## Monday, March 22, 2010

### Five dollars here, ten dollars there - soon it's real money, Part 1

It's becoming popular to use your mobile phone to send a small sum of money to a charity. It's fast. It's easy. You may have made one of these donations yourself.  And you might wonder, How does it work?

An established charity registers with a processing service, such as mGive. This service company sets up an account for the charity, with a unique number/keyword combination for their campaign. Notice is broadcast to prospective donors, through advertising or text messages to phones.

To respond, donors send a text message to a special number. That indicates they want to make a \$5 or \$10 donation. The phone carrier adds that amount to the donor's phone bill, marked as a donation.

The mGive Foundation (TMF) collects this money from the carriers. Every 90 days, the foundation wires all money that has accumulated in the account to the charity (meanwhile, donors have paid their phone bills). If the charity disappears, TMF is obliged to give the funds to a similar charity.

Interesting process, eh? There are safeguards along the way to reduce fraud and risk.

Using only Excel Math elementary school arithmetic, can we calculate:

1. How Much Does This Cost?  and  2. Who Is Getting The Money?

Let's do a case study:

We decide to set up a charity for astronaut relief in case a meteorite hits the moon or space station. We register with the IRS and over the next 12 months do everything necessary to become a legitimate charity. We set up an medium-level, text-donation account. Over the following 6 months, we promote our cause with 106,000 out-going promotional messages (we get 1000 a month free so we still have to pay for 100,000 messages).

Our charity receives 10,000 donations. Half of them are for \$5 and half for \$10. Exactly half of these donors decide they want messages from us on a regular basis telling them how we are spending the money. We spend the next 6 months investing in our charity and telling donors how it's going.

How much does all this cost?
1. It costs around \$500 to do paperwork, set up an account, get the keyword MOON, etc.
2. There's an on-going fee of \$1000 per month for a minimum of 12 months
3. There's a 3¢ or 4¢ fee for each message sent out (over our allowance of 1000 a month)
4. There's a per-donation charge of 3.5% of the gift
5. There's a per-donation fee of 32¢
6. If we need a new disaster keyword like SPACE STATION, that's another \$200 for a year
7. There may be a charge to the donor for the text messages, of 20¢ or 25¢ each
8. There may be programming and/or accounting costs for the us (the charity)

By now, you are probably saying, "Show me the money!"

As the title of the blog indicates, when you get a few thousand of this and a few thousand of that, pretty soon it adds up to real money. Go ahead and do your math. I'm working on it from this end, and we can compare notes later today or tomorrow.