digital philanthropy in china: activating the …...digital philanthropy in china: activating the...

Digital Philanthropy in China: Activating the Individual Donor Base

Digital is unlocking new avenues for individual participation in philanthropy,

promising significant development of the sector.

This report was authored by Yin Chen, Weiwen Han, Ming Wong and Jiakai Yuan. Yin Chen is a Bain & Company partner in Shanghai and leads the firm’s social impact efforts in Greater China. Also based in Shanghai, Weiwen Han leads Bain’s Greater China offices. They can be reached via email at [email protected] and at [email protected].

Ming Wong is a Hong Kong-based vice president with United Way World-wide and leads UWW’s Asia-Pacific practice. Jiakai Yuan is the chief China representative for United Way Worldwide and is based in Shanghai. They can be reached via email at [email protected] and at [email protected].

Bain Radar 360SM is a service mark of Bain & Company, Inc.

Copyright © 2018 Bain & Company, Inc. All rights reserved.


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United Way Worldwide | Bain & Company, Inc.

Contents

Embracing the digital revolution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . pg ..1

At a glance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . pg ..3

1. China’s philanthropy sector: Potential and challenges. . . . . . . . . . . . . . . . . . pg ..7

2. Digital philanthropy: Evolution and characteristics. . . . . . . . . . . . . . . . . . . pg ..15

3. Digital fund-raising: Vision and implications. . . . . . . . . . . . . . . . . . . . . . . pg ..25


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1


Embracing the digital revolution

Dear Colleague:

In life, we benefit when ability and opportunity meet. Having a skill is important, but more so if there is a productive way to use it. Similarly, if an opportunity presents itself but you don’t have the capability to take advantage, the moment goes unrewarded.

The potential for philanthropic growth in China is a tremendous opportunity for organizations with the ability to seize the moment. As this report describes, China, a nation of about 1.4 billion people, possesses an untapped philanthropic market in an early stage of development. We need a tool—a way of working—to help philanthropic organizations take advantage, increase their impact and strength-en more communities.

China’s potential philanthropic growth represents a tremendous opportunity for organizations with the ability to seize the moment.

Right now, in countries around the world, digital technology is reshaping society. To make a purchase, for instance, shoppers used to go to a store and choose from what was physically on the shelf. Today, with the Internet delivering knowledge right to our fingertips, data is plentiful. Shoppers can research any number of options at home, learn about brands and make a selection from the comfort of their sofa.

Digital technology is having a similar effect on philanthropy. Today, people don’t have to rely on tradi-tional charities to act on their behalf. Instead, when they identify an issue they care about, they can go online, donate, get involved and see the progress they’re making. That’s the growth opportunity for charities today.

The philanthropic opportunity in China aligns with our vision at United Way and the digital capabilities that we are developing. This report shows that while donor penetration in China is low, Internet pen-etration continues to rise—creating a pathway for philanthropies to connect with people more directly than ever.

Several years ago, I spoke with my board of directors about the importance of United Way embracing digital technology if we wanted to stay in business. That’s why we have shifted our strategy to build tools to support today’s empowered individuals. We are helping people find causes they care about, develop community partnerships and opportunities, and multiply their impact. We are helping them not only to volunteer, but also to engage their friends and family and to share stories and ideas that increase their reach.


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To be effective, philanthropic organizations in China must embrace this digital revolution. They must build connections, show people how they can make a difference and develop a culture of giving. That’s what United Way is working to accomplish, and it is how charities in China and around the world will build trust and support across our collective sector. In China, these efforts must be aided by the estab-lishment of a regulatory environment that keeps pace with today’s technological innovations.

I encourage you to thoroughly review the data and conclusions in this report. The opportunity provid-ed by digital technology to help build stronger communities at scale is right in front of us. In China, the opportunity is massive. Let’s seize it.

Brian A. Gallagher President and CEO, United Way Worldwide


3


At a glance

. China’s.RMB.156.billion.philanthropy.sector.has.been.growing.at.a.brisk.pace,.but.donations.from.individuals.comprise.only.about.20%.of.the.total ..

. Digital.fund-raising.accounts.for.slightly.more.than.2%.of.China’s.total.donation.value,.but.it.is.growing.rapidly,.driven.by.younger.people.attracted.to.supporting.specific.projects.with.com-pelling.stories ..

. Government.regulations.and.self-reporting.will.also.support.continued.development.of.the.philanthropy.sector,.ensuring.transparency.and.nurturing.public.trust ..

. To.capture.the.opportunities,.stakeholders.across.the.sector.need.to.develop.integrated.digital.strategies,.including.identifying.potential.ecosystem.partners .

Philanthropy in China has grown rapidly over the past three decades, in tandem with the development of the economy as a whole. However, China’s overall culture of philanthropy is still emerging as indi-vidual awareness and participation increase.

Total charitable donations in China reached RMB 156 billion in 2017, having grown at a compound annual rate of 11% from 2011 to 2016. China’s philanthropic sector has developed primarily through corporate giving, which contributes approximately 60%–70% of total donation value, while donations from individuals make up about 20% of the total market. Although China has the fourth-largest num-ber of individual donors in the world (91 million in 2016), this represents only 7% of the Chinese population, suggesting significant room for growth.

Individual participation in philanthropy has fluctuated over the past several years. The sector has been affected by natural disasters, which spur short-term donations, as well as by scandals, which de-flate the public’s trust and willingness to donate. Total donations from individuals fell by 60% from 2011 to 2014 but have since recovered, growing at a compound annual rate of more than 60% from 2014 to 2016. This trend is poised to continue as rising disposable income boosts donor participation and donation amounts, and as rapid development of digital infrastructure (e.g., Internet/mobile pen-etration, digital payments) increases individuals’ access to charities.

Digital—and especially digital fund-raising—is set to transform China’s philanthropy sector, bring-ing both unparalleled access and transparency. This shift presents meaningful opportunities for stakeholders with the resources and capabilities to take advantage of new digital channels. At the same time, the sector continues to face traditional challenges, such as finding and attracting top tal-ent, which are only exacerbated in the new digital environment.


4


Rise of digital philanthropy

Digital technology is rapidly changing how China’s philanthropy sector operates—from diversifying and engaging the sources of funds, to better promoting and enabling fund-raising, to driving improved fund utilization. This report focuses on the most developed of these areas: online fund-raising.

Over the past 15 years, online fund-raising has evolved through three distinct stages. During its period of emergence, from 2004 to 2013, the market saw the rise of new charities and online channels lever-aging commercial platforms like Taobao. From 2013 to 2016, innovations by Alibaba and Tencent (in-cluding the 99 Charity Day campaign) marked a period of rapid development, ushering in exponential growth in online fund-raising. And from 2016 to the present, it has seen regulated but fast growth, with China’s Charity Law—the first comprehensive legislation governing the sector—coming into ef-fect. Online fund-raising has soared over the past five years, both in terms of participation and total donation value.

By making philanthropy increasingly accessible, digital has activated giving by individuals, which represented more than 60% of online donations in the past three years, vs. about 20% of donations overall. Online donations come primarily from younger donors, who have a growing interest in philanthropy and ability to donate. Engaging this population is becoming a must-win battle for all stakeholders. Health, poverty alleviation and education are the most popular themes of online projects, driven both by platforms’ push and by donors’ pull.

Across the sector, online giants Tencent and Alibaba dominate the market today, but the competitive landscape will continue to evolve as more platforms are approved to engage in public fund-raising. The ability to generate and drive traffic is a key differentiator within the overall online fund-raising ecosystem. Departing from the traditional model, where public foundations are by far the largest players, these platforms empower NGOs and individuals to raise funds and enhance their profiles online. Thus far, however, funding distribution for online projects reflects the Pareto principle, with the top 20% of projects absorbing most of the donation value.

Digital fund-raising’s potential growth is significant, as online donations still account for less than 6% of donations from individuals. On the demand side, charitable organizations with public fund- raising qualifications (abbreviated as COPFQs in this report) and nongovernmental organizations (NGOs) also have a relatively limited online presence; only about 40% of COPFQs and 2% of NGOs were represented on Tencent’s charity platform in 2017.

Implications for industry stakeholders

The rapid rise of digital philanthropy in China creates significant opportunity for stakeholders to make a mark in the sector. At the same time, foundations and NGOs need to conquer some key challenges, including gaining and maintaining the public’s trust through more efficient operations and established, transparent reporting standards. The Chinese government is actively providing the philanthropy indus-try with guidelines and policies to manage fraud, as well as drafting clear guidance on charitable


5


organization reporting. However, the overall regulatory environment is still in a nascent stage and must continue evolving to keep pace with innovation.

Digital can accelerate the development of China’s overall philanthropy culture, but this requires stakeholders to define their objectives and develop corresponding strategies. Common digital objectives include creating a positive and targeted impact, building a trusted brand and broadening the scope of influence. Still, individual stakeholders have different objectives and need to develop their own differ-entiated perspectives on how to participate in the market. Even digital philanthropy leaders like Tencent and Alibaba are improving their operations along these lines, developing clear and unique value propositions, and focusing their digital efforts on key areas in order to achieve their objectives.

There is no single path to success, but based on our study and the Bain Radar 360SM framework, philanthropy stakeholders should ask themselves a set of key questions as they begin to develop their digital strategies.

• Customer and channel engagement: How do we leverage digital infrastructure to maximize do-nor engagement?

• Products and services: What donation options and donor services can we develop for digital platforms?

• Operations: How do we improve our internal operations by leveraging new digital tools and ca-pabilities?

• Data and analytics: What analytics do we use to measure and track key activities, and how can we apply digital tools to manage them?

• Operating model and partnerships: How do we tailor our operating model to cater to digital needs? Do we need ecosystem partners?

• Talent and culture: Do we have the right talent and culture to make our digital plan work? If not, how can we practically close the gaps?

Not all of these challenges and opportunities can be met by individual stakeholders alone; the need for true partnerships in various forms will increase. However, given the trajectory of the market and the poten-tial to make a meaningful impact, philanthropic organizations must prioritize their digital strategies if they want to stay relevant and engaged with an increasingly active population of individual donors.

•. China’s.philanthropy.sector.has.emerged.over.the.past.30.years,.with.significant.fluctuation.between.2007.and.2011.as.a.result.of.major.natural.di-sasters.and.scandals ..Thanks.to.increasing.trans-parency.and.government.regulation,.the.sector.is.now.entering.a.phase.of.steady.growth .

•. Despite.its.rapid.rise,.philanthropy.in.China.has.not.kept.pace.with.the.overall.economy ..China’s.total.donation.value.currently.accounts.for.only.0 .2%.of.its.GDP .

•. Individual.donor.penetration.is.relatively.low.at.only.7%.of.the.total.population,.but.participation.continues.to.grow.rapidly.as.the.younger.gener-ation.slowly.embraces.the.concept.of.giving.back.through.charity ..

•. The.sector.is.ripe.for.continued.growth.as.dispos-able.income.increases,.digital.infrastructure.en-ables.easier.access.to.charities,.and.the.govern-ment.actively.participates.by.creating.guidelines.and.policies .

•. However,.the.industry.also.needs.to.tackle.a.set.of.challenges,.including.winning.and.maintaining.public.trust,.establishing.efficient.operations.and.transparent.reporting.standards,.and.recruiting.and.retaining.top.talent ..

1.China’s philanthropy sector: Potential and challenges


8


0.0

0.5

1.0

1.5

2.0

2.5%

Total donation value as percentage of GDP, 2016

China

0.2

Japan

0.3

India

1.4

Australia

1.8

US

2.1

Notes: Exchange rate calculated at 1 USD=RMB 6.7; due to limited data availability, Japan’s giving data estimated as the sum of 2016 individual giving and 2015giving by corporations and foundations; Australia’s giving data is for 2015–16Sources: Giving Japan, Japan Fundraising Association, 2017; Federal Reserve Economic Data (FRED) database; Open Government Data Platform India; Philanthropy Australia; Euromonitor; World Bank; Annual Report on China’s Philanthropy Development, 2018; Philanthropy Roundtable; Bain analysis

Figure 2:.Charitable.donations.account.for.a.very.small.share.of.China’s.GDP,.indicating.future.growth.potential

0

100

200

1981 06 07

31

08

107

09

63

10

103

11

85

12

89

13

95

14

106

15

122

16

146

17

156

Total charitable donation value (RMB billions)

Emergence Fluctuation Adjustment and steady growth Regulated

CAGR

29%CAGR

11%CAGR

7%

(Sept 2016–present)

Notes: Incomplete record of data before 2007; China’s Charity Law took effect in September 2016Sources: China Philanthropic Donation Report, Ministry of Civil Affairs, 2012; Annual Report on China’s Philanthropy Development, 2018; Bain analysis

Figure 1:.After.periods.of.fluctuation.and.adjustment,.China’s.philanthropy.sector.is.steadily.becoming.a.powerful.force.for.good


9


0

100

200

300265

Indonesia

146 144

China

91

39

Japan

36 34

20% 56% 45% 7% 47% 28% 52%

Total donors, 2016 (millions)

India US Germany UK

1 2 3 4 6 8 9Rank bynumber of

donors

Percentageof population

0

20

40

60

80

100

2014

66

2016

91

Total donors in China (millions)

17%

CAGR(14–16)

Notes: Number of donors estimated based on Charities Aid Foundation (CAF) research; donors defined as those who donated money during the one-month periodprior to the interview; Pakistan ranked fifth and Thailand ranked seventh in number of donors Sources: CAF World Giving Index, 2016–17; Giving USA 2017; World Bank; Bain analysis

Figure 4:.Chinese.donor.penetration.is.relatively.low.but.increasing.rapidly

0

20

40

60

80

100%

2011

32%

57%

11%

85

12

29%

65%

6%89

13

18%

70%

12%

95

14

11%

69%

20%

106

15

16%

71%

13%

122

16

21%

65%

14%

146

Total donation value and sources (RMB billions)

Notes: Other includes government, foundations, social organizations, etc.; 2016 data is through September 2016Sources: Annual Report on China’s Philanthropy Development, 2018; Bain analysis

CAGR(11–14)

CAGR(14–16)

–24%

15%

31%

8%

62%

14%

–2%

17%

3%

14%

17%17%

11%

Individuals

Corporations

Other

CAGR(11–16)

Figure 3:.Corporations.have.been.the.major.source.of.funding,.but.donations.from.individuals.are.on.the.rise


10


0

20

40

60

80

100%

2000 2010 2017 2030E

Distribution of Chinese households bydisposable income (USD)

500–2,500

2,500–10K

10K–65K

65K–100KOver 100K

0

20

40

60

80

100%

2015

500–25K

25K–55K

55K–100K

Over 100K

Distribution of US households by disposable income (USD)

3,900

1,052

1,382

2,162

Average donationamount, 2015

(USD)

Percentage ofhouseholds thatdonated, 2015

63%

46%

30%

84%

Notes: Average donation amount is among households that donated; the Philanthropy Panel Study segmented income by 25K, 50K, 100K and over 100K; forconsistency with the US national household income data, we grouped the percentage of households that donated and the average donation amount for 25K‒50K into the 25K‒55K category, and data for 50K‒100K into the 55K‒100K categorySources: Philanthropy Panel Study, Indiana University Lilly Family School of Philanthropy, 2015; Euromonitor; Bain analysis

Figure 6:.Rising.income.levels.in.China.could.help.boost.charitable.donations.and.philanthropy.participation

0

20

40

60

80

100%

China

21%

65%

14%

146

US

72%

5%

23%

2,613

Total donation value and sources, 2016 (RMB billions)

Individuals

Corporations

Other

Notes: Other includes government, foundations, social organizations, etc.; exchange rate calculated at 1 USD=RMB 6.7 Sources: Giving USA 2017; Annual Report on China’s Philanthropy Development, 2018; Bain analysis

Figure 5:.Based.on.a.comparison.with.the.US.philanthropy.market,.donations.from.individuals.could.grow.significantly


11


0

20

40

60

80%

6560 60

NewZealand

57

US

56

Australia

56

Canada

54

Ireland

53 51

TheNetherlands

51

China

14

Yemen

13

CAF World Giving Index score, 2017

Myanmar Indonesia Kenya UAE

12 3

4 5 6 7 8 9 10

138 139

CAF ranking

Notes: Scores calculated as a combined average of the percentage of people who reported one or more of the following in the month prior to the interview: helpinga stranger, donating money and volunteering time; China’s score based on 4,373 interviewsSources: CAF World Giving Index, 2017; Bain analysis

Figure 8:.Despite.its.spectacular.growth,.China’s.philanthropy.culture.is.still.in.a.very.early.stage

0

200

400

600

800

2010

458

11

513

12

564

13

618

14

649

15

689

16

731

17

772

34% 38% 42% 46% 48% 50% 53% 56%Internetpenetration

Internet users in China (millions)

0 200 400 600 800

Onlineshopping 533

Instantmessaging/

socialnetworking

720

Onlinepayments 531

Internet users by activity, 2017 (millions)

69%

93%

69%

Percentage of totalChinese Internet users

Note: Internet users defined as individuals over six years old who have used the Internet in the past six monthsSources: Statistical Report on Internet Development in China, CNNIC, January 2018; Bain analysis

Figure 7:.Tapping.China’s.huge.base.of.Internet.users.represents.a.major.opportunity.for.charities


12


Low salary

50.5%

Problematicmanagement

11.8%

Lack ofsocial

recognition

8.0%

High workintensity

6.8%

Limitedspace for

careerdevelopment

6.6%

Familyreasons

6.2%

Governmentinterference

5.8%

Highpressure

1.6%

Problematicrelationship

with leadership

1.0%

Other

0.8%

Reasons for leaving a job with a charitable organization

Sources: China’s NGOs Salary Survey Report, China Development Brief, 2016 (n=489); Bain analysis

Figure 9:.Low.salary.is.the.biggest.talent-retention.challenge.that.China’s.charities.face


13


2.Digital philanthropy: Evolution and characteristics

•. Digital.technology.is.rapidly.changing.how.China’s.philanthropy.sector.operates—creating.new.bridges.between.stakeholders,.and.closing.the.distance.between.donors.and.specific.projects ..

•. Overall.donation.value.and.participation.have.both.soared.over.the.past.five.years ..Still,.given.the.popularity.of.online.donations.and.increasing.confidence.among.individual.donors,.there.is.significant.room.for.growth .

•. Currently,.the.landscape.is.highly.concentrated;.20.online.platforms.are.licensed.to.link.individual.donors.to.projects,.but.90%.of.total.donation.value.goes.through.Alibaba.and.Tencent ..How-ever,.competition.may.intensify.as.other.players.apply.for.licenses.to.participate .

•. Overall,.digital.philanthropy.in.China.today.is.characterized.by.a.few.key.attributes ..Young.people.are.the.major.donor.group.online,.and.engaging.young.donors.will.be.an.important.battle.for.all.stakeholders ..We.also.find.that.plat-forms.are.encouraging.NGOs.and.individuals.to.fund-raise.online,.and.that.a.relatively.small.percentage.of.projects.are.capturing.the.bulk.of.the.donation.value ..In.addition,.health,.poverty.alleviation.and.education.are.the.most.popular.themes.of.online.projects ..


16


Note: Only 11 of the 13 online fund-raising platforms approved in 2016 are operating today, for a total of 20Source: Bain analysis

February 2005 Two charity

institutions open“Commonweal

Shops” on Taobao

February 2012Sina establishescharity platform

August 2016 Ministry of CivilAffairs (MCA)approves 13

online fund-raisingplatforms

September 2016Charity Law

goes into effect

August 2017“One-yuan

painting”donation drive

goes viral

May 2018MCA approves

9 onlinefund-raising

platforms

December 2004YeePay sets uponline donation

channel forIndian Oceantsunami relief

June 2011Guo Meimei and

Red Cross Societyof China scandal

exposed

September 2015Tencent launches99 Charity Day

August 2016Alibaba launches

Ant Forest toencourage eco-friendly practices

November 2016Luo Er scandal

exposed

December 2017“Same-day birth-day” campaign

initiated on illegalplatform with prob-lematic operations

Emergence Rapid development Regulated and fast growth

Breakthroughs Regulations Scandals Key milestones

Figure 11:.Online.fund-raising.in.China.has.developed.in.three.stages

Sources of funds Fund-raising Fund utilization

Individuals E-commerceSocial media

Live streamingShort-form videos

EntertainmentLifestyleSports

Corporations

Offline:Private/public foundations

NGOs/government

Governmentand social

organizationsGovernment

Foundations/NGOs

Beneficiaries

20 online platforms withonline fund-raising qualifications

+ Charitable organizations with

public fund-raisingqualifications (COPFQs)

COPFQs’ own channels

Emerging influence of new digital tools

Digital-related areas Online flow of funds Offline flow of funds

Notes: Number of online platforms as of August 2018; some individuals and organizations that are not registered as foundations or NGOs can still initiate projectsSources: Expert interviews; Bain analysis

Digital marketing/promotion

touchpoints

New online platformsand channels

Figure 10:.Digital.is.changing.how.China’s.philanthropy.sector.operates


17


0

20

40

60

80%

Donatingonline

62

Volunteering

53

Donatinggoods

43

Initiatingonline project

by oneself

19

Percentage of respondents, 2017

0

20

40

60

80%

Moretransparent

for the industry

64

Easilyaccessible for

individuals

57

Lower entrybarrier for

organizations

50

Percentage of respondents, 2017

“What is your preferred way to participate inphilanthropy?”

“What is the biggest benefit of digitalphilanthropy?”

Note: Survey conducted on People Think Tank’s WeChat accounts and website (n=11,484) Sources: “The Public’s View on Philanthropy in China,” People Think Tank, 2017; Bain analysis

Figure 13:.Donating.online.is.the.preferred.participation.method,.valued.for.its.transparency.and.convenience

0

1

2

3

4

2013

0.4

14

0.4

15

1.3

16

2.0

17

3.5

75%

119%

79%

36%

Online fundraising value (RMB billions)

Notes: No consolidated data before 2013; 2014–16 totals sourced from Online Fundraising in China: A Research Report on Third-party Platforms; 2017 total is thesum of each platform’s data; Tencent data includes individual donations, “steps walked” donations and corporate match donations on 99 Charity Day; Alibaba’sdata may be underestimated because Ant Financial does not disclose corporate donation data; due to limited data availability, 2013 includes Sina platform onlySources: Annual Report on China’s Philanthropy Development, 2017–18; Online Fundraising in China: A Research Report on Third-party Platforms, China Associationof Fundraising Professionals, 2014‒16; China Philanthropy Times; China Global Philanthropy Institute; Tencent and Qfund operational reports; Bain analysis

CAGR(13–16)

CAGR(16–17)

0.44 1.12 3.03 4.61 6.25

Driven by Tencentplatform’s strong

growth

Number of onlinedonations (billions)

Online fund-raisingas percentage of

total donations0.4% 0.4% 1.1% 1.4% 2.3%

Figure 12:.Online.fund-raising.value.and.participation.have.soared.over.the.past.five.years


18


2015

1,345

Increase incorporate giving

835

Increase inindividual giving

1,361

2017

Corporate

Individual

3,540

38% 62%38% 62%

Total online fund-raising and sources (RMB millions)

0

1,000

2,000

3,000

4,000

Contribution to2017 gain

Notes: Corporate giving includes match donations for Tencent’s 99 Charity Day and Tencent “steps walked” donations; online corporate donations for 2017 may beunderestimated because Ant Financial does not disclose corporate donation data Sources: Annual Report on China’s Philanthropy Development, 2017–18; Online Fundraising in China: A Research Report on Third-party Platforms,China Association of Fundraising Professionals, 2014‒16; Tencent and Qfund operational reports; Shanghai United Foundation; China Philanthropy Times; China Global Philanthropy Institute; Bain analysis

Figure 15:.Digital.has.activated.donations.from.individuals

Donation value by channel and source, 2017 (RMB billions)

Individuals

Online 5%–6%

44

Corporations

Offline ~99%

95

Other

Offline 100%

17

Offline ~94%

Online ~1%

Notes: Other includes government, foundations, social organizations, etc.; due to limited data availability, 2017 totals estimated using 2014‒16 CAGRs for individuals, corporations and other; online corporate donations may be underestimated because Ant Financial does not disclose corporate donation dataSources: Annual Report on China’s Philanthropy Development, 2017–18; China Philanthropy Times; China Global Philanthropy Institute; Shanghai United Foundation; Tencent and Qfund operational reports; expert interviews; Bain analysis

Total donation value=RMB 156B

Figure 14:.Online.fund-raising.has.plenty.of.room.to.grow.across.donor.categories


19


0

20

40

60

80

100%

Tencent

41%

59%

Taobao12%

88%

AntFinancial

16%

84%

Unitedfor

Charity

98%

Baidu

98%

Lianquan

99%

289 84 111 17 17 5

COPFQ penetration on online platforms, 2017

2% 2%

Number ofCOPFQs

on platform

0

20

40

60

80

100%

Tencent

~98%

Lianquan

~100%

Unitedfor Charity

~100%

8.22 0.40 0.12

NGO penetration on online platforms, 2017

2% 0.1% 0.03%

Numberof NGOs

on platform(thousands)

Already launched Not launched

Notes: COPFQs refers to charitable organizations with public fund-raising qualifications; NGOs refers to social service organizations (previously known as privatenonenterprise units); some individuals/organizations that are not registered as NGOs or foundations can still initiate projectsSources: Annual Report on China’s Philanthropy Development, 2018; Tencent, Taobao, Ant Financial, United for Charity, Baidu and Lianquan operational reports; Xinhuanet; Bain analysis

Total COPFQs: 697 Total NGOs: 422K

Figure 17:.NGOs.and.charities.with.public.fund-raising.qualifications.have.a.limited.presence.on.online.platforms

0

100

200

300

400

500

Average donation amount, 2017 (RMB)

China

0.4

China,excludingTaobao

China,excludingTaobao

8

Taobao

0.05

AntFinancial

AntFinancial

2

Tencent

26

Qfund

2248

362

442

Sina DonorsChoose

(USplatform)

Onlinecrowd-funding

(US)

0

2,000

4,000

6,000

8,000

China

6,250

270

Taobao

5,980

Top five platforms foronline donations

203

Tencent

63

Qfund

2

Sina

1

Number of online donations, 2017 (millions)

Notes: DonorsChoose selects and runs education fund-raising campaigns online; average donation amount for DonorsChoose reflects first-time donors onlySources: Annual Report on China’s Philanthropy Development, 2018; China Philanthropy Times; Nonprofitssource.com; DonorsChoose.org; Bain analysis

Figure 16:.Small.average.donation.amount.indicates.huge.potential.for.online.fund-raising.among.individuals


20


0

1,000

2,000

3,000

4,000

2013

367

14

436

15

1,345

16

1,978

17

Tencent

Alibaba

Other3,540

Online donation value by platform (RMB millions)

United forCharity

Qfund

Sina

LianquanGongyibao

186

XinhuaBaiduJD

ChinaFoundationCenter

Notes: 2014‒16 totals sourced from Online Fundraising in China: A Research Report on Third-party Platforms; 2017 total is the sum of each platform’s data; Alibaba dataincludes both Ant Financial and Taobao; Alibaba’s data may be underestimated because Ant Financial does not disclose “steps walked” donations; Tencent data includesindividual donations, “steps walked” donations and corporate match donations on 99 Charity Day; in 2013, Other includes Sina only, due to limited data availabilitySources: Annual Report on China’s Philanthropy Development, 2017–18; Online Fundraising in China: A Research Report on Third-party Platforms, China Association ofFundraising Professionals, 2014‒16; Tencent and Qfund operational reports; China Philanthropy Times; China Global Philanthropy Institute; Bain analysis

Figure 19:.Tencent.and.Alibaba.currently.dominate.among.online.fund-raising.platforms

0

20

40

60%

Post-'90s

19

Post-'80s

58 Among those under 30 years old:

Pay attention to philanthropy

Participate in charitable activities

35

Post-'70s

19

9

Other

58

1.0 2.4 4.3 1.8

Percentage of online donors by generation

48

Averagedonation size

(indexed)2013 2016

Note: Donation size indexed to the post-’90s periodSources: 2017 Youth Attitudes Toward Philanthropy Report, Ifeng; China Online Donation Report, 2013; Ant Financial; Bain analysis

63%

52%

Figure 18:.China’s.younger.generation.shows.a.strong.interest.in.philanthropy.


21


0

25

50

75

100

125

Toutiao

107 103

Kuaishou

9486

Pinduo-duo

54

41

Youku

40 39

JD

3730

Vip-shop

2619

Bilibili

17 16

Momo

16 15

Qutoutiao

13

Daily active users, Q2 2018 (millions)

TikTok

iQiyi ixigua Huoshan Meituan Kuwo NetEaseMusic

Didi

Sources: Jiguang; Bain analysis

Companies with online platform qualifications

Figure 21:.Other.Internet.players.can.harness.their.traffic.to.create.innovative.philanthropic.models

0

20

40

60

80

100%

Daily active users (millions)

Tencent (WeChat)

Alibaba (Taobao)

Alibaba (Ant Financial)

Sina (Weibo)

Baidu

1,155

Platform donation value (RMB millions)

Tencent (WeChat)

Alibaba (Taobao)

Alibaba (Ant Financial)

3,384

Online platform performance, 2017

Sina (Weibo)Baidu

Note: Daily active users refers to users of mobile appsSources: Jiguang; Tencent, Taobao, Ant Financial, Baidu and Sina operational reports; China Philanthropy Times; Bain analysis

Figure 20:.Tencent.and.Alibaba.outperform.other.platforms.by.better.leveraging.their.business.traffic


22


0

5

10

15

Distribution of funding across One Foundation projects on the Tencent platform,July 2018 (RMB millions)

178 One Foundation projects

In 2016, the top 20% ofprojects absorbed more than80% of total donation valuefor Tencent’s 99 Charity Day.

Tencent

More than 40% of projectshad few or no donations asof August 2017.

Taobao

The platform’s most popularproject (One Foundation’smonthly donation campaign)raised RMB 135 million andaccounted for about 16% oftotal donations as ofAugust 2017.

AntFinancial

Sources: China Development Brief; Tencent operational reports; expert interviews; Bain analysis

Figure 23:.Relatively.few.strong.projects.claim.an.outsize.share.of.online.donations

0

2,000

4,000

6,000

8,000

10,000

Number of fund-raising projects by initiator type, Tencent platform

Before 2012 12 13 14 15 16 17

COPFQs NGOs Individuals

Note: COPFQs refers to charitable organizations with public fund-raising qualificationsSources: Tencent reports; Bain analysis

Launch of 99Charity Day

Figure 22:.As.online.platforms.empower.NGOs.and.individuals,.public.foundations.are.no.longer.the.sole.major.player.


23


0

20

40

60

80%

Health

63

Poverty/disaster

relief

54

Most popularthemes online

46

Environ-mental

protection

3225

Other

9

Percentage of donors by topic, 2017

Edu-cation

Animalprotection

0

20

40

60

80

100%

Topics on Tencent platform, 2017

Donors are most interested in health, poverty/disaster relief and education

Online platforms focus on projects thatinspire public empathy or support government initiatives

Health

Education

Poverty/disaster reliefEnvironmental/animal protection

Other

Note: Health category does not include fund-raising requests initiated by friends and relativesSources: “The Public’s View on Philanthropy in China”, People Think Tank, 2017; Tencent reports; expert interviews; Bain analysis

Figure 25:.Health,.poverty.alleviation.and.education.are.the.most.popular.themes.of.online.projects

“The Long Tail” “The Survivor” “The Star” “The Influencer”

No cleardifferentiating points

Performance and key characteristics

Initiated/stronglypromoted byfoundations

One of the mostsuccessful projectson online platforms;strong reputationand media exposure

Highly empathy-provoking topic; widepublic awarenessthanks to strongplatform promotion

Relatively newHistorical track record Good track recordoffline

Award-winning orwidely reported

Award-winning orwidely reported

LimitedBranding and marketing capabilities

Dedicated team Dedicated team andPR professionals

Strong IT and onlinesupport fromplatforms

Very limitedResources(online/offline)

Strong source offunds

Strong source offunds; widecollaboration withmedia and onlineplayers

Strong source offunds; deepcollaboration withmedia and onlineplayers

Regular supportPlatformengagement/support

Regular support Positioned at keytraffic point for onlinecampaign

Full ownership; co-brandingcampaign

LowLevel of capability High

Source: Bain & Company

Figure 24:.Four.categories.of.online.fund-raising.projects.have.emerged

•. As.digital.reshapes.a.wide.range.of.industries,.China’s.philanthropy.sector.is.positioned.to.lead.the.world.in.innovation.given.its.unique.combi-nation.of.digitally.savvy.users.and.large.ecosys-tem.players ..

•. China’s.philanthropy.sector.can.harness.digital.to.accelerate.the.development.of.its.overall.culture ..To.do.so,.stakeholders.will.need.to.clearly.define.their.objectives.and.develop.corresponding.strategies ..

•. Digital.philanthropy.in.China.is.still.in.its.infancy,.and.there.will.be.no.single.path.to.success.in.the.market ..As.stakeholders.assess.the.opportunity,.it.is.important.for.them.to.ask.several.key.questions,.with.a.focus.on.how.they.will.engage.customers,.manage.operations,.leverage.data.and.analytics,.and.grow.their.internal.talent.pool ..

•. Even.for.the.most.mature.organizations,.these.are.not.easy.tasks,.and.they.can.be.even.more.challenging.for.nonprofits ..Finding.partners.to.supplement.capability.gaps.will.be.an.important.part.of.any.winning.strategy ..

3.Digital fund-raising: Vision and implications


26


Current stage

Infrastructure (policy/technology advancement)

How digitalenables ...

Sources of funds

Fund-raising

Fund utilization

• Provides touchpoints to increase awareness and drive individual participation• Incentivizes corporations to utilize and enhance digital marketing capability in philanthropy activities

• Creates a new fund-raising channel with better transparency and diverse donation topics• Activates COPFQs with more sources of funds and enhanced marketing and operations capabilities

• Enables project initiators to better design, operate and market their projects• Provides additional sources of funds with higher transparency requirements

Note: COPFQs refers to charitable organizations with public fund-raising qualifications Source: Bain & Company

Stage 1:Engaging mass participation

Stage 2:Increasing frequencyand depth of engagement

Stage 3:Integrating philanthropyinto people’s everyday lives

Figure 27:.China’s.philanthropy.sector.can.leverage.digital.to.increase.its.impact.and.cultivate.a.donation.culture

Sciences Tech Healthcareand

pharmaceuticals

Publicsector

RetailFinancialservices

Industrialgoods

Consumerproducts

Energy

Professionalservices

Entertainmentand media

Telecom

Travel

Beginning to accelerate Changing fast Almost there• Digital impact primarily in operations and cost reduction

• Limited digital disruption in the industry

• Digital-enabled customer experience increasingly important

• Increasing personalization for customers using advanced data analytics

• Advanced technologies and data analytics constantly deployed to find competitive advantage

Note: Industry placement based on prevalence of data management platforms, use of predictive modeling, and adoption of multivariate and A/B testingin marketing campaignsSource: Bain Worldwide Marketing Leaders and Laggards Survey (n=487)

Figure 26:.Industries.further.along.the.digitalization.curve.can.shed.light.on.China’s.digital..philanthropy.journey


27



Bain Radar 360 helps an organization define itsdigital transformation journey

Philanthropy stakeholders can focus onrelevant elements to guide their efforts

Wave 1

Wave 2

Wave 3

Products and services

Operations

Economicmodel

Data andanalytics

Systems and technology

Talentand culture

Operating modeland partnerships

Digitaldeparture

Customerand channel engagement

Planning and continuous oversight

of the process to ensure results

Orchestration

Key activitiesEnablers

Stages of evolution Customer and channel engagementHow do we leverage digital infrastructure to maximize donorengagement?

Products and servicesWhat donation options and donor services can we develop fordigital platforms?

OperationsHow do we improve our internal operations by leveraging newdigital tools and capabilities?

Data and analyticsWhat analytics can help us measure and track key activities,and how can we apply digital tools to manage them?

Operating model and partnershipsHow do we tailor our operating model to cater to digital needs?Do we need ecosystem partners?

Talent and cultureDo we have the right talent/culture to make our digital planwork? If not, how can we practically close the gaps?

Figure 29:.Asking.a.set.of.key.questions.can.help.stakeholders.focus.their.efforts.and.develop..digital.strategies

Sources of funds Fund-raising Fund utilization

Corporations

Digitalphilanthropy

objectives

COPFQs Online platforms Foundations/NGOs

Digital enablers

• Create a positive and targeted impact on society• Build a trusted brand and broaden scope of influence

Strategiesrequired

for success

Seek more touchpointswith consumers andgain public attention

Generate sustainableand balanced sourcesof funds

Create traffic/pull;generate participationand diverse sourcesof funds

Develop a clear and unique value proposition Focus on key areas to improve with digital levers

Increase publicawareness; generatebalanced sourcesof funds

Note: COPFQs refers to charitable organizations with public fund-raising qualifications Source: Bain & Company

Figure 28:.Philanthropy.stakeholders.need.to.define.clear.digital.objectives.and.develop..corresponding.strategies


28



Customer andchannelengagement

Products andservices

Operations

Data andanalytics

Operatingmodel andpartnerships

Talent andculture

How do we leverage digital infrastructure to maximize donor engagement?

What donation options and donorservices can we develop for digitalplatforms?

How do we improve our internaloperations by leveraging new digitaltools and capabilities?

What analytics can help us measureand track key activities, and how canwe apply digital tools to manage them?

How do we tailor our operating modelto cater to digital needs? Do we needecosystem partners?

Do we have the right talent and cultureto make our digital plan work? If not,how can we close the gaps?

Invest in a trusted brand with strong traffic baseCreate engaging digital marketing/storytelling campaigns Embed best-in-class customer relationship management processes

Integrate philanthropy with core business strategiesSource and manage high-quality projects within focus areaDevelop innovative models (e.g., gamification) and sustainable project design

Embed operational efficiency best practices, enabled by digital Standardize reporting and increase information disclosure

Leverage digital tools to conduct data analysis

Establish a digital-ready operating model Develop ability to partner with the right ecosystem stakeholders

Acquire and cultivate digital talent with a clear career story

Capabilities to developKey questionsObjectives

Figure 30:.To.pursue.their.digital.philanthropy.objectives,.stakeholders.should.identify.critical.areas.for.development


29



30


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