e-Fundraising

Print Share on LinkedIn More

“Plus ça change, plus c’est même chose—The more things change, the more they are the same.” This observation by the French journalist, Alphonse Karr (1808-1890), tells us not to be seduced or dismayed by the appearance of change, but to recognize that fundamental
qualities endure.

The revelation that upwards of 100 million Americans (roughly half of the adult population) are using the Internet each week has led to speculation that this traffic may represent a vast new funding stream for nonprofits engaged in social change. According to a recent report by the W. K. Kellogg Foundation, the rapid proliferation of these websites “holds great potential for helping to make philanthropy more ubiquitous.” A host of for-profit “dot-com” businesses and nonprofit “dot-orgs” has opened websites offering Internet-users the opportunity to give to the causes of their choice.

However, potential does not necessarily translate as, “if you build it, they will give.” Before trashing your Rolodex and donor lists, take a closer look at the claims and evidence of Internet opportunities.

The enthusiastic reports of mushrooming online fundraising opportunities reflect an optimistic assessment of the long-term potential for Internet use. Proponents of “e-philanthropy” invariably point to the impressive success story of $2.8 million raised on the Red Cross website last year, or the $300,000 generated by the collaboration between Toys-for-Tots and e-commerce retailer, Amazon.com.

There are at least eight ways for a nonprofit to raise money online. Internet consultant Nick Allen groups these strategies under the broad categories of direct (do-it-yourself) and indirect fundraising (out-sourced) methods.

Direct fundraising strategies involve:
• general appeals from your organization’s website,
• general appeals through your organization’s e-mail newsletter,
• e-mail letter appeals targeting your existing donor base, and
• selling a product online (t-shirts, note cards, etc.).
Indirect fundraising methods include:
• commissions from sales via an “online shopping mall,”
• one-shot, or periodic online auctions,
• charging fees for placing content or advertising from other groups on your organization’s website, or
• registering with a dot-com providing online services to prospective donors.

Direct online fundraising generally involves either driving people to your website or reaching out to them through e-mail. Funding appeals included in an e-newsletter or e-mail targeted to your donor base demonstrate the highest rate of successful returns, especially if the cause involves some degree of urgency. Similarly, many organizations are offering memberships, premiums, links for making donations, and opportunities to get involved directly from their web pages.

Accepting online donations will entail a considerable investment of time, attention, and expense. You must be able to provide: a high-speed Internet connection, credit card security, and real-time credit card verification, an Internet credit-card merchant account, and the capability to monitor your site 24-hours a day/7-days a week. In addition, 39 states will required you to pay registration fees for online solicitation. Luckily, you can avoid most of the expense and headaches by contracting (outsourcing) with a “payment service provider,” often involving a modest fee per transaction.

Of course, the other alternative is to simply provide a downloadable hard-copy of a pledge or membership form, but this “clip and mail” option defeats the original purpose of extending the convenience and security of “instant giving” to your online donors.

With the charity portals, the dot-com assumes the task (and risks) of attracting browsers to the site and then directing them to a list of possible recipients—you may be one of many. Paying a modest fee-per-transaction has the advantage of shifting the burdens of payment processing, site promotion, and maintenance onto the dot-com host. The downside is that most dot-com sites are simply offering repackaged e-commerce tools enabling credit-card transactions. Trading intimacy for efficiency, the marketing logic inherent to this approach demands little or no direct interaction with the would-be giver—treating them like buyers at a yard sale. The Kellogg report suggests that, for nonprofit advocates of change, the greatest challenge posed by the Internet is striking a balance between “high-tech” and “high-touch.”

As the name implies, the e-commerce portals (a.k.a., “shopping malls”) enable an online shopper to purchase an item with the understanding that a percentage of the sale is earmarked for charitable donation. Though still in its infancy, two potential drawbacks of this approach are that the size of the payout check depends on the volume of online traffic, and IRS guidelines currently disallow charitable deductions for these purchases.

In the cold equation of the marketplace, “profit-or-perish” is now the key dynamic in the frenzied growth of the Internet economy. The San Francisco Chronicle (6/23/00) reported that “about two dozen dot-coms have gone out of business in the past two months; at least three dozen have cut staff in response to changed market conditions.” Industry insiders predict that only three-in-ten Internet start-up companies will succeed—one-fifth dying in their first year, half disappearing within three years. The evidence suggests that the current glut of e-philanthropy sites will be experiencing a similar shakeout in coming months.

Internet strategy expert Michael Stein suggests that the e-philanthropy portals most likely to survive the next round of cuts are the multi-purpose sites offering a range of services and information to nonprofits and the public. To hedge against the uncertainties of the market, nonprofits should be clear about their expectations from online fundraising, only negotiating short-term contracts, demanding control over the content appearing in their web-listing and access to their donors, and developing an exit strategy if the relationship sours. Finally, nonprofits should consider joining the ongoing discussion on e-fundraising with their peers (www.gilbert.org/fundraising) and consider subscribing to the Gilbert Center’s informative online weekly, the Nonprofit Online News.

So far, we haven’t told you anything outside of your fundraising experience—and that’s the point. As inspiring as the example of the Red Cross may seem, the impassioned assertions of e-philanthropy advocates tend to reduce its fundraising success to the mere fact of an Internet presence, ignoring or downplaying the importance of other factors. Significantly, the $2.8-million generated by the Red Cross website was a mere 3.5 percent of the total charitable contributions it raised by traditional methods in 1999.

Similarly, a national survey of the 400 largest nonprofits conducted by The Chronicle of Philanthropy (6/15/00) found that online fundraising generated nearly $7-million in 1999—an eightfold increase over the previous year. However, of the 252 organizations responding, only 91 of them reported any online income, and this accounted for less than one percent of total funds raised through traditional means. This trickle is hardly the prophesied torrent.

Another study, conducted for CMS Interactive on “socially engaged Internet users,” found that “the potential for online activism and fundraising is vast, bringing a new and diverse generation to the effort.” Declaring that the “potential universe of socially engaged Internet users is as large, or larger, than the direct mail universe,” the study also noted that “most of this potential is yet untapped—again, potentially.

When queried by CMS about their “most important” concerns, online givers indicated a greater interest in convenience, institutional reputation, accountability, and demonstrated achievement than did their direct-mail counterparts. These findings suggest that the evidence used to bolster the claims of e-philanthropy enthusiasts is probably better explained by the reputation the Red Cross has built by over the course of its 120-year record of achievement in disaster relief and other core programs, as well as by the sense of urgency implicit in these appeals.

The CMS profile of “progressive direct mail donors” revealed a sixty-something self-described liberal Democrat; in contrast, the average age of an online donor was a young forty-two. Politically and ideologically, the online donor was just as likely to be a Democrat (39%) as a Republican (41%), and evenly split between liberals (43%) and conservatives (44%). Nevertheless, CMS concluded that “the Internet is not the medium for everybody,” noting that only 30 percent of the online population (estimated as 15-million people) was receptive to an e-philanthropy strategy.

Seattle-based authority Michael Gilbert of the Gilbert Center insists that “websites are not the killer application of the Internet; e-mail is.” Gilbert, who hosts an Internet listserv on e-fundraising, reports that people are realizing how e-mail reflects relationships in real world: “When engaging a donor nonprofits are saying, ‘Hi Bob, would you like to join us . . . you gave $100 last time, would you consider giving $200?’ Building a relationship with a person is not something you can do from a website.”

Gilbert maintains that rather than expecting your website to attract a flock of new donors, nonprofits should begin examining ways for easing the online transition of their existing donor base. “Why? First, it can reduce transaction costs (printing, postage, phone calls). Secondly, operating on the assumption that many new donors will be similar to your old donors, if you set up online mechanisms supporting and nurturing relationships with today’s donors, you’ll already have the systems needed for the donors of tomorrow.”

“A successful online fundraising strategy is one that is aligned with the real-world fundraising and campaign activities of the organization,” Stein affirms. “In other words, online fundraising activities have to ride the coattails of the organization, and not the other way around.”

Confronted by the realities of widespread social change and rapid technological innovation, the good news for nonprofits is that technology is no substitute for old-fashioned human relationships. ‘Net-savvy nonprofits are moving beyond the hype about e-fundraising to explore its promise while reaffirming that the bottom line of success continues to be a clear-headed strategy for identifying donor prospects and then cultivating personal relationships with them based on mutual respect and reciprocity.

Allen, Nick. 2000. Fundraising on the Internet: Using E-mail and the Web to Acquire
and Cultivate Donors. The Grassroots Fundraising Journal. Vol.19, No. 3 (June).
Craver, Mathews, Smith and Company and The Mellman Group. 1999. Socially Engaged Internet Users: Prospects for Online Philanthropy and Activism. Arlington, VA: The Mellman Group for Craver, Matthews, Smith and Company.
Reis, Thomas K., and Stephanie J. Clohesy. 2000. e-Philanthropy, Volunteerism, and Social Changemaking: A New Landscape of Resources, Issues, and Opportunities. Battle Creek, MI: W.K. Kellogg Foundation. (February).

Ty dePass is the newest member of the editorial staff at the Nonprofit Quarterly. Deeply committed to social justice issues, he is a veteran anti-poverty warrior, with experience as a grassroots organizer, popular educator, and media consultant. He brings a keen sensitivity to matters of race, class, and culture—and deep appreciation for the Afro-Cuban oral tradition reflected in his writing.