The State of Online Fundraising
Steve MacLaughlin, Blackbaud
The last three months of the year represent a critical time for the fundraising efforts of nonprofit organizations. Charities that have traditionally focused on offline fundraising have also learned in recent years the importance of online giving. In fact, the end of the calendar year is also a significant source of the funds raised online for nonprofits.
Blackbaud's analysis of online giving in 2008 found that December accounted for about 21% of the year's transaction volume, but 48% of the total dollars raised. The average online gift for the month of December increased to $248.82 for Blackbaud customers in the entire analysis. These positive results are no longer being overlooked by nonprofit executives.
Online giving has actually developed a consistent and predictable cycle. Since 2004, online giving has peaked in December through the first months of the year before bottoming in April or May. Giving then grows gradually before making large jumps beginning in September through the end of the year.
Nonprofits that use online friends asking friends or peer-to-peer fundraising programs usually see spikes around these events during the year.
The end-of-year online fundraising opportunity only underscores the importance of this channel as a giving source. Some nonprofits still struggle with developing a successful online fundraising program. And there are still some skeptics out there, those who say "wake me up when online fundraising is really really big." They probably said the same thing about Facebook, Twitter, and other social media tools.
Here's your official wake-up call.
Online Giving Tops $15 Billion in 2008
Giving USA estimates that $307.65 billion was given in 2008 to US charities, exceeding $300 billion for the second year in a row. This was a decrease of 2%, or -5.7% adjusted for inflation, from the $314.07 billion donated in 2007. The economic impact on giving has been felt by nonprofits and was foreshadowed by the Index of National Fundraising Performance.
Online giving has continued to grow year-over-year even during the recession. Blackbaud analyzed the Giving USA data, along with other important metrics, and estimates that more than $15.42 billion was given online to US charities in 2008. This is a 44% increase over 2007's online giving estimates. Online giving accounted for just over 5% of total giving to charities in the US during 2008 and has been growing for many years now.
Online Giving Growth Continues
Online giving continues to grow in terms of dollars raised and as a percentage of total fundraising revenue. The steady increase in online fundraising continues despite challenging economic conditions and declines in other channels. Blackbaud studied 1,274 nonprofits to compare their online fundraising results for the first six months of 2008 to the same period of 2009. These nonprofits had a 22.13% year-over-year growth in online revenue. Not bad for all the doom and gloom being reported.
Target Analytics noted in the 2008 donorCentrics Internet Giving Benchmarking Analysis study that as much as 16% of new donors and 27% of new revenue came from online sources in 2008. Compare that with a recent downward trend in donor acquisition using offline channels like direct mail. Online giving has become the growth engine for nonprofits for many years now.
The Cannibalization Argument
Some skeptics argue that the growth in online giving comes at the expense of donors who used to, or would have otherwise, given offline. I have seen customer data that backs up this argument and I've seen data that refutes it. Your own trends may differ and it is extremely important to analyze your online and offline donor data together to see what is happening. It is also important to look at how giving to different channels impact the size, frequency, and length of giving. Start by checking a sample of your own data. Your own results may vary.
Research by Target Analytics looked into donors and the channel flipping that they do. Their study found that online donors do switch to become offline donors, but offline donors rarely become online donors. The same trend was true in the 2006 report and has held up over time.
This means it is very rare for a traditional offline donor to change to online giving and any cannibalization would be very minor. One could argue that offline might actually cannibalize online giving.
The Online Donor Profile
We know a lot more about the profile of an online donor than we did in years past. Online donors are younger and have higher incomes than traditional direct mail donors. The donorCentrics study found that 11% of online donors were under 35 compared to only 3% of offline donors in that that age group. 34% of online donors earned over $100,000 annually versus only 24% of offline donors in the same income range.
Online donors also give much larger gifts than traditional donors. The 2009 eNonprofit Benchmarks Study, authored by M+R Strategic Services and NTEN, surveyed 32 nonprofit organizations and found an average gift size of $71. Blackbaud's analysis of approximately 2,000 nonprofit clients found an average online gift of $152.12 in 2008. These are both higher average amounts than traditional offline giving.
Online donors are increasingly making more substantial contributions that would be considered major gifts. Blackbaud's analysis of data of approximately 2,000 organizations for the first half of 2009 found that 1,245 nonprofits had at least one online gift of $1,000 or more. 38 nonprofits in the analysis had at least one online gift of $20,000 of more so far in 2009. Online pledges and recurring gifts were excluded from the analysis. Major donors continue to move to the web as part of their giving behaviors.
The Present and Future are Integrated
While online donors are a very good acquisition source, they are also less loyal donors. Every year, large numbers of online donors migrate away to other channels, primarily direct mail. This reinforces the importance of an integrated approach to managing your donor relationships.
Target Analytics found that 37% of the donors acquired online in 2006 who gave in both 2007 and 2008 never gave online again in either of their subsequent years of giving after their acquisition year. The key is to leverage integrated multi-channel strategies to identify and cultivate these donors over time.
Everyone talks about the need for nonprofits to use integrated fundraising and marketing strategies. But we now have the research that shows that multichannel donors are more loyal, more valuable, and key to meeting long-term fundraising goals.
Nonprofits are embracing new channels and combining them with their existing fundraising practices to maximize their relationships with donors. These organizations understand what a critical role the Internet plays in their current and future fundraising programs.
