The only thing more predictable than the salmon-and-wild-rice dinner at a charity gala is the compulsory patrol of the silent auction. Competing bidders hover awkwardly over the clipboards. When the checks are rounded up, the charity may find that, despite selling a fair number of gift certificates and spa treatments, it hasn't covered its overhead.
During the first Internet boom dozens of companies competed to put charity auctions on the Web. It made sense: An online auction opens up the bidding to a wider audience and takes up less time and space. "You try setting up 400 items in a room," says James Wintner, owner of New York City online auction firm BenefitEvents.com.
Only a handful of Web auctioneers survived the tech bust: 99% of the $14.6 billion charities raised last year from auctions was done offline. But the survivors (and a few startups in their wake) are coming up with some improvements on the idea. Chief among the innovations is a more powerful ability to analyze bidding databases to help nonprofits maximize their take from auctions.
A Cambridge, Mass. firm called Cmarket offers charities access to a trove of data it has collected from past auctions. The company will steer nonprofits toward items that sell, such as luxury trips and theater tickets, and away from things that typically don't, such as electronics, antiques and baby gifts. "We know five days before the close, with 95% accuracy, where an auction will end up," says Jon E. Carson, Cmarket's chief executive.
Jeffrey Reid, Cmarket's director of product analytics, is working with Deepak Malhotra, an assistant professor at Harvard Business School, to identify what affects an auction's success. A tip from them: Set higher opening bids. Low opening bids whip up a frenzy but don't generate the highest price.
Cmarket lets charities sell ads on auction sites to defray the cost of a Cmarket auction. (It charges $695 and 9% of the first $60,000 raised.) Cmarket is also selling national sponsorships based on the promise of hard data on who sees the sponsor's ad on the auction. Zipcar, an hourly auto rental agency, so far is the only sponsor signed up.
Cmarket also pitches its auctions as great vehicles for marketers to reach the well-off gala-goer. It has built up a consignment catalog of 200 popular items any charity can auction off, including trips to Hawaii and hot-air balloon rides. The donors get to write off the cost of the item; the winning bidder gets to deduct the amount paid over fair value.
The Cancer Community Center in South Portland, Me. sold for $7,500 a trip to Hawaii consigned to Cmarket for $5,000. The Center kept the $2,500 difference and netted $70,000 overall in an online auction in March, double what it brought in two years ago.
Cmarket has hosted 1,600 auctions with $12 million spent on winning bids since its founding in 2002, absorbing $20 million in venture funding without yet achieving profitability. Since last year Cmarket has seen its auction volume rise 150% and its revenue triple. To what level it won't say, but its average auction grosses $18,000 now (for revenue of $1,600), and it expects to handle 1,000 auctions this year. The employee count is 55.
In its first online auction this June the Bronx High School of Science raised $33,000 with Cmarket's help, compared with $20,000 from last year's offline benefit. "I got many e-mails, especially from alumni, saying, 'This is great the school is doing it ... it's a way for us to get involved even if we can't come to the auction,'" says auction chairman Beth M. Herman.
Ebay, through its Giving Works program, waives auction fees to charities who want to sell to its 203-million-strong audience. The smaller auctioneers can't match that reach but can offer features Ebay lacks, such as making auctions invite-only.
