Earlier this week, the Federal Election Commission gave its stamp of approval for federal campaigns to collect anonymous donations via text donations. I'm a big believer in using technology to get citizens more involved in the political process. This is a great step forward in reducing the friction in collecting donations.
Here's how the FEC ruling applies to us political fundraisers:Text donations are capped at $10 per text. Donors can only give $50 per month via text message. If a donor goes over $200 in text gifts, the identity of the donor must be disclosed to the FEC.
Now the math:
So a donor makes a $10 donation. His or her cell carrier then takes 50 percent of donation. (This is based on what the AT&T/Verizons of the worlds have traditionally charged for transactions other than non-profit donations. The carriers don't consider political organizations non-profits. Hopefully we see market forces pushing these fees lower.)
In the current plan, the aggregator is fronting the gifts and sending the donation funds directly to the campaign within 10 days of the donation taking place. The aggregator is then reimbursed by the carrier once they collect the funds through the cell subscriber's phone bill, which takes 3-to-5 months. That means the aggregator has some risk for which he should be compensated. Currently m-Qube, the aggregator who petitioned the FEC for approval, is not posting its prices, but it would be reasonable to expect them to charge between 5-15 percent.
Now, a campaign gets to pocket $4.50 to $3.50 out of the $10 donation. That means the total cost of funds raised is 55-65 percent.
If text-to-donate is the only way a campaign will be able to gather $10 donations from a group of supporters, then text-to-donate is a great deal and worth every penny.
If the campaign can drive these supports to give via a website or by check, text-to-donate is a relatively expensive option based on my current guesstimations.
Erik currently runs sales and marketing for CMDI, the largest Republican fundraising technology platform. Prior to joining CMDI, Erik founded numerous fundraising technology companies whose products have raised over $300 million for hundreds of political and cause-based organizations.
A version of this post was also published on CMDI’s blog.