As someone who participated in the Facebook Causes challenge (I recruited about 30 donors to Love Without Boundaries), I can say I think these things absolutely work, and here's why:

1. Cost. An online challenge costs the charity nothing. LWB heard about the challenge and signed up. That's all -- every other bit of the fundraising was done by people like me, recruiting friends and sending emails. The old model -- wooing big donors -- requires considerable time and expense, albeit with bigger payoffs.

2. Game theory. As the challenge neared the finish line and it was clear that either LWB or Tibet Freedom Movement was going to win, each side marshaled its forces. One would finish the day up 100 donors, so the other would wake up the next morning and start looking for new donors to catch up. It was competition as much as it was philanthropy. The final 24 hours accounted for a third of all the donations.

In the end, LWB ended up with $155,000 (between donations, daily prizes, and the grand prize). TFM earned over $130,000. I realize that there are people in the world who can write checks like those without blinking, but the number of those people is limited. The number of people online who can give small amounts and challenge friends to do the same is a much much larger pool, as Barack Obama can attest to.