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Thousands of people turned to crowdfunding during COVID-19. For most, it didn't pan out.

Thousands of COVID crowdfunds didn't make much
Thousands turned to crowdfunding during the pandemic, but most were unsuccessful 07:42

Aaron Davison has been without work since last spring, when the amusement parks in Orlando, Florida, furloughed thousands of employees. The 28-year-old is a caretaker for his parents, who are too disabled to work, and, after living in their car for part of 2020, the family has been staying in a hotel. But the unemployment benefits that made this possible are ending this week.

Given this precarious financial state, Davison is eager to discuss his GoFundMe campaign to attract donations. "I always would tell everybody, family or friend, if they had a platform to share the GoFundMe," Davison told CBS MoneyWatch. "A share can go a long way, even if it's not a donation. I think visibility is an important thing now."

In the 18 months since he launched the crowdfunding campaign, it's raised just over $6,000 of a $10,000 goal — still short of the money he needs to sustain his family or move into permanent housing.

Aaron Davison, 28, wants to pay for some of his family's medical and housing costs through a crowdfunding campaign. Aaron Davison/GoFundMe

But Davison's online plea for assistance is doing far better than the typical GoFundMe campaign, according to a new analysis of coronavirus-related crowdfunding set to be published in August in the journal Social Science & Medicine.

Most Americans who turned to the internet for financial help during the pandemic failed to raise much. Of the more than 175,000 GoFundMe campaigns that were started in the first half of 2020 and that cited COVID-19, 43% received no donations at all and 90% did not reach their stated goal. Nearly a quarter of all funds raised through the platform went to the top 1% of campaigns, with the typical campaign receiving just $65, the research finds.

"Americans have turned to [crowdfunding] in large numbers since the early months of the pandemic, yet for many users it has not offered considerable relief," write the authors, a group of four academic affiliated with the University of Washington. The technology "can exacerbate inequalities and further benefit already privileged groups," they noted.

Where the money goes

Given the unequal impact of COVID-19, which destroyed millions of low-paying jobs while largely sparing professional work, one might expect to see plenty of GoFundMe campaigns to come from poorer parts of the U.S.. But that's not what the researchers found. 

In fact, the top predictor of success of any given campaign on the crowdsourcing platform was the average income and education level of residents in the county where a GoFundMe campaign was started. 

"People from these areas are more likely to initiate campaigns in response to adverse health and economic impacts of COVID-19, and they also receive more funding compared to people living in areas with lower income and education," the researchers said.

The reason: The fundraising platform's reliance on social media to get the word out, along with the personal networks of the people running campaigns. 

"Things that go viral on social media obviously are going to get a lot more traction than those that don't," Mark Igra, one of the paper's authors and a graduate student in sociology at the University of Washington, told CBS MoneyWatch. What's more, "Social networks are unequal — people who live in poorer places are more likely to know other people who live in poorer places."

To be sure, there's no way to precisely identify recipients of GoFundMe campaigns. A spokesperson for the company noted that most campaigns on the platform are started on behalf of other people, not by the intended recipients themselves.

However, given what we know about social networks, the researchers are confident that the findings hold. "It's safe to say that, in most cases, the person who starts the campaign is in the same social or economic position" as the intended recipient, said Nora Kenworthy, a leading researcher on crowdfunding and one of the paper's authors. 

A handful of high-profile campaigns did cross social barriers, such as efforts to support golf caddies at a Los Angeles golf club, efforts to support employees of country clubs in wealthy New York suburbs and a campaign for employees of the high-end New York City restaurant Le Bernardin. 

Campaigns such as those, whose "organizing teams overwhelmingly consisted of corporate executives, industry leaders, celebrities and influencers," according to the researchers, underscore the main ingredients required for crowdfunding success: access to the kind of social networks and status that financially desperate people often lack.

Not meant for "basic needs"

It's worth noting that GoFundMe was never meant to serve as social safety net. CEO Tim Cadogan has at times bemoaned its role as a forum for people falling on hard times, and has urged Congress to step in with money for the needy. 

"Our platform was never meant to be a source of support for basic needs, and it can never be a replacement for robust federal COVID-19 relief," he wrote in February.

Researchers Kenworthy and Igra agree. "The best way to address this is to make sure people don't have to crowdfund to put food on the table," Kenworthy told CBS MoneyWatch. 

But they also urge the company to be more transparent about what kinds of campaigns are successful, and why. GoFundMe keeps 2.9% of campaign funds, as well as "tips" that donors can choose to contribute, so the company also has a financial interest in raising funds on its platform.

A spokesperson for GoFundMe also said the company was expanding its partnerships with traditional charities so that donors could give to specific causes, splitting their money between people in immediate need and organizations that offer long-term aid.

For his part, GoFundMe user Davison knows that his campaign isn't a financial solution. "It was never meant or intended to buy a home or buy an apartment," he said. 

But with his unemployment benefits ending, and his family not qualifying for most social assistance programs, he thinks it's his best hope for now. A local TV station ran a story recently about his family's plight, and Davison hopes the coverage will be the "secret ingredient" to unlock hundreds of donations. 

"I swore to my Dad that I was so confident that it would be such a surge," he said. "It would give us the relief, the same as a stimulus check."

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