In July of 2005, with the economy in a tizzy and housing prices blowing up, CNBC interviewers asked future Federal Reserve Chairman Ben Bernanke for his thoughts on the potential for a housing bubble. As we of course now know in hindsight, conditions were ripe for the crash that would come, however Bernanke and his cohorts simply couldn’t see it, and he said as much on national TV.
INTERVIEWER: Tell me, what is the worst-case scenario? Sir, we have so many economists coming on our air and saying, “Oh, this is a bubble, and it’s going to burst, and this is going to be a real issue for the economy.” Some say it could even cause a recession at some point. What is the worst-case scenario, if in fact we were to see prices come down substantially across the country?
BERNANKE: Well, I guess I don’t buy your premise. It’s a pretty unlikely possibility. We’ve never had a decline in house prices on a nationwide basis. So what I think is more likely is that house prices will slow, maybe stabilize: might slow consumption spending a bit. I don’t think it’s going to drive the economy too far from its full employment path, though.
A year later, housing prices peaked and by the fall of 2008 — three short years after Bernanke said he didn’t “buy” the premise — the entire world economy took a giant, putrid dump on everyone. Not only did it drive the economy too far from its full employment path, it drove the economy right off the cliff, into a pit of rotting corpses and horse turds.
Much like the irrational exuberance of investors, lenders, economists, vice presidents of squid vampirism at Goldman Sachs, and credit-hungry consumers leading up to the crash of 2008, GoFundMe has celebrated its exponential growth in recent years, and reaped all the benefits that come along with it. They have good reason to pat themselves on the back; GoFundMe has charged donors $200,000,000 since its inception seven years ago. If we were to average that out, it means they’re making about $28 million a year in fees alone. That figure does not include payment processor WePay’s cut of 2.9% of every donation.
However, we can’t average it out, as it took a few years for GoFundMe to get a stranglehold on the highly desirable “social causes and throwing money at problems” niche. I know it might be difficult to remember the Before Time when people died and their families didn’t slap $50,000 GoFundMes across their obituary, but there was a time when eBegging was considered in poor taste by a lot of people. As we all know, that attitude has changed. And that shift in accepted social behavior has certainly worked out for GoFundMe. They did such a good job positioning themselves over the years that “GoFundMe” is now the blanket noun for personal crowdfunding, just like Band-Aid is for bandages, and Kleenex is for tissue. And it is the default option when someone needs to cash in their social capital for a helping hand.
In a February 2016 Medium post, GoFundMe CEO Rob Solomon wrote that it took five years for “the GoFundMe community” to raise $1 billion on the platform, “60 months for the first billion and 9 months for the second.” “Today,” he said in February 2016, “a little more than 9 months later, we hit $2 billion raised on GoFundMe.” A September 2015 blog post by Solomon says that $1 billion was raised on GoFundMe in the 365 days prior to publication of that post, so it’s unclear when, exactly, they hit the $1 billion raised mark but let’s use late 2015 as the jumping off point. To put this in perspective: GoFundMe announced it reached the $100 million raised mark in August of 2013. Something clearly clicked in the two years following that announcement, and it wasn’t an obscene number of poor people suddenly getting cancer and putting up GoFundMes.
Solomon says it took five years to reach the $1 billion mark (again, he also says they raised $1 billion in a single year so *shrug*), then $2 billion nine months later, and $3 billion eight months after that. Clearly, it’s not just that people’s needs are great, but that more people than ever are using GoFundMe to fund everything from medical bills to emergency Nintendos.
In an October 2016 Medium post celebrating the $3 billion raised milestone, Solomon writes:
I’m excited to announce that another billion dollars has been raised on GoFundMe, bringing us to more than $3 billion total raised on our social fundraising platform. That is an astounding amount of help given and help received — everyday people getting the assistance they need for their classrooms, their families, their favorite charities, their houses hit by storms, their community members in need.
Every billion dollar milestone on the platform is another $50 million in fees to them, so yeah, I’d be excited to announce that too.
And now, we find out that GoFundMe quietly surpassed the $4 billion mark in another Medium post from Solomon earlier this month:
I’m happy to announce that there are now more than 40 million people who have donated to a GoFundMe, again making our giving community the largest in the world. It’s this global community that, earlier this year, helped us reach more than $4 billion raised.
So quietly, in fact, that they haven’t updated their About Us page with that impressive new figure.
Why are we only hearing about this in June? Where’s the press release, the parade through downtown San Diego, the flurry of self-congratulatory tweets? It’s almost as if it finally dawned on GoFundMe that it’s slightly tacky to celebrate the fact that enough people were sick, facing homelessness, fighting cancer, or dead to solicit $1 billion in donations from other people through their platform. “We’re happy to announce that desperate people everywhere needed $1 billion to pay their bills, treat their cancer, and bury their loved ones, and we charged them for it, yay us!”
Right around the time GoFundMe surpassed the $2 billion raised mark, this humble little website popped up to educate donors, investigate sketchy campaigns, help reporters do stories on GoFundMe gone wrong, and collect GoFundMe scams in a single centralized place. Despite GoFundMe’s explosive growth in the last two years in particular, the company is sticking with its claim that misuse (fraud, as normal people call it) makes up less than one tenth of one percent of all campaigns. How is that statistically possible? In order to even have that figure, GoFundMe would have to monitor and verify ALL campaigns. It clearly states the exact opposite in its terms and conditions: “We do not and cannot verify the information that Campaign Organizers supply, nor do we guarantee that the Donations will be used in accordance with any fundraising purpose prescribed by a Campaign Organizer or Charity.” Therefore, how can GoFundMe even know how many campaign organizers are “misusing” their service if they aren’t even checking? They do, however, claim to “employ state-of-the-art fraud-prevention technologies and a team of dedicated specialists working to protect [donors] around the clock.” I can confirm that last bit, they’ve often removed fraudulent GoFundMe campaigns from their site within ten minutes of me posting one, even on Sundays. They must get an alert or something.
Over the last year, I’ve spoken to countless reporters in newsrooms across the country who had no idea fraud and misuse was even a thing on GoFundMe until they stumbled across this site. So I’ll give it to GoFundMe, they ran one hell of a PR campaign leading up to their first $1 billion milestone, and they continue to do so despite evidence that clearly shows fraud and misuse to be far more common on the platform than they care to recognize. Rather than claiming fraud is rare, maybe educate donors (telling them “only donate to people you know and trust” isn’t education just BTW, and it totally defeats the purpose of ePanhandling), and make the platform safer so the legitimate people out there can get the donations they need. Pretending as though fraud and misuse is some glitter-farting unicorn never seen nor heard doesn’t do anything to assure donors, it only makes it look like they’re in denial.
Sort of like our pal Ben Bernanke up there, who absolutely did not think housing prices would fall on a nationwide basis, much less crash spectacularly in the way they did. Perhaps Peak GoFundMe is soon upon us? I bet they’ll never even see it coming.