Is Online Fundraising a Bad Idea?

As I sit at my computer, the world is at my fingertips. I can order takeout from a local restaurant, express-deliver flowers to a friend across the country, and make a gift to my favorite organization—all without getting up.

Many nonprofits embrace online giving because it makes asking for gifts, processing payments, and thanking donors easier and less costly. Some organizations are investing heavily in online fundraising platforms like Razoo or CauseVox, or improving the donation process on their own website. Other organizations are transitioning from direct mail to online-only solicitations to cut costs and ease the staffing burden of processing payments by check.

But is this the right way to go? Each year, I conduct research on individual donor fundraising. Lately, I’m starting to wonder: Is online fundraising a bad idea?

The research for my Individual Donor Benchmark Project dives deep into the fundraising results of small (but mighty) organizations with budgets of $2 million or less. The project, now in its fifth year, included data from 155 organizations across the United States that volunteered to participate in the online survey.  

This year’s findings document some emerging general trends:

• More than 1/3 of organizational revenue comes from individual fundraising
• From year to year, organizations retain 60 percent of their donors
• About half of individual donor revenue comes from donors giving $1,000 or more
• On average, 40 percent of an organization’s board members are significantly involved in fundraising

These findings are relatively straightforward and in keeping with past results from our studies of small nonprofit fundraising. But our data about online giving reveals some counterintuitive—and important—trends.

The Dangers of Digital

It’s no surprise that online giving is becoming increasingly popular. We learned from our data analysis that the amount of individual donor revenue raised from online giving grew from 17 to 24 percent in just two years. This means that about one in every four fundraising dollars from individuals is now generated online.

In addition, we see a significant increase in the proportion of donors who choose to do their charitable giving online. Two out of every five now donate online, whereas two years ago it was one out of three.

So far, this sounds great for the future of online giving, if people are migrating to a method that’s cheaper, more efficient and more convenient for organizations. But the outlook is not all good. Our data indicates that online giving involves some harsh realities. When made over the Internet, gifts are much smaller than average; donors give only 1/3 as much online as they do overall.

What’s worse, those gifts are declining. Online donations have shrunk from 48 percent of the overall average gift in 2014 to 32 percent of the overall average gift in 2016. So even though more people give online, their donations are smaller than those given offline.

This data suggests that as organizations move more of their fundraising online, they may unintentionally sabotage their revenue. The people your organization is cultivating to donate online may be contributing less than the rest of your donor base.

That’s a potential danger, because as organizations look to save time and money by encouraging online giving, they could unintentionally be recruiting donors who give less. Even considering the costs of mail appeals or in-person visits, focusing on donors who give through offline channels may be significantly more valuable to organizations, as these donors are likely to make significantly higher gifts. The push towards efficiency may cost organizations more in the long run.  

In addition, we know that response rates to email fundraising appeals are lower than response rates to other ways of asking for support, such as in person, by phone, or by mail. According to the most recent M+R Benchmarks report, email fundraising response rates are only 0.05 percent, while in-person solicitations have a 50 percent donation rate. One reason is that email is an unreliable form of communication, with open rates typically under 50 percent and an average of 25 percent of email addresses going bad each year.

So what does this mean for the small organization that relies on individual donations? Proceed with caution while recognizing that there are definite benefits to promoting online donations. To take advantage of the positives and avoid some of the pitfalls, here are five tips:

• Keep track of individual donor fundraising stats, and monitor the trends. I’m obviously a believer in paying attention to your individual fundraising data. But if you promote online giving, following the numbers is even more important. Be sure to watch your retention rate, average gift, and response rates for dips among online donors.
• Get offline to build relationships. Once someone has made a gift online, you can make that relationship more personal by shifting offline. A thank-you call, handwritten note, or in-person visit can build a stronger connection and, over time, a bigger gift.
• Look for ways to upgrade online donors. As you cultivate your backers, be sure that you work to increase their donation over time in the same way you would an offline donor. Personalized email messages with specific asks based on an individual’s specific giving history can be effective in upgrading them.
• Test different types of online outreach. Experiment with specific campaigns versus broad requests, large goals versus small goals, staff versus board member authors, and other variables. Figure out what works for your organization and your donors.
• Create a fundraising plan with specific metrics and strategies for online donations. Fundraising plans are a great way to track stats, map out tests, and clearly communicate your ideas to your team. We also know that creating a fundraising plan is the best predictor of individual giving success.

The bottom line is that online fundraising will continue to be a reality for most nonprofit organizations. It is up to the leadership to make sure that it is done strategically and benefits the organization for years to come.

See the full fundraising trends data brief here.

Read more stories by Heather Yandow.