But after seeing The Daily Beast’s take on impact measurement called “Celebrity Impact Rankings“, I have questions.

On the face of it, I should like this article.  It’s a quantitative analysis that measures in real dollars the social return on investment for 50 charitable causes.

But the investment is the appointment of a celebrity spokesperson, and the return is the raised awareness that spokesperson brings to the charity.

How is ‘raised awareness‘ quantified?  Arguably, it isn’t.  What is calculated is the number of times the celebrity and charity get mentioned together, and a dollar value for each mention.

The results of the (self-proclaimed) “most exhaustive study ever on the effects of celebrity on charities” offered few surprises:

Justin Timberlake (for Shriners Hospital) and Madonna (for Raising Malawi) offered exceptional returns; while those of Paris Hilton (for Sarlight Foundation) and Hillary Duff (for Kids with a Cause) were just sad.

socialmarkets aspires to be open to all SROI comers, so my problem isn’t with a celebrity having impact - it’s with her weight.

Crowdsourcing is nothing if not inclusive, so Mr. Timberlake is entitled to his voice in impact measurement.  However, the $9.3 million payout attached to his single voice warps the very fabric of crowdsourcing’s space-time.

I think the bigger problem with this ’study’ is that it measures nothing BUT money (actually I don’t buy the $$-per-article model of the study, so I’m not sure it even measures that, but for the sake of argument…)

Even in a multiple-bottom-line world, money is almost always worthy of measurement.  But aside from the balance sheet entry, what is the real impact of a charity’s $9 million windfall, if there is no info on what that charity will accomplish with it?

I feel confident that I can distinguish between good and bad impact analysis, in the form of strategy or tactics… but I wonder if the same is true for the innumerable other visitors to The Daily Beast’s (usually) smart, entertaining site?

I always knew that measuring impact was hard… apparently defining it can be too.

socialmarkets itself does not have nearly the scope of charities to make recommendations, but we can direct you to some of the best information and insight about supporting Haiti (including charity recommendations) that we’ve seen so far:

Givewell: http://www.givewell.net/haiti

Charity Navigator:  http://www.charitynavigator.org/index.cfm?bay=content.view&cpid=1004

Philanthropy2173: http://philanthropy.blogspot.com/2010/01/disaster-donations-in-age-of-disruption.html

The scope of the catastrophe seems to grow with every news cycle, so give what you can: money, attention, prayers - it’s all good…

There were about 40-50 participants, hosted by my friend Deborah Elizabeth Finn (aka The CyberYenta, for her uncanny knack for nonprofit professional match-making )

Offcially, the conference took place in Boston, but its locale was hard to pin down since most participants (including myself, and even some presenters) were attending remotely.

There were a few things about this hybrid physical-web attendance I found interesting, but before going into the conference format, a quick summary of content: three organizations presenting innovative web-based resources for the nonprofit community and its supporters:

1. Social Actions: gathers and disseminates an open database of actions that anyone, anywhere, can take right now to make a difference [ link:http://socialactions.com/ ]
2. NPO Connect:  facilitates skill transfer between professionals in the non-profit sector by allowing professionals to connect with one another through a web-based platform [ link: http://mnn.npoconnect.org/ ]
3. Massachusetts Nonprofit Database:  Compiles a multi-dimensional database of nonprofits in Massachusetts, which can serve as a model for other states [ link: http://massnonprofits.clinc.us/Default.aspx ]

Attending via the web is definitely not the same as being there, but it’s not quite as simple as saying it’s the next best thing.

Advantages included live simultanous chat, real-time surfing to related sites, and the myriad conveniences afforded by being in your own office or home - including the option of not wearing pants (for the record, I did.)  There were some technical hiccups, but once underway it was a pretty seamless experience, and I was glad I was “there”.

I’m always intrigued by the economics of things, so my final thought is on the total costs of provding both audio and video access: zero.

In this case, the conference call audio was hosted by FreeConferenceCall [link: http://www.freeconferencecall.com ] and video by dimdim [link: http://www.dimdim.com/ ] - two of many free remote meeting services.

I don’t know if the business model of these “free” hosting services is good, ethical, or most importantly, sustainable (see Free Conference Call’s explanation/defense here: http://www.freeconference.com/blockingfaq_press.aspx ) - but I do know that it’s a useful tool for a sector that can use all the free help it can get.

When pondering these conferences’ ROI - social or otherwise - an I at or near zero makes for some impressive Rs.

This is a beta release, covering much but not nearly all the functionality we want to build into the site.

As always, our focus is on SROI (Social Return on Investment) but in this release, we are particularly focused on how crowdsourcing figures in to the calculation of SROI.

We are capturing our user’s opinions on which social projects deliver the greatest social returns.  The more user input we get, the better our result will be - so please visit us and add yours!

Here are the highlights of what you can do on the beta site:

• Find links to some basic research on SROI
• Find out about some nonprofits, including the outcomes used to measure their success
• Use our Rate-O-Matic to rate how valuable you think nonprofit outcomes are
• See how other users have rated nonprofit outcomes
• Vote up or down the SROI of individual nonprofits
• Donate to nonprofit projects you want to support
• See how your nonprofit “investment portfolio” compares to those on our Leaderboard

We are allowing access to the site in stages.  Anyone can tour the site, but an invite code is required for full access.  Here on the blog we are announcing the first public invite code: BLOG.

Please visit us at http://beta.socialmarkets.org and use the code BLOG to register.

We would be grateful for any input you have, from your opinion on social outcomes, to the value of our approach and its execution on the site.

There is a short survey at http://bit.ly/7wvBE, and you can always send us a note at info@socialmarkets.org.

We hope to hear from you!

performance measurement: evaluating non-profit effectiveness by measuring their outcomes.

outcomes taxonomy: creating a master list of non-profit outcomes to be used as a sector-wide standard for comparison.

social capital: broadening the definition of capital to capture environmental and other social values.

socialmarkets depends on all these trends, and also pushes them a little further into unknown territory.  This is especially true for the social capital model, like when we mix up ‘regular’ dollars (e.g. a donation to a charity) and social dollars (e.g. the SROI a donation produces).

The name socialmarkets itself goes a long way towards explaining what we do: applying the market model to the social sector.  We believe there are potential benefits to applying economic market principles to the non-profit sector, which is after all, itself an economy.

We do not believe that markets and non-profits are a match made in heaven, and our goal is not to force one onto the other.  Rather, our goal is to explore the boundaries of where the market and social sectors can come together constructively, and where they can’t.

This exploration includes stretching some of the classical market vocabulary.  Take ‘currency‘, for example.  Currency is the very foundation of modern economies, offering a neat method of assigning value to things, and of facilitating their exchange.  Dollars, euros, rubles and the like comprise the hard currencies that make traditional economies go around.

socialmarkets suggests an economy based on the soft currency of SROI (Social Return on Investment.)  Social currency is no good for shopping at the mall, but is excellent for capturing and communicating the social value of non-profit work.

Currency actually flows quite naturally in socialmarkets, but price does not - even though the two terms seem closely related.  We capture the value that non-profits add to society, in the form of social currency - which is not quite the same as coming up with a price.  This distinction illustrates how social markets don’t always mesh neatly with traditional ones.

Traditional economic markets depend on a neat line between profit-maximizing producers and penny-pinching consumers, to guide the market’s invisible hand towards a compromise called ‘price’.

Social markets are more complicated.  The line between the producers and consumers of social capital are fuzzy, and the currency that flows between them is more nuanced than plain dollars.

We are so used to traditional ‘prices’ that we forget how fickle they actually are.  From real estate on a global scale, to a cup of coffee on our own corner, prices often move along surprising trajectories.  There is an entire field of economics devoted to studying (and ironically, rationalizing) the irrational behaviour of prices.

This helps remind us that the price of any thing is just a snapshot of how people value that thing… which suggests a useful definition for social return of any given outcome: a snapshot of how valuable people believe the outcome to be.

When we have more experience with social markets we should be able to make better sense of how price - and other economic jargon - translates into the social economy.  For starters, we can recognize that the boundaries between social and economic currency aren’t all that well-defined in the first place.

Impact metrics like SROI (Social Return on Investment) are easier to manage with impacts that are easily quantified.  Outputs are more likely than outcomes to be expressed in neat countable units, which makes them an appealing starting point for calculating SROI.

Consider the large and growing number of environmental groups focusing on climate change.  Their energy conservation efforts can legitimately claim “a healthy and sustainable planet” as an outcome.  Such an outcome is clearly and immensely valuable, but challenging to nail down to a dollar figure.

Now consider a short-term output of those same conservation efforts: reduced CO₂ (carbon dioxide) emissions.  This is an easy result to quantify.  Even better for socialmarkets, it’s easy to monetize: financial markets have been pricing CO₂ for years now.

According to the ECX exchange, CO₂ is currently trading at roughly €14 per metric ton.  An output that saves 100 metric tons of CO₂ emissions has a related market value of around €1400, which is a good starting point for calculating SROI.

I say starting point, because the SROI of a project is rarely is simple as the market value of one particular output.  There can be many outputs, with many related outcomes.  In any case, there are questions to complicate even the simplest of impact metrics:

• How do we allocate the SROI of one outcome across many contributing agencies?
• Should we discount the SROI of an outcome over the time it takes to produce it?
• How does SROI account for the risk associated with a project falling short of its stated goals?
• Is the impact of not producing a negative output, e.g. a ton of CO₂, the same as producing a positive output, e.g. a gallon of fresh water?

We are a long way from having good answers to these questions, but countable outputs (like tons of CO₂) is one promising shortcut.  Here are some other volume-based outputs we find intriguing, especially if we can find a reasonable estimate of the corresponding social benefit per unit:

• Number of nutritious meals served at a soup kitchen
• Number of students obtaining a higher level of education
• Increase in fish population from a river clean-up

Because the fungibility of such data is good for SROI calculations, we are including projects with outputs like this in the set of listings for our beta release.  They should make an interesting testbed for examining if and how easily quantified outputs translate into better calculations of SROI.

The database of such values is large and growing, and we are grateful for it.  Every study that contributes data on the social return of a meal served to the hungry, on medical treatment to the uninsured, etc. helps us more accurately produce SROIs to associate with the related project listings on our site.

But the database of outcomes and their social values is not nearly comprehensive.  This would prevent us from compiling SROIs for many non-profits, if we didn’t have the help of our crowdsourcing mechanism.

One of the most important functions of socialmarkets is capturing our users’ opinions on which outcomes they value most.  For better or worse, opinions are never in short supply, so our own database of user input can cover the entire non-profit space.

Ideally we would have both subjective and objective data available for the SROI calculation of a given project, but we know this won’t always be the case.  In any case, the amount of available data is significant.  Like in any market, size matters in socialmarkets.  The more players in the market, the more likely we can mitigate gaming, bias and other distortions that prey upon markets with few participants.

The wisdom of crowds presents another argument for more crowdsourcing data. Consider a classic guessing game, like when a random crowd is asked to guess the number of jelly beans in a jar, or the weight of a prize bull.  It turns out that while the average guess is off by a wide margin, the average of all guesses becomes more accurate as the number of guesses grows.  The bigger the crowd, the wiser they seem to be.   This is a fascinating emergent property of society, and it certainly applies to socialmarkets - at least to the extent we can reconcile votes on social priorities with guesses at bean counts.

The bottom line is that socialmarkets runs on social metrics, and is both producer and consumer of the data it needs.  Using the data generated by our own users, and by others doing related social science, we are piecing together a truer picture of the costs and benefits of social projects.  Ultimately, this will enable us to see how our social investments can generate the greatest social returns.

We can think of lots of reasons (of course!) but have narrowed the field down to this top 5 - hopefully one or more of them speaks to you:

1.  Because socialmarkets is a better way to give… and receive.
One of the foundations of socialmarkets is the belief that more informed investors make better investment decisions.   When it comes to donations, socialmarkets offers information about your options that you will not find anywhere else.  Our input on where you can get the most “bang for your buck” can help you realize the greatest possible social impact.

socialmarkets works on the other side of the donation transaction too: at non-profits.  For starters, our social returns (SROIs) and user inputs offer potentially useful insights to non-profit managers too.  In addition, we help level the playing field, because visibility on our site is the reward for good social returns - irrespective of an organization’s size or marketing budget.

2.  Because socialmarkets is an interesting experiment.
socialmarkets is venturing into new territory in the field of charitable giving.  We are bringing social capital, outcomes measurement and crowd-sourcing together on the virtually limitless scale of the internet.  We believe the results will be exciting.

Our users are an integral part of the experiment.  Aside from being a source of donation dollars, our users are a critical source of data in the valuation of our project listings.  User input on the outcomes they feel are most important directly affects our SROIs.  The more user input we have, the more credible our SROIs become, as a reflection of the true social value of non-profit work.

3. Because socialmarkets is a critical piece of the social capital  model.

Social capital is not just different than ‘regular’ (financial) capital - it’s better.  It includes finance, but also the other dimensions of life that have value.  Good health, clean air, personal happiness… there is a long list of things in our lives that bring us more wealth than any bank balance can.

socialmarkets is a critical piece of this model.  By focusing on the value of non-profit work, socialmarkets promotes the social sector, and raises the visibility of the formerly fuzzy social capital it creates.  Ultimately, we can help bridge the gap between rich and poor, by any metric of wealth.

4.   Because socialmarkets is fun.
Social investment is serious business, but that doesn’t mean it can’t also be fun.  Our rate-o-matic was designed to be an instructive and entertaining way to gather your input on social values.  We encourage our users to engage with us and each other, on socialmarkets and on social networks like Facebook.

We also encourage our users to track their own portfolios of social returns (SROIs), and to get into the spirit of competition that lands the top social investors on our leaderboard.

5.  Because socialmarkets doesn’t cost you anything.
Finally, you can enjoy all these benefits without cost.  We don’t charge donors or non-profits to participate on our site.  We certainly welcome your financial support, either by funding our own socialmarkets listing, or by an optional commission when you fund others.  However, socialmarkets’ funding model is built on the honor system.  We are counting on enough users seeing enough value in what we do, to offer enough voluntary support to keep us going.  In this way, we are being the trust and transparency we want to see.

SROI is our end-game, but before we can start talking about a donation’s social return, we have to talk about how it first flows to a non-profit from our site.  Most significantly, we have to decide if donated dollars show up as restricted or unrestricted grants.

Restricted grants are pretty much what they sound like: money that can only be used to pay for a specific project (e.g. an after-school program) or purpose (e.g. office supplies).  Restricted grants require more  administrative overhead for the non-profit, but donors are free to ask for them, and non-profits are free to turn them down.

There are many arguments for and against using restricted donations (see a good sample at this discussion at Tactical Philanthropy.)  We may eventually offer the option of restricting donations, if for no other reason than that our donor community wants us to.  However, at the time of this writing, socialmarkets sends donations without formal restrictions.  When a user funds a listing, the funds sent to the associated non-profit are earmarked - but not officially restricted - to the associated project.

To some extent, this is a matter of trust.  We generally believe that commitment to mission, rather than additional accounting hurdles, is what keeps non-profits spending the way we expect them to.

To some extent, this is also a matter of scope.  socialmarkets’ focus is more on outcomes than the projects that produce them.  From our perspective, projects are just proxies for the set of outcomes they produce, so we don’t feel strongly about managing their administration.

The final - and arguably most compelling - justification for not restricting funds is also the most practical: restricted grants don’t really work.  Dennis R. Young, in his book Financing Nonprofits sums up the problem like this:

“as long as a recipient was already spending at least as much of its own resources on the designated activity as the amount of the grant, it can effectively convert what appears to be a restricted grant into an unrestricted cash equivalent.”

Consider a $1000 grant restricted to the purchase of office supplies, given to a non-profit with a $5000 office supplies budget.  The non-profit will spend the same $5000 on supplies it was always planning to, now using the $1000 restricted grant and only $4000 of the money already budgeted.  The extra $1000 is free for them to use without restriction.

I should note that this argument takes restricted grants at face value.  It does not consider their less obvious but no less significant function: they make donors happy.  Some donors may enjoy asserting additional control over their donations through their restriction, irrespective of whether that control is real or imagined.

socialmarkets takes such intangible benefits seriously.  We value SROI precisely because it incorporates both tangible and intangible factors.  In much the same way, we may turn to our users rather than our research to decide the issue of restricted grantmaking.

FAQs are an essential part of good site design. If done well, they are a great time-saver for site users and site managers alike.

Because we are committed to transparency, socialmarket’s FAQs are particularly important. We want to be forthcoming about the issues we deal with, and to resist the temptation to sweep the thornier ones under the rug. Instead, we are including them in the FAQs, where they can be seen, discussed, and perhaps even de-thorned.

But FAQs are also, ideally, succinct. When answers outgrow their limited FAQ real estate, we will pick up the discussion thread here on the blog, where the real estate is virtually unlimited.

The next few blog posts will be exactly that: a closer look at the FAQs we thought could use more explanation space than we provided on the FAQ page itself.