Andrew Blau: How Info Tech Will Change the Way Nonprofits and Foundations Work

September 28, 2001
Andrew Blau: How Info Tech Will Change the Way Nonprofits and Foundations Work

Like millions of people around the country and the globe, the staff of Philanthropy News Digest was both drawn to and horrified by the stream of images and nonstop news coverage emanating from lower Manhattan and Washington, D.C., on September 11. The tragic events of that day underscored, as few things in our recent history have, the central role played by information technology in American society and culture. From the cellphone calls made by doomed passengers on hijacked planes to the disruption of voice, data, and electronic trading networks, information technology was both player in and witness to the unfolding disaster.

In August, PND sat down with Andrew Blau, author of More Than Bit Players: How Information Technology Will Change the Ways Nonprofits and Foundations Work and Thrive in the Information Age (54 pages, PDF), to discuss the challenges confronting the nonprofit sector as the tide of technological change rolls on. What Blau had to say then — about network effects, capacity building, online privacy concerns, and the preservation of diverse viewpoints in a broadband world — strikes us as even more relevant today to the concerns of nonprofit leaders and practitioners than it did prior to the terrible events of September 11.

Andrew Blau is a program designer and strategist who works with foundations and other organizations engaged in developing programs at the intersection of technology and society. Building on fifteen years as an analyst focused on the social and policy impacts of the Internet, telecommunications networks, and digital media, Blau launched Flanerie Works to help foundations assess these technologies and their effects on public interest values.

Previously, Blau was Program Director at the Markle Foundation and directed the Benton Foundation's program in Communications Policy and Practice. At the request of the Clinton administration, he was the principal organizer of the first meeting to bring together nonprofit and foundation leaders with White House officials to discuss new communications technologies and the public interest. He has testified before Congress about the role of nonprofits in the information age, participated in scores of regulatory proceedings before federal and state regulatory agencies, and published and lectured internationally on developments in U.S. telecommunications policy.

In 1998, the National Research Council appointed him to its committee on "The Internet and the Evolving Information Infrastructure." That committee's report, "The Internet's Coming of Age," was published in October 2000. Blau is also a member of the Program Committee for the 2001 Telecommunications Policy Research Conference, the nation's foremost interdisciplinary gathering focused on telecommunications and Internet policy, and chairs the President's Task Force on Digital Inclusion for the American Library Association. He has been an advisor on technology projects to many organizations, including the U.S. Department of Health and Human Services, the Center for Children and Technology, the National Endowment for the Humanities, the City of Seattle, the City of New York, Independent Sector, and the Microsoft Corporation.

Philanthropy News Digest: Good morning, Andrew. Thanks for stopping by.

Andrew Blau: My pleasure.

PND: Your paper, More Than Bit Players: How Information Will Change the Ways Nonprofits and Foundations Work and Thrive in the Information Age, has received a lot of attention since it was published in the spring. How did you come to write it?

AB: Vince Stehle at the Surdna Foundation invited me to write a report for Surdna about technology in the nonprofit sector. Surdna, like many foundations, has received a lot of proposals from nonprofits seeking financial assistance to become more technologically adept. At the beginning of our conversations, we were talking about how Surdna could evaluate technology-related proposals effectively — that's certainly a question a lot of foundations are asking. As the conversation with Vince developed, however, we agreed that it would be more interesting to ask not just how we help individual nonprofits get technology and use it effectively, but to go the next step and ask what happens when the nonprofit sector does get technology and begins using it effectively.

PND: The paper is based on a couple of premises. One, that there's a digital divide in the nonprofit world. Can you describe that divide?

AB: The digital divide — that is to say, the gap between those who have access to technology and can use it well and those who don't — is an issue throughout society today, especially in areas where you have adoption of fast-moving technology, either by certain sectors of the population or certain sectors of the economy. And in the nonprofit sector, there are at least two digital divides worth talking about.

One is the divide between the nonprofit sector and the for-profit sector. In other words, in an increasingly information-based environment can nonprofits — which often have fewer resources than for-profits — get technology and use it to provide services with greater efficiency and measure their performance more effectively?

And then there's a second digital divide within the sector. There are nonprofits who are going to — or have already — made effective use of technology to provide back-office administrative efficiencies, to expand their marketing and outreach efforts, or to provide new services online in compelling ways. And as that subsector of the nonprofit world grows, a new digital divide is opening up between effective users of technology in the sector and those who, for reasons of money or history or their own organizational culture, are slower to adopt those technologies. The report is primarily concerned about this second divide.

PND: In the paper, you suggest that one of the implications for the sector is that, when it comes to information technology, size is important. What do you mean?

AB: Well, first, let me say that this is true but not in the way that people often think — it's relative size, not absolute size that we should be looking at. So the question isn't, "How big do we need to be?" But rather, "How big compared to others trying to do the same thing do we need to be?"

One of the interesting characteristics of Web-based markets, both commercial and noncommercial, is that they tend to operate with what economists call "network effects." In other words, in choosing a network to become a part of, people tend to go where other people are. Some people refer to this as Metcalf's Law, which was first articulated by Bob Metcalf, one of the creators of the Ethernet protocol. Metcalf argued that the value of a network increases in direct proportion to the number of people connected to that network. For example, a fax machine by itself is essentially worthless. Connect it to another fax machine, however, and you've created some value. Add a third machine to the network and you double the value of the network. Add a fourth and you double it again. And so on.

"...in a networked world, you end up with a self-reinforcing dynamic in which the big guys keep on getting bigger...."

The point is, once you've got a critical mass of people connected to a network, it creates an incentive for new folks who are looking to join or connect to a network to join the one that's already the largest. And eventually, in a networked world, you end up with a self-reinforcing dynamic in which the big guys keep on getting bigger.

This matters for a variety of reasons, but especially because in the commercial world, at any rate, it creates a set of conditions in which a handful of players in any given sector — whether it's Amazon or eBay or Yahoo! — get really large, making it hard for others to compete. Take eBay. If you have something to sell, you want to be where the most buyers are. And if you have something to buy, you want to be where the most sellers are. The result is that each new person who decides to go with eBay as the place where he or she wants to buy or sell makes it that much harder for everyone else who wants to provide an online auction service to compete.

So size is important when it comes to attracting new members to a network. Size is important when it comes to achieving visibility. And size also is important in terms of efficiency — and I'm not just talking about relative size here. One of the trends I was looking at — although it doesn't really appear in the final report — is that information technology enables those who adopt it well to achieve additional internal efficiencies — to lower costs while effectively serving constituents, for example. And one of the implications of that trend is that large organizations which make effective investments in technology find that their costs of doing business are actually lower in many cases.

This, too, becomes self-reinforcing. Because as these organizations grow larger, their marginal costs become lower than their competitors', and as they continue to grow and are able to amortize their costs over an ever-growing number of users, their advantage becomes hard to overcome.

PND: Let's back up a second. What are we talking about when we talk about markets in the nonprofit sector? What is a nonprofit market?

AB: In the nonprofit sector, there are organizations with goods or services they want to provide and there are people who want or need those services. A nonprofit marketplace is the setting in which people with something to provide and people who want or need the thing that is being provided find each other and make that exchange.

In the nonprofit sector people don't often think of themselves as engaging in marketplace transactions. One of the things that is important in understanding the implications of information technology, however, is understanding how noncommercial organizations operate in a distinct kind of marketplace that brings together people who have a service, people who want or need that service, and people who pay to support that exchange. And one of the distinctive characteristics of a noncommercial marketplace is that, often, the person who wants the service and the person who pays for it are different people.

Another characteristic of nonprofit organizations — one that's often overlooked in some of these conversations about information technology — is that they actually operate in two different marketplaces. Nonprofit organizations think of themselves as belonging mostly to this noncommercial sector, where there are clients for their services and they provide a service. But a substantial part of their work also goes on in the commercial marketplace. By that I mean nonprofit organizations buying goods and services, supplies, and so on. It may not be a very sexy part of their business, but it's one that needs to be taken into account.

One of the questions that gets glossed over in many conversations about information technology and nonprofits is: Are there ways in which these technologies could be used to streamline nonprofit organizations' operations so that, like a lot of small and medium-sized businesses, they could lower their administrative costs and realize other efficiencies that, increasingly, are important to the effective management of any organization?

PND: Given some of the differences between the two sectors, does it make sense to extrapolate lessons from the for-profit sector to the nonprofit sector?

"...One of the challenges for nonprofit organizations is to figure out how to draw successful analogies from the commercial sector...."

AB: Absolutely, but we have to keep the analogy straight. By that I mean we can only draw meaningful lessons if we are careful about which role the nonprofit is playing — producer or consumer — and equally careful about the fact that the people paying for the service to be provided may not be the ones who get the service. Just speaking pragmatically, the for-profit sector has spent billions of dollars at this point trying to figure out how to successfully operate in a marketplace transformed by information technology. The nonprofit sector simply doesn't have the resources to make the same experiments. And while the stock of many dot-coms may be close to worthless at this point, their experience is still very valuable. So, one of the challenges for nonprofit organizations is to figure out how to draw successful analogies from the commercial sector and adopt those lessons to their own work.

PND: In your paper, you write: "Information is the lifeblood of nonprofit work." Can you give us a few examples that illustrate that point?

AB: There are six hundred thousand nonprofit organizations — not including churches — and a huge variety among those six hundred thousand. But if you look under the surface, most nonprofits are, at each step of their work, creating information in equal proportion to any other service they're providing.

Take some of the very large voluntary health organizations — the American Heart Association, the American Lung Association, major nonprofits whose names are known to millions of Americans. What is it that they're providing? They're really information-based organizations. They collect, organize, and disseminate information as their primary way of providing service to millions of Americans.

Advocacy organizations are another example. Advocacy organizations collect information, organize it, use it to build constituencies and to address public policy issues. Educational organizations within the nonprofit sector are clearly dependent on their ability to collect, manage, and distribute information, either to the public at large or to their clients, that is, their students.

PND: And for a nonprofit that delivers a direct service to a specific population?

AB: When we look at the ways in which community-based, social service, or health organizations operate, clearly their most visible product is whatever service they provide locally. However, their ability to provide that service depends in no small part on their ability to collect and organize information effectively. Fundraising is an information-based activity. The ability to track clients is an information-based activity. The ability to link services with other human and social service providers is an information-based activity. An organization's ability to report publicly on its work is an information-based activity. The ability to track the effectiveness of its work depends on its ability to translate the direct service it's providing into a database of information. Everything about an organization's ability to provide a tangible service to a needy population is based on its ability to gather, manage, and disseminate information.

And those are activities where computers attached to networks can make them more efficient and effective. So even organizations that do not think of themselves as information-based organizations are dependent, to varying degrees, on the successful utilization of information and information technology.

PND: In your report you suggest that the process of creating a Web site and increasing traffic to that site will end up giving larger nonprofits an edge in fundraising and membership development. As a result, you suggest that e-philanthropy could very well do to nonprofits what Wal-Mart has done to local retail. But we haven't seen that happen. What is e-philanthropy, and why is it struggling to gain traction?

AB: E-philanthropy is an umbrella term for a variety of efforts to move a key component of the nonprofit marketplace online. It's the marketplace where people with something to offer nonprofits find nonprofits who would like to take advantage of whatever it is those people have to offer, whether it's money, time, or goods. And it's the place where nonprofits can, at least in theory, increase their visibility to prospective donors.

If we go back just two or three years, the idea behind e-philanthropy seemed clear enough. The Internet is a marvelous tool for various kinds of matching services — whether it's eBay matching buyers and sellers in an auction environment, or VolunteerMatch matching volunteers to organizations that need those volunteers. E-philanthropy was born from the insight that you have a large marketplace involving donors and nonprofits and it's not very transparent.

Let's stick with the example of volunteering. One can imagine someone saying, "Well, I feel it's important to volunteer in my community. I'm interested in helping feed the hungry. I have this amount of time and this is my schedule, but I have no idea where to start." E-philanthropy allows you to use the Internet to find the opportunities that meet your criteria.

So why hasn't it taken off? Well, first, the question needs to be narrowed a bit. VolunteerMatch is part of e-philanthropy, and it's a resounding success, so I wouldn't say that all e-philanthropy is struggling.

That said, the charity donation sites seem to have gained very little traction, and I can't say anyone knows definitively why they're not working. One reason, I suspect, has to do with the ways in which the philanthropic experience is different from the consumer experience. People give — whether it's their time or their money or their goods — to nonprofits for a variety of reasons that may have less to do with consumer satisfaction and efficiency and more to do with a variety of historical commitments and emotional attachments to certain kinds of organizations.

It's also the case, however, that in some situations people in the e-philanthropy space created their services around a set of premises about user behavior that turned out not to be accurate. For example, that people would go online thinking, "I have two hundred and fifty dollars that I'd like to give to charity this year. Where should I give it?"

One of the things I address in the report is the idea that the technology projects that are successful are the ones that don't simply answer the question, "Could I do this online?" Successful technology projects are the ones that solve a problem that people really have, that allow people to do something they're either already doing and would like to do faster or more cheaply, or that provide people with a new set of tools to do something they couldn't do before.

One of the challenges for e-philanthropy going forward will be to create sites that provide a service that people really want. Are e-philanthropy sites solving a problem that people think they have? Are they providing a new set of services that no one could access before? Those are key questions.

And one of the possibilities in this second area is to make it possible for people who want to give money to do so in ways that make them feel their donations are being used more effectively. My belief that e-philanthropy will be, on the one hand, a positive force and, on the other, a highly disruptive force, derives from this possibility. Once people can do side-by-side comparisons — when they can start to see that, say, two organizations are providing hunger relief in their community but one seems to have much lower administrative costs — that not only will provide greater incentives for increased efficiency throughout the sector, it's also possible that it will provide a set of incentives for potential donors to gravitate toward a small number of very successful projects.

As a result, I think one key ethical challenge will be to make sure that the metrics that e-philanthropy sites use to rate support-seeking organizations are ones that really measure how the service benefits the target population that receives it.

PND: Let's stay with this topic for a second. Many critics of the first generation of e-philanthropy sites — in particular those sites that were designed to match donors with organizations — have suggested that the entrepreneurs and venture capitalists behind those sites overlooked the most important aspect of philanthropy, namely, that it's driven by personal relationships rather than gross margins or return on investment. Is that a fair criticism?

AB: Let's look at where e-philanthropy is working. Based on reports I've seen, the places that are having the greatest success with online giving are not the soup-to-nuts portal sites, they're the individual high-profile nonprofit Web sites that allow people to make donations right on the site. What are these organizations doing right? First, they already have great name recognition with the public. People are not going online thinking, "If I were to give twenty-five dollars to a nonprofit, where would I go?" Instead, they're thinking, "There's a disaster in such-and-such a place and the American Red Cross is a place that I know and trust to provide assistance there. I'll go to their site to find out more about what's going on and how I can help."

"...Philanthropy at the individual level tends to be connected to things and opportunities close at hand where a personal connection exists...."

In other words, an organization like the Red Cross has already earned the trust of the individual donor and so can use the Internet to expand its fundraising at a relatively modest cost. I think the assumption that people would simply go online with money to give doesn't reflect the way millions of Americans engage in philanthropy every year. Philanthropy at the individual level tends to be connected to things and opportunities close at hand where a personal connection exists.

Let's not forget, though, that the Internet is still relatively new as a medium for philanthropy. And the fact that we've had a wave of high-profile failures in the e-philanthropy field doesn't mean that that's the end of the story. It simply means that round one didn't work, and we need to figure out why and move on to round two equipped with those lessons. Because I'm pretty confident that there will be a second round of innovations, maybe on a smaller scale, with more modest ambitions, funded in perhaps a different way, that will be geared to helping nonprofits raise money — again, most likely from individual donors. But there will be a round two.

PND: Your report suggests that in situations where a nonprofit service or activity coalesces around a couple of large online providers of that service, someone should step in to ensure the equitable distribution of that service to smaller groups. Who should that someone be and how should the effort be funded?

AB: I don't actually say that should happen, but I think it is a possibility that people concerned about the vitality of the sector should consider. Let me step back. In a conversation I had with Vince Stehle at Surdna after the completion of the report, we discussed the degree to which it emphasizes how the efficiency of the Internet creates a set of conditions whereby the winners keep on winning. In the commercial marketplace that dynamic tends to create so-called "category killers" or winner-take-all situations. And in my conversation with Vince, he asked the question, Is the nonprofit sector different? Must winners "take" all, or could winners in our sector make another choice?

I think it's a very important question, especially coming from a funder. And I think it points to a set of long-term questions for funders, especially large institutional funders who are interested in the success of the sector overall and the successful adoption of technology to support the continued development of the sector. Funders who are committed to the strength of the sector ought to be looking at strategic investments in either software or strategy that could be used by lots of nonprofits.

PND: Care to name any names?

AB: [Laughs.] There are a growing number of foundations that are looking at how to make effective grants in this area and lots of organizations that are working hard to learn everything they can about working effectively in this area. It's a learning experience for everybody.

But more important perhaps than naming names is the fact that there are a growing number of foundations out there that are aware that technology is going to change the field that their grantees play on and could very well change the field that they themselves play on.

And that's important. The urgency sometimes comes from grantees themselves — grantees who, through the proposal process, are implicitly asking foundations to develop a better understanding of the role technology will play in the nonprofit sector. And it sometimes comes from organized processes initiated by the foundations themselves. As I've argued elsewhere, I think the way in which technology disrupts the balance between grantmakers and grantseekers is also going to force foundations to learn.

Because this is a field where things are still changing, you can't single out a single organization and say, "Those folks get it." In fact, one of the most challenging things about technology is that it keeps evolving, so just when you think you've got it, you realize that what you've got was "it" a month ago and now there's either a new technology or a new experiment or a new set of practices that are forcing change on the field.

PND: Given the complexity of today's information technologies and the rate at which they change, are you suggesting that the sector may have to move toward a more engaged style of grantmaking — what some would call a venture philanthropy model — in order to grow and prosper?

AB: I think your question supposes a linkage between venture or engaged philanthropy and technology that, while often made, is not necessarily a given. One can imagine engaged philanthropy that has nothing to do with technology-based products or projects. And similarly, one can imagine grants or foundation activities around technology that draw on more traditional models of philanthropy and don't require a grantmaker to be so actively involved in the week-to-week activities of the grantee.

It also begs the question of expertise. That is, where will the expertise nonprofits need as they mount technology-based projects come from? Foundation staff? It's possible that some of the newer foundations that have been created by high-tech entrepreneurs will have that expertise. But I don't think we should assume they will. The question of where the next generation of program officers is going to come from and what expertise the foundation leaders who hire them will expect from those officers is an open one. But without that expertise, adopting a posture of engaged or venture philanthropy offers no hope of improving the odds of success.

"...I think the larger question is about the incentives for change in a sector that is insulated from the kinds of pressures that commercial organizations face all the time...."

That said, I think the larger question is about the incentives for change in a sector that is insulated from the kinds of pressures that commercial organizations face all the time. This is going to be a real challenge for both grantmakers and grantseekers. The sector is designed to be shielded from the daily pressures of the bottom line. And that's in part because, as a society, we believe that a set of charitable, educational purposes ought to be responsive to a different set of drivers.

So where will the incentive to change come from? It could come from foundations, whether they're new or more established. It doesn't matter as long as they are able to bring new expertise as well as new resources to the table.

But I also think change is likely to come simply because grantmakers of every stripe want to do a good job. They want their grantmaking strategies to be effective, both because they are responsible for using the resources of the foundation wisely and because they are committed to the success of the nonprofit areas in which they do grantmaking.

That commitment to the effectiveness of the sector will require grantmakers to grapple with the new world of technology. And so I think change will come, even to organizations in areas that may seem very far from technology today. But we will also see that in order for them to be successful grantmakers — and for their grantees to be successful nonprofits — they will have to develop a strategy vis-a-vis technology. How can they ensure — whether it's through the way they do grantmaking or through other kinds of resources they may bring to the table — that the areas in which they provide grants and the organizations to which they provide grants can be the most effective providers of those services possible?

PND: In the report, you raise the question of whether the goal of funders should be to preserve nonprofit organizations that might otherwise be overwhelmed by disruptive information technologies or whether it should be to hasten a restructuring of the sector within broader trends in the economy. Have you answered that question to your own satisfaction?

AB: You've hit on an issue that emerged from my research that I didn't expect to encounter when I started to write the report. I still don't have an answer to it, but I do think it is one of the fundamental questions our sector will have to grapple with in the years ahead. Realistically, I think we will have more success with a jiu-jitsu approach that turns this energy toward our own purposes rather than an approach that tries to oppose these forces or pretends they don't exist.

Let's face it, one of the critically important things about the nonprofit sector is that it provides protection from marketplace pressures that might otherwise undermine the ability of organizations to provide services that society deems valuable. In that sense, I think the question of whether technology could hasten processes that are in some way market-driven requires us — especially, I think, foundations and grantmakers — to think about strategy, not just opportunity.

I should also point out these things are not ineluctably opposed, even if I've presented them that way. Historically and philosophically, foundations have played an important role in helping organizations remain viable that would otherwise be swept aside by change. And one could argue that that's exactly what foundations ought to be doing. Yet there's a growing interest within philanthropy in particular and society in general to figure out the best way to provide services to those segments of society that need them. And some would argue that it might require not only more of what we have been doing, but new tools — information technology being one of them — as well.

Let me give you an example. Information technology could allow homeless and hunger relief organizations to consolidate their administrative structures, to manage their internal operations more effectively. Their presence on the street would look exactly the same, but rather than half a dozen different nonprofits, they would actually become a single nonprofit with different public faces. So in that community, the service infrastructure would be restructured, but at the street level a network of organizations would be preserved. So it could be restructuring at one level and preservation at another.

PND: I'm going to put you on the spot.

AB: Okay.

PND: Look into your crystal ball and answer the following: In ten years, will the nonprofit sector be smaller or larger than it is today?

AB: [Chuckles.] My crystal ball says it's hard to make predictions about the sector because it is protected from market pressures by design and so grantmakers can continue to keep any number of nonprofits operating. But here's what I would predict. At the very least, I think there could be a slight increase in the overall number of nonprofits, but that the distribution of size will become more extreme. That is, there will be a small number of very large nonprofits — large in terms of their overall budgets and in terms of other ways in which we might measure their size — and probably a large number of very small nonprofits.

The real pressure is going to be felt by medium-sized nonprofits. The smaller sort of niche nonprofit may, in a sense, fly under the radar here. Typically, those organizations have a small number of supporters who are loyal to them, and that often allows them to continue doing what they're doing in good times and bad. At the same time, some set of large nonprofits will probably get larger, especially within various subsectors of the overall sector. Take, for example, the environmental community, where you have lots of groups with online strategies. One likely scenario is that one or maybe two of those groups will end up attracting a large share of real-world volunteers and Internet users and a greater share of individual donations as a result. The question that no one can answer yet is whether nonprofits will still be able to attract financial support even if their "audience" has migrated elsewhere.

PND: That's especially interesting in light of the release of a recent RAND report funded by the Pew Charitable Trusts that finds the same sort of thing happening in the field of performance art.

AB: Yes, that particular report is very interesting, inasmuch as it documents this trend already starting to play out in a very important nonprofit sector. And one of the interesting things the report argues is that technology doesn't actually create these forces in and of itself. Instead, it works in conjunction with other forces in our sector to create a set of conditions that move things in this direction.

I think the real question is, "What are the strategies that organizations might adopt to cope with the forces that these technologies unleash?" One is to link up with other like-minded organizations. This has been talked about for years in our sector, and I don't mean to downplay the difficulties that individual nonprofits face in trying to work together. But a strategy that allows nonprofits, through collaboration, to share their marketing or outreach costs, to share some of the cost of providing goods or services — that's a strategy that nonprofits will have to consider.

There are other options involving focus and niche. In a discussion following a speech I made at the Minnesota Council of Nonprofits annual conference this year, someone mentioned the very successful Minnesota E-Democracy Project and asked whether I was suggesting that even a state-based effort such as Minnesota E-Democracy had to become a national project. Now, I'm not suggesting that every organization has to operate on a national or international scale to be successful in the future. I am saying, however, that organizations will have to have a clear sense of the arena in which they want to operate and will need to be aware of the possibility that even if they choose not to operate in a larger arena, an organization that chooses to operate nationally or internationally may start providing services that compete with the services they provide.

PND: Is the trend toward ever more pervasive data-gathering techniques and the use, appropriate or otherwise, of personal data an issue for the nonprofit sector?

AB: Absolutely. The issues around data gathering are huge, not just for the nonprofit sector but increasingly for society as a whole. Let me explain.

The issue of data gathering is, in many ways, one of the most profound conundrums faced by a technology-based, data-driven society. One of the interesting things about new information and communications technologies as compared to earlier technologies is that their use actually creates information. As a result, we can collect and analyze data about a particular set of relationships and discern patterns in communications among individuals or organizations much more powerfully and, in many ways, much more intrusively than ever before. And what makes this a conundrum is that, in terms of personalization and making the sector more efficient, this is exactly the area where much of the potential of these technologies lies. And that will present great temptations to nonprofits.

Take direct-mail fundraising. One of the things we all know about direct mail is that it has a very low rate of response — what, one or two percent? That's a tremendous waste in terms of cost, in terms of the environment, in terms of organizational resources, and so on. Even though a small number of organizations have used it well, it's a low-return strategy.

But what if, by increasing an organization's ability to tailor its pitches to exactly the folks whom that organization knows are going to be responsive to them, the response rate rises to eight percent, ten percent, even twenty percent? One of the promises of information technology is that, in theory, it should allow an organization to do that. The cost of that, of course, is that it requires the organization to know a lot more about people and their individual giving habits, lifestyle habits, etc. than people may want it to know, or are willing to give it under certain circumstances.

"...The sector operates with the trust of its donors and clients. But if nonprofits were to lose or squander that trust, it could have tremendously negative consequences for the sector...."

The point is, the nonprofit sector has an opportunity here to distinguish itself in terms of its practices. The sector operates in no small part with the trust of its donors and clients. But trust is a fragile thing. If nonprofit organizations were to lose or squander that trust, it could have tremendously negative consequences for the sector.

PND: It sounds like you're suggesting the nonprofit sector should lead by example in this area. But won't that be difficult for the sector for some of the reasons — lack of resources, expertise, etc. — we've already discussed?

AB: I think what I'm suggesting is that the nonprofit sector has an incentive to lead in this area because it has more to lose. One of the distinguishing features of the sector in the minds of the public is the sense that it operates independently of the kind of market-based incentives that might cause for-profit companies to sell their data and exploit individual consumers. I think a lot of people would assume that nonprofits would be less likely to do that.

PND: And do you have confidence in the sector's ability to lead in this area?

AB: I have confidence in the sector's commitment to a set of values, and I have confidence that people who have committed their professional lives to work in this sector will operate out of that value set even as they enter this new world. At the same time, I also think technology is moving the boundary between for-profits and nonprofits. Again, technology is not the sole cause of this, but it is amplifying a trend that sees for-profit organizations offering services that traditionally have been provided by nonprofits. And in those areas in which nonprofits find themselves competing nose-to-nose with for-profits, I think there's a possibility that members of the public who are not specifically focused on for-profit versus nonprofit may start to wonder about the data gathering practices of all organizations in a specific domain.

PND: I met you last December, after you made a presentation at the New School here in New York on the importance of cable access issues to the nonprofit sector. Can you give us a little background on that issue and tell us what has been happening in that area?

AB: Nonprofits may hear the term "cable access" in two ways. The more traditional one revolves around the fact that since the early 1970s certain channels on cable systems across the country have been set aside for use by individuals and noncommercial organizations. These are the public, educational, and governmental channels that today carry more than twenty thousand hours of local, community-based programming — a very important segment of which is provided by nonprofits that use those channels as a mechanism to provide information to the public.

However, more recently "cable access" has also started to mean something else. And that is that as cable companies start providing broadband access to the Internet, one of the unresolved questions that arises is whether they will they provide Internet access along the lines that it has been provided in the past —

PND: — the common carrier model...?

AB: Right, the common carrier model, where you can get access to any service you want. Or whether they will provide access based on the traditional cable model in which the cable system operator says, "I provide you with seventy-five channels, I decide as the operator of the system which seventy-five channels they're going to be, and I sell them to you as a package based on my understanding of my marketplace."

Well, that would be a very different Internet — and one that would probably not work in favor of nonprofits, which are unlikely to be able to provide the revenue streams or visibility that would cause cable system operators to include them in their broadband Internet packages.

PND: We continue to see consolidation among cable system operators....

AB: Correct.

PND: Have there been any legislative developments in this area since December?

AB: There are congressional hearings going on right now about consolidation in the media industry. Some have argued that if you want to see the future of broadband Internet access, you need only look at what has happened to the radio business since 1996. The 1996 Telecommunications Act resulted in tremendous consolidation in the radio business, in large part because the law lifted the restrictions on how many stations a single owner could control. Up to that time, the industry had been characterized by a lot of smaller, individually owned stations. In the five years since the law passed, however, we've seen two major group operators assume dominant positions in the industry, and with that has come what appears to be a much greater homogenization in terms of programming. We've also seen that the real beneficiaries of the Telecommunications Act are not the listeners, but the large group owners. And it's the advertisers, who have lobbying clout and can get their voices heard, who are now complaining that they are operating in a market that only has two sellers.

PND: So what can the person who has read this far do to ensure a diversity of voices on their cable systems in the future?

AB: The openness of the Internet going forward and the ability, as a matter of public policy, of people to access a range of services and voices over the Internet, however they choose to access it, is an important public policy issue, and people need to become more aware of and involved in it. If we really care about the future and strength of the nonprofit sector, we need to make sure that nonprofits have a fighting chance to get their message out to their audiences.

At the same time, we also need to make sure that they understand the range of issues associated with identifying audiences and promoting and distributing their products and services in an environment that's likely to become much "noisier" — that is, in an information environment where there's likely to be more competition for people's attention and, as a result, navigation between choices becomes much more difficult. So helping nonprofits as creators and distributors of information is going to be just as important as ensuring, on the public policy side, that those nonprofits can get access to cable systems and use them.

PND: Last question: What are you working on at the moment?

AB: My work is primarily about helping foundations interpret how information technology is affecting the things they care about. Information technology is going to have an impact in every field in which foundations and nonprofits operate. So one of the things I'm working on is how this report for the Surdna Foundation starts to play out in different sectors.

I'm also developing a strategy for a foundation that's interested in how nonprofit media advocates can get access to better information and become more effective participants in the public policy process around some of these issues.

And last, but certainly not least, I'm getting ready for the birth of my first child in a few weeks, and I suspect that will become my single biggest project in the months ahead.

PND: Congratulations. As the father of twins, I can say with some confidence that you've got that right. [Laughter.] Well, Andrew, thank you very much for sharing your thoughts on this important and fascinating set of topics. On behalf of the readers of PND, best of luck in your future endeavors and with the new baby.

AB: Thank you very much.

Mitch Nauffts spoke with Andrew Blau in August. For more information on the Newsmakers series, contact Mitch at mfn@foundationcenter.org.