by Michael Stein
Online fundraising is now fifteen years old and email appeals have become a staple of the online experience for millions of Americans. Most charities that send direct mail solicitations to their donors and prospects are also sending out email appeals to those with email addresses on file.
With fifteen years under their collective fundraising belts, nonprofits have learned a thing or two about their return on investment (ROI) in online fundraising. And more often than not, these nonprofits are comparing their ROI to that achieved with their direct mail programs — assuming they have one — which for numerous decades has been our fundraising foundational benchmark.
It’ll come as no surprise that online fundraising results vary widely. Philip King, the CEO of online fundraising solutions company Artez Interactive, writes in Fundraising Success Magazine in January 2009, “While some fundraisers have struck gold — generating 10 times their online investments in as little as three months — others just break even after three years of hard work.” Lots of factors play into this including how long an organization has been building an email list, the tech savvy of key management staff, or simply the luck of riding the coattail of some viral marketing event that delivers instant results.
So what is the value of an online donor? For the past decade, we’ve seen the gradual rise in the size of the average online gift. According to the most recent online benchmark reports from both the Nonprofit Technology Enterprise Network and tech vendor Convio, the average online gift in 2009 stands at $70. This is twice the average gift that is typically received offline for events such as direct mail appeals or walk-a-thons. Add to this the very marginal cost of sending a thousand emails instead of just one email, and the mathematics of online fundraising look very good.
The two other key variables in the online fundraising equation are the size of an organization’s email list, and the online fundraising response rate. Email list size is a critical issue, since the mathematics depend on scale to be effective. The challenge for most organizations is how to build up the size of their list. This depends on how long and well they’ve been collecting emails, how often they email updates to supporters, and whether they have an active online advocacy program which is one of the most effective list generating techniques. List sizes vary widely from a few thousand for a local charity, to sizes in the seven digits at large national nonprofits with name brands.
The online fundraising response rate is how successful a nonprofit is at raising money from their list. The national benchmark (from the same earlier sources) is around 0.12%. You might think that achieving this benchmark is easy, but the devil is in the details: From lines, Subject lines, good copy, a Donate Now button, an embedded video, and a good donation landing page. Add to that an email (messaging) vendor and some savvy at creating an HTML email template. The complexity adds up fast.
This is why online fundraising has become a career choice for savvy fundraisers turned techies, or techies turned fundraisers. Having made my own living at this trade for the past few decades, I have high praise for those who labor silently behind the scenes, putting these various tools and techniques together to raise money for nonprofits. Finding a good staff person to manage these tools is a rare and valuable commodity.
A key strategic decision for organizations that want to increase their online fundraising investment is to decide whether to outsource that work or hire someone in-house. The industry of service providers willing to assist with online fundraising is vast, and has become specialized by verticals such as unions, alumni networks, environmental groups, conservatives, and others. The competition for business in this service industry is huge, with firms vying for lucrative contracts.
Finally, the technology tools themselves provide a high cost variance. It’s become relatively inexpensive to build a basic website or send out simple emails, but succeeding with online fundraising requires a more complex process of integration. Integrated online solutions are the growing trend, and vendors such as Convio, Blackbaud, Democracy In Action, Wild Apricot, MemberClicks, eTapestry and numerous other web-based systems are now available to send emails, process online gifts, and track donor data. Costs range from $100 per month for some of the solutions, to several $1,000 per month for more complex integrated systems, and the right solution for you will depend on what you’re trying to do online and the size of your email list and online audience.
Most of this discussion about the return on investment in online fundraising has presumed that the email appeal is the technique being used to drive the giving process, with the size of the organization’s email list being the scalable variable. Fast forward to 2010, and new opportunities for online fundraising have emerged in online social networks Facebook and Twitter, and mobile fundraising. These digital platforms are playing a new role in the online fundraising equation, and their value is still a hot debate topic and subject to real world testing.
Writes Donordigital founder Nick Allen in a recent article in Mal Warwick’s Newsletter: “Facebook, Twitter, iPhones, and whatever comes next are going to play an ever larger role in fundraising, even if you can’t easily measure the ROI from social communications.” Nick urges nonprofits to “dedicate more staff time to building relationships with donors and other supporters who use the networks, and try to figure out the revenue stream as well.”
Digital fundraising is alive and well, and pushing new boundaries with social media and mobile tools. This fast evolving medium reminds us that just as technology is changing, so are donors’ interests and preferences in how they want to be involved in the fundraising experience. Paper-based fundraising has remained relatively unchanged for several decades, while digital fundraising is reinventing itself every few years, trying to keep up with the attention span, interests, and devices being used by the average donor.
Philip King of Artez Interactive: “Any way you look at it, your digital ROI should beat every other direct channel at your disposal … hands down. In comparison to your phones, your mail and your canvassing, every dollar spent on digital should produce more dollars for your cause. Why? Because the average gifts will be higher, and the cost to get each gift will be lower. As an added bonus, you’ll be saving many, many trees!”
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