Microgiving with Digital Platforms

Abstract

Microgiving, a new form of digital fundraising, operates by soliciting minuscule donation amounts that are typically not viable in traditional settings. This paper considers the scaling up of microgiving via platform integration, whereby small donations are bundled with high volume of economic activities that are naturally occurring on digital platforms. We evaluate a charity subscription program run by Alibaba, one of the world’s largest retail platforms, which allows sellers to pledge a tiny portion of a product’s revenue (2 cents per order at minimum) to charity, with donations made automatically as transactions take place. We document that, between 2018 and 2020, the program attracted more than 2 million Alibaba sellers and generated 1.2 billion yuan of charitable funds, representing one of China’s most successful online fundraisers. We pinpoint three forces that jointly create a self-fulfilling incentive for platform sellers to engage in microgiving: First, intense competition motivates sellers to link their products with charitable causes, even though the signaling value of the linkage is small; Second, due to low financial commitment, sellers rarely discontinue their giving once subscribed to the program, which ensures stable streams of charitable funds; Third, the program provides sellers with the joy of giving at a low cost, and this “warm glow” effect further reinforces participation. The success of the microgiving scheme hinges on features that are shared by many digital platforms, and its success is potentially applicable on a broader scale.