Upfront Privacy Options Don't Encourage Crowdfunding

While the average contribution increases, the number of donors falls.
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(Photo: tobiasfeltus/Flickr)

(Photo: tobiasfeltus/Flickr)

You would think that offering a crowdfunding website’s contributors more privacy options earlier in the process would increase trust and bring in more money.

You would be wrong.

While giving visitors the option to hide their names and how much they’re about to give before they seal the deal does indeed increase the average individual contribution, it also decreases the number of people who actually go through with one. The result is a net loss of three and a half dollars per visitor, according to a forthcoming paper in the journal Management Science.

While giving visitors the option to hide their names and how much they’re about to give before they seal the deal does indeed increase the average individual contribution, it also decreases the number of people who actually go through with one.

As visibility and traceability increase online, so does the demand for more privacy, and websites of all stripes are responding, says Gordon Burtch, lead author of the study and a professor of information and decision sciences at the University of Minnesota’s Carlson School of Management. Facebook, for example, now gives users the ability to control exactly who sees any given post, and crowdfunding sites allow users varying degrees of control over their anonymity.

From the point of view of musicians, entrepreneurs, or potato-salad makers, Burtch says, giving potential supporters more control up front makes sense—they’d feel more secure and therefore be more comfortable giving. On the other hand, seeing those options before they decide on how much to give might prompt some users to think harder about online privacy fears, perhaps to the point that they don’t contribute anything at all.

To find out, Burtch and colleagues Anindya Ghose and Sunil Wattal went to “one of the world’s largest online crowdfunding platforms,”as they describe it in their paper, and proposed a simple experiment. They would give each of the website’s actual visitors the same privacy options—whether to post their names and whether to post their contributions—but choose at random whether each visitor saw those options before or after they’d finished making the donation.

The researchers got the go ahead, and as expected, they found a privacy effect, meaning about five percent more people gave when they had to pay first and select privacy options later. But the authors also found what they termed a publicity effect: When users saw the privacy options last, those who went through with a contribution gave $5.81 less on average, the net result of fewer very large or very small (but still non-zero) amounts. Still, the higher donor base was enough to make the “pay first, privacy later” formula worth it: Despite smaller individual contributions, the average earnings per visitor—counting both those who gave money and those who didn’t—went up by $3.55.

“There is demand” for more privacy online, Burtch says, but the results point to a kind of reverse psychology. We want control over our information online, but actually having the choice stokes fears of identity theft or, more mundanely, being exposed as a cheapskate or a wastrel—enough that we end up giving less.

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