how-does-gofundme-make-money

How Does GoFundMe Make Money?

GoFundMe is a for-profit crowdfunding platform, which makes money based on donations on the platform. The platform makes money via fees paid by whatever entity runs the campaign and as transaction fees for processing the payments. Also, it makes money via the GoFundMe Charity service (fundraising platform) and donations.

Origin story

GoFundMe is a for-profit crowdfunding platform.

Founded in 2010 by Brad Damphousse and Andrew Ballester, the service enables people to raise money for events including graduations, celebrations, and other personal causes. It also provides a vital source of funding for those who require medical procedures as a result of illness or injury.

Damphousse and Ballester created an early iteration of GoFundMe called CreateAFund, which allowed social media users to raise money for causes near to their heart. At the time, crowdfunding as we know it today was only beginning to become mainstream.

In 2008, GoFundMe was adopted as the preferred name. Less than a decade later in 2017, GoFundMe became the largest online crowdfunding platform, raising over $3 billion since its inception.

Read Also: How Does Venmo Make Money?

GoFundMe revenue generation

GoFundMe makes money whenever a user donates to a cause.

For every donation there are two fees:

  1. Platform fees – these are fees paid by whatever entity is running the campaign. The entity may be an organization, team, or individual. Note that the platform fee is 0% for those wanting to start a fundraiser in the UK, Australia, Canada, United States, and most major European countries. For the rest of the world, the exact platform fee depends on the country. In Luxembourg, for example, the platform fee is 5%.
  2. Transaction fees – which cover the cost of processing each payment. In the United States, the transaction fee is 2.9% plus 30 cents. Similar to platform fees, transaction fees vary by country. Returning to the Luxembourg example, the transaction fee is 1.4% of the donation in Euros.

GoFundMe Charity

GoFundMe Charity is a feature-rich online fundraising platform helping organizers raise more money by engaging with donors. Businesses get full access to donor and fundraising data in one place and can create donate buttons and email sequences that are on-brand.

Fundraising campaigns can also be integrated with platforms such as WordPress, Salesforce, and Mailchimp, among others.

Two subscription plans are available:

  1. Free – every donation attracts a 1.9% processing fee plus 30 cents. This gives the fundraising organization a guaranteed 97.5% of the total donation.
  2. Flex – every donation attracts a 2.2% processing fee plus 30 cents, giving the organization at least 94.5% of the donation. However, donors can choose to cover the processing fee which means the organization receives 100%.

Donations

Some individuals and organizations prefer to donate directly to GoFundMe itself. In this case, the funds are redistributed where appropriate.

Key takeaways:

  • GoFundMe is a for-profit crowdfunding service. The service was originally called CreateAFund and allowed social media users to raise money for causes important to them.
  • GoFundMe makes money on every user donation. The 5% platform fee has recently been waived in several countries such as Australia, Canada, and the United States. However, every fundraising campaign must pay a 2.9% transaction fee depending on where the campaign is located.
  • GoFundMe also offers a dedicated service for businesses running fundraising campaigns. Dubbed GoFundMe Charity, the service helps them create targeted, on-brand messages that can be integrated with popular platforms such as WordPress and Salesforce.

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Connected Business Model Types

Crowdsourcing Business Model

crowdsourcing
The term “crowdsourcing” was first coined by Wired Magazine editor Jeff Howe in a 2006 article titled Rise of Crowdsourcing. Though the practice has existed in some form or another for centuries, it rose to prominence when eCommerce, social media, and smartphone culture began to emerge. Crowdsourcing is the act of obtaining knowledge, goods, services, or opinions from a group of people. These people submit information via social media, smartphone apps, or dedicated crowdsourcing platforms.

Asymmetric Business Models

asymmetric-business-models
In an asymmetric business model, the organization doesn’t monetize the user directly, but it leverages the data users provide coupled with technology, thus have a key customer pay to sustain the core asset. For example, Google makes money by leveraging users’ data, combined with its algorithms sold to advertisers for visibility.

Attention Merchant Business Model

attention-business-models-compared
In an asymmetric business model, the organization doesn’t monetize the user directly, but it leverages the data users provide coupled with technology, thus having a key customer pay to sustain the core asset. For example, Google makes money by leveraging users’ data, combined with its algorithms sold to advertisers for visibility. This is how attention merchants make monetize their business models.

Marketplace Business Models

marketplace-business-models
A marketplace is a platform where buyers and sellers interact and transact. The platform acts as a marketplace that will generate revenues in fees from one or all the parties involved in the transaction. Usually, marketplaces can be classified in several ways, like those selling services vs. products or those connecting buyers and sellers at B2B, B2C, or C2C level. And those marketplaces connecting two core players, or more.

Wholesale Business Model

wholesale-business-model
The wholesale model is a selling model where wholesalers sell their products in bulk to a retailer at a discounted price. The retailer then on-sells the products to consumers at a higher price. In the wholesale model, a wholesaler sells products in bulk to retail outlets for onward sale. Occasionally, the wholesaler sells direct to the consumer, with supermarket giant Costco the most obvious example.

Retail Business Model

retail-business-model
A retail business model follows a direct-to-consumer approach, also called B2C, where the company sells directly to final customers a processed/finished product. This implies a business model that is mostly local-based, it carries higher margins, but also higher costs and distribution risks.

B2B2C

b2b2c
A B2B2C is a particular kind of business model where a company, rather than accessing the consumer market directly, it does that via another business. Yet the final consumers will recognize the brand or the service provided by the B2B2C. The company offering the service might gain direct access to consumers over time.

Open-Core Business Model

open-core
While the term has been coined by Andrew Lampitt, open-core is an evolution of open-source. Where a core part of the software/platform is offered for free, while on top of it are built premium features or add-ons, which get monetized by the corporation who developed the software/platform. An example of the GitLab open core model, where the hosted service is free and open, while the software is closed.

Open Source vs. Freemium

open-source-business-model
Open source is licensed and usually developed and maintained by a community of independent developers. While the freemium is developed in-house. Thus the freemium give the company that developed it, full control over its distribution. In an open-source model, the for-profit company has to distribute its premium version per its open-source licensing model.

Freemium Business Model

freemium-business-model
The freemium – unless the whole organization is aligned around it – is a growth strategy rather than a business model. A free service is provided to a majority of users, while a small percentage of those users convert into paying customers through the sales funnel. Free users will help spread the brand through word of mouth.

Freeterprise Business Model

freeterprise-business-model
A freeterprise is a combination of free and enterprise where free professional accounts are driven into the funnel through the free product. As the opportunity is identified the company assigns the free account to a salesperson within the organization (inside sales or fields sales) to convert that into a B2B/enterprise account.

Franchising Business Model

franchained-business-model
In a franchained business model (a short-term chain, long-term franchise) model, the company deliberately launched its operations by keeping tight ownership on the main assets, while those are established, thus choosing a chain model. Once operations are running and established, the company divests its ownership and opts instead for a franchising model.
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