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Mini Case Study: Idealist struggles to survive the Great Recession

   /   Jun 15th, 2010Mini Case Studies

PROBLEM:
Idealist is a leading online portal for social organizations, job seekers and volunteers to connect with causes, resources and employment opportunities. Despite its well-established brand and loyal user base, Idealist came close to going under earlier this year after its revenues from job ads plummeted in the wake of the financial crisis.

After late 2008, many organizations froze their hiring. “[F]rom one week to the next our earned income was cut almost in half, leaving us with a hole of more than $100,000 each month,” explained Idealist’s founder, Ami Dar. Meanwhile, foundations, also suffering losses, cut back on giving. After surviving “on faith and fumes” for 16 months, Dar knew Idealist needed to find alternative sources of revenues—and quickly.

RESPONSE:
He turned to his user base. Rather than increase usage fees, an idea that was considered, he decided to send a plea to 500,000 site members this past February: “If over the past 15 years Idealist has helped you or a friend find a job, an internship or a volunteer opportunity; connect with a person, an idea or a resource; or just feel inspired for a moment, now we need your help.” He went on to detail Idealist’s predicament and request support.

RESULTS:
Over 7,500 people stepped forward, contributing close to $250,000. The donations have provided vital breathing space while Dar pursues other tree-shaking strategies to raise an additional $250,000. Dar believes Idealist’s “authenticity and transparency” accounted for the response. “We let ourselves be vulnerable,” he said.

Dar also rallied Idealist’s users to vote for the organization in the Chase Community Giving online competition, which resulted in a $125,000 prize. But in order to close gaps, the organization has had to make substantial staff cuts. It streamlined operations, consolidated its Buenos Aires office, and halted all non-essential employee travel.

Dar believes the crisis forced the organization to become more efficient. But Idealist is not out of danger yet. In recent years, large foundations have become reluctant to fund infrastructure organizations like Idealist, Dar said. He is hard at work developing new financial models to sustain and ultimately strengthen the organization. We’ll be following his progress closely.

For more on Dar and Idealist, check out this interview.

Photo: In Defence of Marxism

5 Responses

  1. Rebecca,

    I’m not sure that this story about Idealist is a “story about change.” I wrote a blog post a few months back about Idealist’s campaign, and I argued that in doing an emergency fundraising appeal Idealist was actually taking a page from the old nonprofit playbook–when times get tough ask for more money. I think an innovative approach would have been for Idealist to completely rethink their business model, put a new plan together and then go after equity capital to make it happen. You can read my post on this here: http://www.socialvelocity.net/2010/02/what-we-can-learn-from-idealist/

    • Doni Bloomfield says:

      Nell, I think you make a good point – ultimately, as we say in the case study, Idealist will need to restructure its model. The recession is taking its time leaving, and having 70% of your revenue flowing from one source – let alone one susceptible to major fluctuations – is a danger that needs to be addressed. The emergency plan which we highlighted here was impressive not because it was a radical break from how non-profits operate, but because it showed the value of building a tremendous community like Idealist has. This base provided the emergency funds to tide Idealist over, as well as evidence to potential funders that Idealist has developed a community worth preserving. So this was not a panacea, nor was it a gamechanger in nonprofit strategizing. But it did show that using some tried and true tactics along with a strong internet community can lead to valuable results.

  2. Martin says:

    The consolidation of the Argentina office meant that they had to fire 20 people. Unfortunately they had not developed plans to be prepared for crisis and had to leave many people in the street

  3. Rumor says:

    Keep it cmoing, writers, this is good stuff.

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