other, less noble goals.

James English: It's advertising. It's a cheap way to get a lot of advertising.

James English is a professor at the University of Pennsylvania who's written a book about the history of philanthropic prizes and corporate contests.

English: These things always seem to be crafted with an eye toward what's going to make a splash, what's going to be a story, what are journalists going to be interested in, rather than necessarily what is really needed at this time, what are the problems.

But supporters of philanthropy contests don't see a contradiction between doing good and doing well for themselves. Pepper Evans Roukas is with American Express, which recently launched its own contest, and an accompanying ad campaign.

Pepper Evans Roukas: We feel like that provides a very good halo for the brand. And for people who are not card members, hopefully it will make us seem more relevant to them as a brand. So that when they start to consider a new financial product, we're in their consideration set.

There's no doubt that people are paying attention. Roukas says the American Express Members Project has more than half a million fans on Facebook.

In Philadelphia, I'm Joel Rose for Marketplace.

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So the end justifies the means. What are we teaching the next generation of philanthropists? Thoughtful consideration and responsible use of money are absent in this mechanism. The pleasure response concept related to giving is fine when combined with critical thought about impact. Nonprofits are businesses that provide economic vitality and quality to communities. Deliberate philanthropy is still needed.

Being someone who is competing and has competed in the Pepsi contest it is welcome to see so much in grant dollars made available for all types of projects. We, and 8 other partner groups - Refresh Our Playgrounds, are just trying to build playgrounds and it is terribly hard and expensive to do so. Maybe we have to work very hard to get these dollars and we give free advertising to Pepsi, but it's the world were in at the moment.

I call it a popularity contest philanthropy. It casts nonprofit organizations in the role of flacks for the donor company's brand while the donor company abdicates all responsibility for discerning the comparative value and effectiveness of the competing organizations, their program models, and the quality of their execution.

Sure, it's advertising, and less commendable than anonymous donations. But apart from the fact that all the money for these kinds of things eventually comes out of consumers' pockets, this is better than ordinary advertising.

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