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    • Fundraising

    Omaze: Is the fundraising revolution too good to be true?

    Luxury fundraiser Omaze has collected more than $150 million for good causes — but critics say its model misleads donors and risks falling foul of regulations. Devex goes in search of answers.

    By Abby Young-Powell // 13 September 2021
    “How would YOU help your loved ones with $100,000?” reads the text on a brightly colored Instagram post by Omaze, a for-profit company that raises money for charity by running draws for dream prizes. “[I’d] pay for the surgeries my mom and grandma need,” replied one user. “[I could] help my kids complete their education,” said another. Someone else simply stated: “Help me. … I will start my own business.” Omaze, a multimillion-dollar company founded in California in 2012, has rapidly risen in profile in recent years. Despite attracting substantial controversy, it has successfully raised more than $150 million for hundreds of charities ― and a reported $42 million in venture capital toward its own expansion. The organization has offered once-in-a-lifetime prizes — such as a trip aboard a luxury Greek yacht, a Lamborghini that was blessed by Pope Francis, and even a trip to space — and worked with celebrities including Michelle Obama and Daniel Craig on its self-declared mission to “transform” fundraising for the better. Previously confined to the United States, it expanded to the United Kingdom last year and says it now has a waiting list of charities that want to get involved. NGOs that have already worked with Omaze are enthusiastic about the experience, saying they’ve been able to raise hundreds of thousands of dollars for their causes with minimal effort. But critics argue that the model encourages gambling, misleads donors, and risks falling foul of regulations — allegations that Omaze denies. ‘Raising money in the easiest way possible’ Omaze says it has created a “fundraising platform for a new generation of donors,” touting a model that “democratizes” traditional auction giving. “We give everyone a chance to dream big and win once-in-a-lifetime prizes while helping to make the world a better place,” the organization says on its website. Omaze started out mostly offering celebrity experiences, such as chances to meet George Clooney or to attend a “Star Wars” movie premiere, with celebrities giving their time for free to help with fundraising. But to expand, it also started offering more tangible prizes such as luxury houses and cars. Omaze itself pays for the majority of these prizes and takes care of the purchases, certain taxes, and other costs, as well as advertising and marketing. In the U.K., it recoups these expenses through ticket sales and then takes 20% of whatever is left over as profit, while the rest goes to the charity. It also guarantees its U.K. charity partners a minimum donation, come what may. In the U.S., the model works a bit differently. Due to differing regulations between states, Omaze partners not with multiple charities individually but with Charities Aid Foundation America, which distributes the funds on Omaze’s behalf. As stated on its website, Omaze guarantees the charities a fixed percentage of gross receipts — typically 60% for celebrity experiences and 15% for tangible prizes. It nets approximately 12%-20% of gross receipts as profit, while the rest ― up to 75% ― goes to costs. “I’ve dreamed of having a house, and I know it’s not something that in the foreseeable future I could ever afford. So I thought: ‘Heck, why not? It’s for a good cause. That would be amazing.’” --— Mckinzie Davis, a participant in an Omaze sweepstakes in the U.S Global development and humanitarian organizations are among those that have managed to raise large sums through Omaze. This year, International Medical Corps partnered with it on a campaign for a chance to spend a week on a luxury yacht and an opportunity to win a Porsche plus $20,000. Marcia Roeder, a fundraising specialist with IMC, said she would recommend Omaze “in a heartbeat.” Charities don’t pay anything for the service. “They make our jobs on the nonprofit side very easy. … It was really all about … raising money in the easiest way possible,” Roeder said. “All we had to do was provide them with some assets and provide some language around what we’re doing, as well as updates through the campaigns that they could share with their audiences.” IMC started working with Omaze in March 2020 and a little over a year later had already raised just under half a million dollars. “The other important thing to mention [is that] they don’t hold the funds. They don’t sit on them,” Roeder said. “They make sure you can utilize them straight away.” But where Omaze truly excels is in the marketing and promotion, according to Roeder. “They’re huge marketers. … They’re the ones who are amplifying the messaging,” she said. All of this can be particularly appealing to charities amid the impacts of the COVID-19 pandemic. The British Heart Foundation partnered with Omaze this year on a chance to win a £3 million house in London. “The COVID-19 pandemic has devastated the BHF’s income, and as a result we had to cut our funding for new medical research in half in 2020-21,” said Paul Davies, its head of corporate partnerships. “When we entered the partnership [with Omaze], we didn’t know how much it would raise and were excited by the possibilities. Omaze committed to donating a minimum of £100,000 to the BHF. ... [But] the partnership raised a staggering £1 million. ... This phenomenal amount of money was beyond anything we imagined.” Drawbacks The troubles, however, start with regulation. Because Omaze giveaways are for profit, they cannot legally be classed as lotteries, unlike other charity contests such as the U.K. National Lottery. Instead, the giveaways are classified as “free draws” in the U.K. and “sweepstakes” in the U.S. “[Omaze is] simply a for-profit company seeking to make money off the back of charity.” --— Stephen Lee, expert in voluntary sector management, Bayes Business School at City, University of London This means they are not regulated by gambling authorities and must include an option for people to enter for free — potentially undermining the ability to raise funds. Under U.K. regulations, the free entry option must be “no less convenient” than the paid route and must be “displayed with as much prominence.” In the U.S., a similar principle applies. The free entry route must be given "equal dignities" to the paid route, according to Andrew B. Lustigman, a partner at Olshan Frome Wolosky LLP. Although what this means isn't always clear cut, "the greater the disparity [between them], the higher the risk," he said. Omaze draws do include free options, but as Devex reported, it has run into issues with authorities over this in both the U.S. and U.K., amid repeated accusations that the company does not meet the conditions for free prize draws. Although it has made changes to promote the free entry options more prominently, some issues still appear to disincentivize them. Omaze firmly denies this. In the U.K., for example, while tickets can be bought in bulk — allowing people to submit hundreds of entries at a time — free entries have to be submitted one at a time, making it difficult to achieve the same chance of winning. In the U.S., the paid entry options are displayed in brightly colored boxes, while the free entry option is shown in unadorned text underneath. Omaze’s marketing strategy — which reaches a young demographic with high-production social media content centered on its eye-catching prizes — has also come under scrutiny. James Oakes, international senior vice president at Omaze, who runs the U.K. operation, said the key demographic for participants is 24- to 35-year-olds, although rules stipulate that they must be over 18. “Creating amazing content is kind of in our DNA. … That’s what drives the majority of our customers, is engaging with that content ... on social media,” Oakes said. “And that will skew younger than most [charities’] typical ways of interacting with potential donors.” Some participants have reported receiving a high number of follow-up emails encouraging them to buy more tickets. After buying tickets for a “Million Pound House Draw” in aid of U.K. children’s charity NSPCC, Devex received up to three marketing emails per day for several months, highlighting new prizes or special offers such as “2 for 1” deals on additional ticket purchases. In these emails, the option for free entries was mentioned in small print only. “It’s a large sum of money, but when you look at who’s getting what, where [and] how, it’s a pretty small percentage of the total income [that goes to charities].” --— Stephen Lee, expert in voluntary sector management, Bayes Business School at City, University of London David Girling, an associate professor at the University of East Anglia who specializes in marketing for the international development sector, said that the model could encourage gambling and that it “supports the commercialization and commodification of charity,” with limited attention paid to the charities themselves. Mckinzie Davis, 26, entered an Omaze sweepstakes in the U.S. to win a house, after coming across it on Instagram. “Honestly it was born out of almost desperation,” she said. “I finished grad school last year and haven’t been able to find a job. I’m living in my parents' house. And I’ve dreamed of having a house, and I know it’s not something that in the foreseeable future I could ever afford. So I thought: ‘Heck, why not? It’s for a good cause. That would be amazing.’” She added that she thinks the draw was in aid of Girls Build, but “I’m ashamed to say I didn’t look [into the group’s work].” Omaze denies that it fails to properly promote the free entry option. A spokesperson said it is presented “in the same location” and “with equal prominence to the paid options" on its website, "in accordance with sweepstakes law in the U.S." A spokesperson for Omaze UK also said that the website and entry pages are "transparent and compliant" with requirements and that "the system for allocating prizes does not differentiate between those who participate by paying” and those who enter for free. When asked about gambling, Oakes responded: “Our draws are not gambling. They're not classified or regulated as gambling.” However, “we're not oblivious to the fact there are some similarities, so we take that very seriously,” he added. Oakes said that Omaze has an internal system to flag “problematic behavior” — such as people entering multiple times a day or using different credit cards — and that it reaches out to anyone who is identified as a potential concern. So far, the company has found no confirmed cases of participants “in gambling-related trouble,” he said. He also argued that the marketing model allows charities to reach audiences they otherwise wouldn’t. “There’s a lot of focus on raising awareness. We genuinely care about the causes we’re working for. We want to be helping in every way,” he said. ‘Distasteful’ The latest challenge to Omaze came in the form of a class-action lawsuit filed in California earlier this year. The plaintiffs, who participated in Omaze draws, accuse it of “operat[ing] illegal lotteries and mislead[ing] the general public into believing (among other things) that most, if not all, of their ‘donations’ are going to charity when, in fact, the overwhelming majority of their ‘donations’ are pocketed by Omaze.” Class actions in the U.S. rarely progress to trial and are commonly settled out of court. Omaze has filed a motion to dismiss the case, saying the allegations do not have merit. But the case points to another criticism often leveled against it: that the distribution of funds is misleading to those buying tickets. In the U.S., the ticket purchase button is labeled “Donate,” even though in many cases only 15% of the funds are sent to charities. By comparison, to qualify as a “lottery” in California, 90% of gross receipts would need to go directly to charitable causes. In the U.K., meanwhile, Omaze says 80% of net profit goes to the charity, while it takes 20% as a “fee.” But the net profit doesn’t include “campaign costs” — and exactly how much that amounts to isn’t clear. “We don’t see any conflict between having a for-profit company whose mission is to raise money for charities … [We] insulate the charities from any financial risk. --— James Oakes, international senior vice president at Omaze UK Oakes said it “doesn’t include any Omaze salaries or office costs” but does include the “prizing costs and marketing costs of the campaign.” Those vary, he said, and are made transparent to the charity partner but not to the public. All of this makes Omaze a poor choice for individuals whose primary intention is to provide money for charity. The key question is whether participants understand this. A spokesperson for Omaze said its website “clearly states the exact amount that will go to the designated grantee. This information is provided on every experience page. It is also clearly outlined again on the About Us page.” But Stephen Lee, an expert in voluntary sector management at the Bayes Business School at City, University of London, believes most participants do not realize this. He points out they are referred to as “donors” a number of times on Omaze’s U.S. website and considers this type of fundraising “disingenuous” and “distasteful.” “When people engage in these activities, they’re not engaging in philanthropic endeavor,” he said. “They’re being told they are, but they’re not … It’s a large sum of money, but when you look at who’s getting what, where [and] how, it’s a pretty small percentage of the total income [that goes to charities].” Omaze, he argued, is “simply a for-profit company seeking to make money off the back of charity.” ‘Incentivized’ giving Just how much money Omaze takes in is unclear. As a private company, detailed financial reports for its operations are currently not available. Asked by Devex, Omaze declined to provide information on its revenue or profits, but said it raised $20.2 million for charities in 2020. However, IRS filings from CAF America, which handles the distribution of funds on Omaze’s behalf in the U.S., shed some light. They suggest gross receipts for Omaze campaigns in the financial year ending April 2020 totaled nearly $70.9 million, of which about $51.3 million was returned to Omaze and around $19.6 million — just over a quarter of total receipts — was distributed to charities. It remains unclear how much of approximately $51.3 million taken by Omaze covered the costs of running campaigns and how much was taken in profit. From Omaze’s perspective, however, there’s no shame in the fact that its “incentivized nature” is what motivates people to put their hands in their pockets, nor that its draws are for profit. Oakes said Omaze doesn’t encroach on other streams of fundraising because it comes from a “different spending decision” than regular charity donations. So, for example, the money is replacing what would otherwise be spent on “a fancy coffee or going to the cinema.” He added that the for-profit model allows Omaze to absorb the risks of buying expensive prizes and invest in marketing. “We don’t see any conflict between having a for-profit company whose mission is to raise money for charities … [We] insulate the charities from any financial risk … and that’s something we’re able to do because of the fact we’re a regular company,” he said. Omaze seems to have landed on a fundraising model that works, and that puts little additional burden on charities themselves. But there are things that Girling and Lee said NGOs should consider before using this type of fundraising. “The first thing I’d say to charity professionals is, in terms of protecting your reputation, which is your single most important intangible asset as an organization, are you happy with the bonafide use of this organization and what it’s seeking to do? ... Equally, are you happy with the way the funds are being distributed?” Lee said. Girling added: “I would say that they should think about the ethical implications … and how much brand awareness are they really getting, compared to Omaze ... Look at the website and what they are promoting the most.” Davis said she’s not sure if she’d recommend the experience to others. It’s a good way for charities “to get donations you wouldn’t normally,” she said. But “I wish there was more of a focus on why the giving was happening, and not the transaction.” Jessica Abrahams contributed reporting.

    “How would YOU help your loved ones with $100,000?” reads the text on a brightly colored Instagram post by Omaze, a for-profit company that raises money for charity by running draws for dream prizes. “[I’d] pay for the surgeries my mom and grandma need,” replied one user. “[I could] help my kids complete their education,” said another. Someone else simply stated: “Help me. … I will start my own business.”

    Omaze, a multimillion-dollar company founded in California in 2012, has rapidly risen in profile in recent years. Despite attracting substantial controversy, it has successfully raised more than $150 million for hundreds of charities ― and a reported $42 million in venture capital toward its own expansion.

    The organization has offered once-in-a-lifetime prizes — such as a trip aboard a luxury Greek yacht, a Lamborghini that was blessed by Pope Francis, and even a trip to space — and worked with celebrities including Michelle Obama and Daniel Craig on its self-declared mission to “transform” fundraising for the better.

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    About the author

    • Abby Young-Powell

      Abby Young-Powell

      Abby Young-Powell is an award-winning freelance journalist and editor based in Berlin. She covers a range of topics for publications including The Guardian, The Daily Telegraph and Deutsche Welle. Before working freelance, she was deputy editor of Guardian Students, part of the U.K.'s Guardian newspaper. She is also a fellow of the International Journalists' Programme, after working at Die Tageszeitung in Germany.

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