Online Fundraising

How online donation became a central pillar of fundraising.

When was the last time that you made a bank transfer by getting a biro, filling out a form and taking it to the bank? Transfers, and donations, are much easier online, whether on the organisation’s website, through donation platforms and fundraising widgets, electronic donation vouchers or by text message. That’s why increasingly donation is migrating online.

Up until now direct mailings, i.e. direct debit forms sent out by post, were the main source of revenue for fundraising organisations (alongside legacies and contributions from private companies). This paper form of donation generation is very inefficient, however, and the overwhelming majority end up unopened  in the recycling. A mailshot is considered successful if more than one out of every hundred recipients makes a donation. This explains why about a third of donations end up flowing back into the fundraising industry. Over the internet, however, many small donations can be gathered with very low costs. Studies in the USA and Germany show that younger donors prefer online channels to traditional means such as direct mailing, telemarketing and fundraising events. The generation difference is particularly pronounced when it comes to direct mailing: 52 percent of those aged 45 and over donate by post, compared to just 10 percent of “Generation Y”, i.e. those born after 1980. Conversely, 47 percent of Generation Y donate online compared to 27 percent among the 45+ group.

On the whole, the studies show that online donations have increased considerably in the past five years. One study in the USA in 2012 showed a 10.7 percent increase in online donations from the previous year, whilst offline fundraising decreased by 1.7 percent. In 2012 online fundraising made up 7 percent of all donations. It also appears to correlate with a shift from large to many smaller organisations (see trend The Long Tail). The Blackbaud Index of Giving 2013 calculates that between 2011 and 2012 medium-sized organisations experienced a growth in these donations of 14.3 percent, followed by small organisations with 11.8 percent, and large organisations lagging behind with a 7.2 percent increase. Online donations tend to spike following natural disasters. After Hurricane Katrina, the Haiti earthquake and Hurricane Sandy, online and SMS donations made up over 50 percent of all money given to the American Red Cross. Similarly, during the floods in Germany in 2013 there were twice as many donations online as from other sources. This development reflects the desire of donors to react as quickly as possible to emergency situations. The average amount donated online is 2-3 times as high as with classic fundraising methods. The avage offline donation is 33 Euros, online the average is between 65 and 86 Euros.

The potential of online fundraising

On the internet anybody can become a fundraiser for the project of his or her choice with just a few clicks. This can be as simple as posting on Facebook or Twitter, or forwarding emails recommending the project to friends. Such personal recommendations are perceived to be much more trustworthy than classic advertising methods. On betterplace.org in 2013 Facebook was the fourth-biggest source of traffic, and visitors following a link on Facebook were the third-biggest source of donations, with a conversion rate over 40 percent higher than the betterplace.org average. The internet also enables projects and the work of NGOs to be transparently presented so as to generate trust (see trend Transparency). In the offline world the donor gives her money and then rarely receives an kind of feedback from the charity. On the internet this one-way street can be turned into a roundabout, as feedback can be easily distributed through digital channels. Online fundraising is also attractive because for people who are already using the internet, getting them to donate is not a big psychological threshold. This trend will only increase with the advent of various mobile payment methods. Already we are seeing cooperations between mobile service providers, NGOs and donation platforms. For example, Vodafone together with JustGiving developed the SMS-based JustTextGiving.

Online donation platforms

One area of dynamic growth is online donation platforms. In the year 200 there were just two platforms that let NGOs present their work and their requirements:JustGiving in the UK and GiveIndia in India. By 2012, the number of platforms had soared to over 130 worldwide and continues to grow rapidly. These platforms bring donors and beneficiaries closer together than ever before, in part by cutting out the old established charities, for instance when teachers donate to school projects on DonorsChoose or when people collect for their own social initiatives on betterplace.org.

Some platforms have a particular thematic or regional focus: Vittana, for example, raises money for school and university scholarship grants for disadvantaged young people, whilst Greater Good South Africa and Help Argentina limit their attention to projects in the respective countries. Some platforms such as nexii, Phineo and SoSense are aimed specifically at social investors, and on platforms like Kiva, Zafèn and MyC4, internet users can issue microloans to entrepreneurs all over the world. In the USA the platforms JustGivingand FirstGiving are particularly successful. A relatively recent variation on the concept of online fundraising is so-called “crowdfunding” on platforms such as Kickstarter, which allows artists, software developers and many more besides to present their ideas for the crowd to collectively finance. When the project is completed, supporters receive a symbolic or a real service in return, maybe first access to a beta-version or prototype, or being named in the film credits. From a legal point of view this does not qualify as donating – a misunderstanding which is posing problems for more and more NGOs.

Donating without noticing you’re donating

Online donation is very flexible and can be combined with many other transactions. For example, when booking a flight to the Dominican Republic, as well as CO2-offsetting, in future you’ll also be able to add a little extra for HIV prevention projects by ticking a box. Or look at so-called “embedded giving” in eBay auctions. Or Cause Related Marketing campaigns (see trend Selling with Love), where the producer donates a portion of the sale price to a good cause. Because the customer doesn’t make an active decision to donate and doesn’t perceive this amount as an extra charge, such methods are often referred to as “painless giving”.  Similarly, donating bonus points doesn’t hurt. Through Payback Spendenwelt, run in partnership with betterplace.org, reward points with a value of over one million Euros were donated over a four week period for victims of the Haiti earthquake.

Conclusion

As the proportion of online donations increases there will be a fundamental change in the entire fundraising sector, with effects for all its participants. NGOs must invest in future donors, even if they don’t currently have a lot of money to give. It’s already more or less taken as read that organisations will offer online donation opportunities. Online donors are still in the minority, but soon they will be the majority.