The End of the Beginning of Online Giving

March 4, 2019 Steve MacLaughlin

2019 marks 20 years since online giving first began in any significant way. In 1999, Blackbaud pioneered the nonprofit technology market by introducing reliable, secure, and donor-friendly online donation forms. Fast forward 20 years to today and online giving now represents tens of billions of dollars in charitable giving each year.

The last three years, in particular, have shown how online giving continues to be a growth engine for fundraising in the nonprofit sector. Since 2016, online fundraising has grown 17% among nonprofits in the United States. We are 20 years into this online giving adventure and there is still a tremendous amount of up-side for nonprofit organizations.

Online Giving Growth

Here is a short list of innovations that happened after online giving began in 1999: Airbnb, Android, Bitcoin, Chrome, Dropbox, Etsy, Facebook, Github, Hashtags, iPod, iPhone, iPad, jQuery, Kindle, LinkedIn, MySpace, Netflix, Oculus Rift, Pinterest, Reddit, Slack, Tesla, Twitter, USB Flash Drive, Venmo, Wii, Xbox, YouTube, and the Zettabyte.

Many of these innovations have been around long enough that most are common household names. Online giving is older than all of them and yet in some circles of the nonprofit world it is treated like the new kid on the block.

Stop, Start, and Continue
Let’s stop acting like online giving is still a new thing – it’s not. Let’s start embracing the fact that the next 20 years will bring tremendous digital transformation in the nonprofit sector. Let’s continue to focus on delivering multichannel giving experiences for donors

Based on research from the Blackbaud Institute’s Charitable Giving Report, online giving in the United States represents 8.5% of total fundraising revenue. That might seem low, but it’s actually on track with other online trends. As a point of comparison, the U.S. Department of Commerce estimates that e-commerce sales in the third quarter of 2018 accounted for 9.8% of total sales. Donor behavior is keeping pace with consumer behavior. (Hint: Donor behavior is consumer behavior.)

Online Revenue Trends

Let me also suggest that we need to stop placing a wall between offline and online giving strategies and tactics. While many nonprofit professionals are digital immigrants, we’ve had 20 years now to learn the language and customs of the digital native world. The data shows that both digital immigrant and digital native donors have embraced the multichannel wonderland.

There is perhaps no more telling data point than this: online donors 65-years and older have the highest retention rate. And donors that are 55-years and older have the highest retention rates for both online and offline giving. This online versus offline wall is mostly in our own heads. It’s in our org charts. But the data clearly shows that donors do not see themselves as online or offline — they’re just supporters who don’t care about the attribution games nonprofits play.

Common Best Practices Remain Uncommon
One would like to think that after 20 years of testing, more testing, conferences, webinars, and pithy blog posts about online giving that there might be wide adoption of best practices. Sadly, that is not the case. Studies done by Dunham+Company in both 2013 and 2018 reveal that even many leading nonprofit organizations have struggled to implement common best practices.

In many cases, we are not dealing with unknowable or unsolvable mysteries of the online giving universe. Instead, there are some fundamental best practices that improve the donor experience, reduce friction, and produce better results. For example, 65% of charities still do not pre-select a mid-range gift on their donation forms even though the data shows this approach performs better.

Donor Channel Switching

For most of the last 20 years, we’ve also had an ongoing debate whether online giving cannibalizes offline giving. Thankfully, we have lots of data to settle the argument. Only 3% of offline acquired donors switch to give online. Compare that to 17% of online acquired donors that switch to give offline. One might argue that offline cannibalizes online – but this is equally silly.

If we were to look at the engagement channels and the transactional channels, we are likely to see a symbiotic relationship between online and offline. Do not confuse the channel of engagement with the channel of the transaction. Do not fall for the false choice of online versus offline.  Do not let someone talk you into dumping all offline engagement in favor of online. Do not let someone else convince you to drop online for offline. High performing nonprofits know the value of using both.

The future will reward nonprofits that move on to next generation practices designed to optimize the entire giving experience. Yes, we are seeing some parts of the nonprofit sector doing a much better job of engaging, communicating, optimizing, and acknowledging donors through digital channels. But expect to see a widening gap in performance between organizations that are continuously optimizing and those that are standing still.

Mobile is the New Normal
There are 7 billion people on Earth and 5 billion of them have a mobile phone. Compare that to about 2 billion personal computers – and not growing. It should come as no surprise that giving on mobile devices has seen tremendous growth in the past few years. Since 2009, online donations made on mobile devices have grown from 9% of all transactions to 24% in 2018. Mobile is the new normal. Did you get the memo?

Online Donations Made On Mobile Devices

It is important to separate the difference between SMS text-to-give and mobile device giving. SMS text-to-give in the United States experienced a major spike following the Haiti Earthquake in 2010 but has never achieved inflated expectations. It was the right medium, but the wrong method. By contrast, online gifts made on a mobile device have only continued to grow.

To stay relevant into the future, all our digital communication—from our websites to our emails to all other digital engagement channels—must be optimized for mobile devices. Nonprofit organizations will need to navigate the shifting tides from desktop to mobile. This shift is already in motion and it is rapidly accelerating the importance of a strong mobile strategy.

Year-End is A Dead End
If someone tells you to focus most of your online giving efforts on the last few days of the year, then you should run away as fast as you can. It’s a trap! Back in 2012, I wrote why nonprofits must avoid the year-end online giving trap. Procrastination is not a strategy. Diversification is the key to sustainable fundraising success.

The data is now showing that I was onto something. Since 2012, the percentage of online giving — and overall giving — that happens in December has decreased. Yes, that’s right. In 2018, only 17% of overall giving happened in December and a new low of 17.3% of online giving took place in December. Smart nonprofits have started to shift away from the crowded inbox that is end-of-December giving campaigns.

Socializing with the Crowd
Crowdfunding and peer-to-peer fundraising are not new. Back in 1914, fundraising pioneers Charles Ward and Lyman Pierce had a crowdfunding campaign that raised $4 million in a week in New York City. Peer-to-peer run, walk, and ride events have been around for more than 30 years. But digital technologies have transformed these techniques in amazing ways.

A decade ago, we found through research that peer-to-peer fundraising combined with social media was a form of giving alchemy. People give to people and this is hyper-activated with social media A proliferation of digitized, socially-connected giving has followed, and it’s known by many names: Crowdfunding. Peer-to-Peer Fundraising. Independent Fundraising. Do-It-Yourself Fundraising. Consumer-Led Giving.

Social Media and Giving

The future of fundraising is distributed, sustainable, and opportunistic. Social media will continue to be a channel for both engagement and giving. The cost to engage new and existing supporters on these channels will continue to increase. A changing social media environment is going to drive changes in strategies and tactics. The future of giving and social media is likely to be less about disintermediation and more about decentralization.

The Next 20 Years
Some people are going to spend the next 20 years talking about the death of direct mail, email, social media, online giving, peer-to-peer, and everything in between. I know this because these same people have been talking about the death of all these things for the past 20 years. They were wrong then and they’ll be wrong in the future.

I will now break my rule of not attempting to predict the future. 50% of these predictions will be dead wrong. 25% of these predictions will be mostly right. 25% of these predictions will be spot on. Choose wisely.

Mobile devices will become the primary mechanism for digital giving. (Oh, and the whole “online” distinction is going to disappear.) People will manage, monitor, and measure their philanthropic activity primarily on a mobile device. When they engage on an issue or interact with a nonprofit, it will happen more often than not on a mobile device.

Privacy and security concerns will create additional regulations around the use of data. Some form of GDPR will come to the entire United States – not just a few states. Get supporter consent – now. At some point in the future, there will be a breach of a nonprofit organization’s data that puts all organizations in a very uncomfortable situation. Get your data governance practices togethernow.

Generation Z, those born between 1995 and 2012, will make the connection between gaming and giving. Livestream fundraising will become a big thing. Augmented Reality will take storytelling to an immersive level that allows donors to see the impact of their giving like never before. Giving through the use of drones is unlikely to be a big thing.

Donor-advised funds (DAFs) will no longer be just for wealthy donors. For a long time, we’ve talked about how organizations must become more transparent and accountable to their donors. Time is up. Donors are not going to wait any longer and DAFs are one way they will disrupt the status quo.

Data literacy will become one of the most important skills for a nonprofit professional to possess. (Add to that agility and empathy.) Can you read a chart? Can you explain what is happening based on data? Can you balance quantitative and qualitative information? Can you make data driven decisions? Build these skills and hire for them too.

Artificial Intelligence will help sequence the giving genome. That does not mean that robots will replace fundraisers, marketers, and everyone else in the nonprofit sector. It means that engaging the right people at the right time with the right message using the right medium will be aided by AI. The use of machine learning and algorithms will also help automate mundane tasks and recommend high-value actions.

We are at the end of the beginning of online giving. The future of online giving is inextricably tied to the future of charitable giving. The future of online giving will be completely unrecognizable from the past. This should scare you and energize you – both at the same time.

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