Raising Money Online - Fact or Fiction?
A recent study by a large tech research organization indicated, of the 180,000 "Causes" on Facebook, the average funds raised through this online method for each charity over the course of a year, was only $ 1000.
Really?
This seems slightly outrageous given the excitement and passion circulating about using Facebook by nonprofits for online fundraising. It seems everywhere you turn we have charities urging us to "like" them, to support their efforts. Daily my social networking news feed blows up with requests from friends to give to the> insert cause here <organization to help them cure, fight, win, save, grow or change.
Before I get angry comments by those who might find these remarks slightly antagonist, I am NOT disparaging the nonprofits for trying. Good things do come from visibility and advocacy in this way.
It just does not look like any of those good things include money, and I wanted to know why.
To be clear on this subject I recently underook a (very unscientific) research project of online fundraising by United States based nonprofits. I searched Web 2.0 portals designed to help nonprofits raise funds online. Here is a list of those I identified and used in this study:
Causevox.com (Beta)
Changingthepresent.org
Connecttocharities.com
Crowdrise.com
Donorschoose.org
Firstgiving.com
Fundrzr.com
Give2gether.com
Giveo.com (Beta)
Globalgiving.com
Independentcharities.org (givenirect.org)
Jolkona.org
Jumo.com (Beta)
Justgive.org
Mtdn.com (MakeTheDifferenceNetwork)
Networkforgood.org
Pledgie.com
Razoo.com
Sixdegrees.org
Tuttidare.com (Beta)
Yourcause.com
In addition to these, I discovered four more sites currently in beta to be launched this year (2011), including one called 'Supporter Wall' - I presume to model itself after Facebook Causes.
This list is in no way exhaustive, nor as I said scientific, so all you data wonks, do not get all geeky on me.
Some observations
Most of these vendor developed online fundraising sites have a short life history, from 2000 to the present. One site started and closed within a few years (Make the difference network). Firstgiving.org, which also has a UK version called Justgiving.org, and Network For Good have the longest history with the years 2000 and 2001 claimed as launch dates on their sites.
When a gift is made through one of these fundraising portal sites to your charity, the gift is held in a donor advised fund owned by the company. Despite the web address extension of.com on some of them, most of these vendors have a 501C3 status organization as an affiliate, which handles the contributions, for tax relief purposes. When a gift is made to your charity, the tax receipt is from the vendor's 501C3 organization, not from your charity. Of course you are encouraged to send a thank you, but the receipt is not from you to your donor, it is from Network for Good. This may mean something to some donors who want to be 'counted' as having given to your cause, but for most they may not notice. The distribution of your gift from this donor advised fund is not instantaneous-most are scheduled as a once or twice per month distribution. These donor advised funds are usually managed by investment firms. No information could have found on where the interest from these temporarily held funds goes. I would imagine they might be part of the revenue stream for the portal vendor. In one interesting case, the corporate officers of a certain portal vendor were found to also be the principals of the investment firm that manages that particular ports donor advised fund.
The big gorilla, based on longevity and reach with nonprofits is Network for Good. They have an interesting B2B model that probably helps with their revenue stream for operations. Many of the newer and beta sites listed above, indicate that they use Network For Good to process and manage their contributions (as the 501C3 donor advised fund), for which a "grant" of 4.75% is paid to Network For Good, usually by the charity receiving the donation. It raised the question, "Then how are these particular portal vendors earning money?" Probably through data analytics marketing, like Facebook, and through ad sales. If you are not paying for a service, you are not the customer, you are the product.
One interesting site is the Independent Charities of America (ICA) site at givenirect.org, which offers individuals the ability to create a personal foundation, to which they can invest an initial low amount of $ 250, all contributions being tax deductible and dividends can be made at the donors convenience with only 5% of the money in your donor advised fund needing to be distributed annually. The site does not have a social networking capacity or connections with charities, although it links to an outside source for charity information. Beside ICA, the other vendors reviewed are set up to offer multi-cause, multi-organizational opportunities, most of which (but not all) require a charity to be a registered IRS entity, with a position on Guidestar or BBB. Only two that I reviewed allowed anyone to raise money for anything - personal causes (a new boat ??), medical bills, weddings, etc.
I then reviewed the number of nonprofits each fundraising portal vendor had reported as 'registered' on their site or the number of charities which they had distributed funds to in the year 2009, as well as the total amount of money raised through their portal. As expected those vendors who were.org or had listed the.org affiliates who managed their funds, were easier to find data on, getting it directly from their 990's off of Guidestar. The few corporate sites had limited data available for review. Of those portals where data on number of charities served and amount raised could be found, the avg raised per year / per charity through their online portal revealed the highest amt was just about $ 30K per charity on avg. and the lowest was $ 470. In going back a few years, spikes can be seen that I can only absorb correlated with global disaster funding, for which online giving seems the go to measure.
Let's pause for a moment here.
If the Network for Good is eleven years old, has a breadth of experience and professional technicians leading its efforts, has a global reach, and it can not help the nonprofit to raise more than $ 30K per year on avg ... what's wrong with this picture? A good annual appeal direct mail campaign would be more successful.
Ruminate on this for a minute and we will review the fees charged to charities for this privilege.
In the list reviewed, fees range from a low of 3% per transaction to a high of 15%. One site took no fees but required a $ 9.oo per project fee from the charity. Some sites also required credit card processing fees on top of transaction fees. Some sites asked the donor to consider covering these costs for the charity. All told, the fees charged are, as with everything, buyer beware for charities when it comes to choosing to engage in online fundraising using these portals.
I do not know about you, but if I had to pay $ 199 per month for my charity to be listed and an additional 3% per donation, plus credit card transaction fees, not to mention the back office costs of staffing for management, gift processing, stewardship etc. I would want evidence of a significant return on my investment. * Side note- now on these portals did I find any pitch to support the financial value proposition of charities using such a site for fundraising.
Back to our review. Given the advent of Facebook, Myspace, Friendster, LinkedIn and other social networking sites into our culture, I expected to see a lot of these vendors offering a social networking aspect to their services. And they did not fail me, although they are not as advanced as I would expect, nor as would be beneficial. While 1/3 have no social networking aspects, 1/3 have what I would term a simple or basic social networking component to their sites, while 1/3 use existing Facebook links and - yes - Causes, exclusively. Some include a game of collecting or placing badges on current social networking sites like Facebook, twitter etc.
All of those vendors reviewed offer or require a pitch page that charities use to highlight their organization or their project or, in two cases, requests for funding for very, very specific needs: pencils, books, etc. This allows the donor to get most of the info right on the vendors portal without having to bounce off to the charities site, although most offer the option of placing a link to your organizations homepage on your pitch page.
Donorcentric? Many of the sites offer intent options to the donor during gift processing, but not the majority. This is, in my humble opinion, a great defect in these portals. It undermines what we in the industry know about donor giving- that it is specific to the interest of the donor, NOT the need of the organization. I guess they rationalize this, by considering the potential for massive volume of possible donors- like throwing **** against a wall and knowing some of it will stick. Some limit the gift intention choice for the donor by project as defined by the charity. The newest contender Jumo.com (by Chris Hughes the co-founder of Facebook) does not currently offer donor intention option, but it is in beta and soon could.
One other * missed * opportunity by these portals in being donor-centric, is in offering to the donor (or requiring of the charity) gift use reports for each donation. Very few offer this option, although some do require charities to show evidence of their project completion as defined on their pitch page. Donor intention is a very hot topic and something that quite often will keep donors from contributing, out of fear that their gift will not be used as intended. Currently, there is no system to screen for that through the checks and balances surrounding nonprofits in the US. The annual tax audit nonprofits are required to have only ensure that accounting methods are followed accurately and that the gift intention was followed when depositing and allocating the money, not necessarily that the gift was then used to purchase the product or build the building. Would the benefit and value of required gift reports bring more donors to the online system of giving?
Conclusions? These vendors are well intentioned and I applaud them for trying. Most of these portals are built on direction from nonprofit industry experts, but they fall short of being technologically cutting edge. Others are developed by tech rock stars, who may have no personal experience or inside knowledge of how a donor thinks, feet or acts, or what best practices exist in raising money from individuals for a charitable group. All portals are directed toward the relationship between the portal vendor and the charity - and all but ignore the needs of the donor!
Online fundraising needs to continue to be examined and iterated. How are we currently using social media to raise funds as part of an overall revenue budget and to what end results? How can online fundraising better mimic and support our real world relationship building efforts with our donors? Is there a niche for online fundraising that we have not even yet? I do not believe we are there yet with any of this - online giving results we are currently seeing are unremarkable. We need to keep shaking it up, iterating and evolving to determine what 'IT' is that might make this a productive and supportive tool in our arsenal as fundraisers.