Geoff Livingston co-founded Zoetica to focus on cause-related work, and released an award-winning book on new media Now is Gone in 2007.

Recent media coverage and Case Foundation America’s Giving Challenge research demonstrates that non-profits can hurt themselves by participating in too many online giving contests and challenges. Yet, given the extreme popularity of social media-driven online contests like Pepsi Refresh and others that innovate, non-profits can expect to see many more opportunities like this.

“We’ve seen the emergence of two quite different kinds of contests,” said Mayur Patel, Director of Strategic Assessment at the Knight Foundation. The first kind, he notes, offer “prizes and awards focused on supporting particular innovation and experimenting with new solutions to societal challenges, such as the Knight News Challenge or Apps for America.” The second kind offer “online fundraising contests, in which non-profits compete with each other to get the most votes in order to win a sum of money for their organization.”

Now that the sector has more experience, it’s time for non-profits to intelligently weigh the pluses and minuses of contests. Here’s an analysis of how online giving contests and challenges impact the sector.

Disclosure: My company Zoetica performed the America’s Giving Challenge research for the Case Foundation.

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Understand The Possible Negative of Impact Contests

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The obvious benefit of participating in contests and challenges is winning. But there are also negative aspects that can occur, especially if you lose — lost resources and community fatigue can be a problem. This is particularly true of giving contests that focus on crowd-driven popularity, and don’t offer matching grants or widespread consolation prizes.

“The downsides for non-profits entering contests that create a ‘who’s who’ popularity contest are obvious: Burn-out from campaigning, fear of or actually damaging the support base from asks (whether it’s vote, donate, or support), capacity (time, energy, resources) spent disproportionately to the return, and so on,” said Amy Sample Ward, global community development manager for NetSquared. NetSquared has hosted several innovation challenges over the past few years.

“It’s important to consider scalability and bandwidth to take on any additional tasks or responsibilities related to a contest or program — for any organization, non-profit or otherwise,” said Anamaria Irazabal, Marketing Director at Pepsi. “Organizations entering into these programs should clearly understand the staff time and resources needed to apply, campaign, and most importantly, oversee implementation of any added funding or other benefits of such a program.”

Disclosure: Mashable is a media sponsor of the PepsiCo10 competition.

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More Pluses Than Just Winning

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Instead of looking at contests and challenges as all-or-none opportunities, non-profits should also consider the intangibles. A complete picture shows opportunities to excite donor and volunteer bases with social media driven contests on national and even international stages.

“Philanthropic contests amplify voice, connect new audiences and break down traditional silos and barriers,” said Michael Smith, Vice President of Social Innovation at the Case Foundation. “The explosion of new interactive technologies combined with an increasing desire from social institutions to have genuine interactions and input from their constituents, have created the perfect storm and opportunity for philanthropic contests to take center stage. Innovative non-profits and causes now have the opportunity to compete on a level playing field, allowing their voice to be heard by the mass public, influencers and social investors (big and small) alike.”

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Theories of Change

In the non-profit sector, it’s critical to have an actionable theory of change. This provides outcomes, results, and accomplishments that relate to a desired long-term goal, according to ActKnowledge. A theory of change can help the non-profit determine the value of the contest.

“We believe that the power lies in having a specific theory of change,” said Pepsi’s Anamaria Irazabal. “Through the Pepsi Refresh Project, we believe in enabling ideas that will make a difference. We want people across the country to use their voice, community and the Internet to promote good ideas, which can help them get the funding and the volunteers to make these good ideas a reality. We’re encouraging organizations and individuals to use their own theories of change to refresh America.”

“Contests almost by their nature don’t have a specific solution in mind that they are looking to fund and/or test,” said the Knight Foundation’s Mayur Patel. “All contests though, embody some form of agenda setting, regardless of whether they have an explicit ‘theory of change’ at work.

“For challenge prizes and awards, rather than online fundraising contests, the act of problem identification — of elevating a specific issue that you are encouraging innovation around — can be a targeted way of incentivizing and spurring problem solving,” Patel continued. “It gives people the constraints in which to work, and can build a constituency around a particular problem.”

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Size Does Matter

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For some reason, smaller non-profits seem to favor contests more than larger ones. Whether that’s based on sheer numbers or the way contests and challenges are built, smaller non-profits tend to be better suited to participate.

“I don’t think it’s that larger organizations are not willing to take risks, I think it’s a couple other key factors,” said the Case Foundation’s Michael Smith. “When you are a large non-profit with a large development staff that has a set calendar of events, mailings and five layers of organizational approvals you have to go through before you can send an e-mail out to supporters, it makes it very hard to compete in these types of competitions.

“Winning these competitions is all about giving up control,” added Smith. “An e-mail or two from a development director in Washington to a large mailing list will not guarantee success. Rather, you have to depend on a decentralized group of passionate supporters who are willing to tweet, DM, Facebook, e-mail, text andSkype a few hundred of their closest friends to get the viral ball rolling and make the personal connection that motivates people to take time from their day to help an organization win.”

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Thoughts on Criteria

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Irazabal, Patel and Smith offered several tips for non-profits to consider when weighing a contest or challenge. Here is an amalgamated list of ten points to consider:

• Do you have a realistic chance of being successful in the contest?
• Do you have the necessary time and resources to engage intensively in the contest to maximize the chances of winning?
• Will the campaign help build a new set of donors?
• Will participating in a contest strengthen capacity to integrate social media tools and networks into overall strategy?
• What kind of publicity will be generated from the application? Is there strong alignment between the contest’s brand and your own?
• Does the contest align with your values, mission and goals?
• Will participation add to or detract from potential donor fatigue?
• Can your organization give up and share control?
• If your non-profit wins, can you implement any funding or other offering from the contest with your current infrastructure?
• If not, can your organization scale to meet the demands a winning opportunity brings?