Online Fundraising on the Rise - Target Analysis Group and Donordigital Report finds

Lori Halley 08 March 2007 0 comments

While the Internet, broadband networks and email have grown to be the new fundraising tools for non-profits over the past several years, their potential has not been reached - in terms of the amount of money raised and the number of organizations fundraising online.

On that subject, there's an interesting new study out by Target Analysis Group and Donordigital, 2006 Internet Giving Benchmarking Analysis, providing detailed research on online giving.

Analyzing 12 large non-profit organizations, the study showed that:

  • Online donors are a potentially very valuable new constituency for non-profits, and that they behave differently from traditional direct mail donors.
  • Online donors are much younger and have higher incomes than direct mail donors. They tend to join at higher giving levels and to have higher lifetime giving.
  • Online giving is not currently well integrated with direct mail efforts in a cohesive, productive way, and there is evidence that online donors' higher giving dollars may mask issues with cultivation and renewal.

Here are some key findings:

1. Growth in online donors has increased rapidly in recent years
Direct mail remains the largest source of revenue, and online donors still make up a small portion of overall donor files at most organizations. However, online donors have been growing quite rapidly. Median cumulative growth has been 101% over the past three years, compared to 6% growth for offline donors. In particular, relief and animal welfare organizations saw significant spikes in online donations in the past two years due to tsunami and hurricane-related giving. Online giving's share of overall giving for 9/11 was less than 20%; for Tsunami, it was about one-third; for Katrina, it was about 50%.

2. The internet is serving as an acquisition source for donors
Acquisitions account for the majority of online donations for many organizations. For most of the organizations in the study, more than 50% of the online donors were new. A median 16% of all donors acquired in 2006 were online donors. And online gifts make up an even greater portion of acquisition revenue for many organizations. In fact, for half of the project participants, online gifts accounted for 30% of all their new revenue in 2006. Direct mail was the most dominant acquisition channel for almost all organizations, with the internet as the second-most dominant identifiable channel.

3. Online donors are younger and wealthier than offline donors
Online donors tend to be spread relatively evenly through all age groups, while non-online donors are heavily concentrated in the 65+ group. A median 13% of their online donors were 65 or older in 2006. In contrast, a median 47% of offline donors were 65 or older. The proportion of online donors who had incomes over $100,000 was greater than the proportion of offline donors who earned that much.

4. Online donors give more than offline donors
Online donors join at significantly higher giving levels, give substantially more revenue per donor when they renew or reactivate in subsequent years, and have much higher cumulative lifetime revenue over the long term than donors who do not give online. In 2006, the median average online gift was $57, in contrast to a $33 average gift to all other sources. In fact, for 10 participants, revenue per donor from online donors was more than double that from offline donors. As we have seen, online donors tend to have higher household incomes, which almost always correlates to larger gifts regardless of channel. However, online donors still give more than offline donors even when they have the same income level.

5. Online donors are slightly less loyal - they renew at lower rates than offline donors
This is more evident for new donors; as loyalty to the organization increases, renewal rate differences diminish. For donors who were new in 2005, those who had given online renewed at a median 26.5%, while those who had not given online in their acquisition year renewed at a median 30.4%. Retention rates were essentially the same for 2005 multi-year online and offline donors.

6. Online giving at most organizations is not well-integrated with direct marketing efforts
Most non-profit constituents are established direct mail donors who rarely give online. The longer a direct mail donor has been giving to an organization, the less likely they are to start giving online. Direct mail donors do not renew online, and lapsed direct mail donors do not reactivate online. But, the converse is not true.  Many online givers gave through direct mail when they renewed.  The consensus in the study was this was not so much because the donors liked giving through direct mail, but rather that was how they were solicited because the orgs didn't have an active online renewal strategy. For donors acquired online in 2005, only a median 4% also gave direct mail gifts in their acquisition year, compared to 46%. The proportion of these donors who gave online also dropped correspondingly, from 100% in 2005 to 50% in 2006.

7. Multiple-channel donors have higher revenue and retention rates than single-channel donors
Most donors only give to one giving channel in a single year. Online donors are more likely to give to more than one channel than offline donors, but the majority still give to only one channel. For all organizations, a median 16% of their online donors and 6% of their offline donors gave to more than one channel. Although there are fewer of them, donors who give to multiple channels have much stronger performance in several key measures than donors who only give to one channel. This is true for both online and non-online donors, and is true even when controlling for donor giving frequency.

8. Online-acquired donors have higher lifetime value than mail-acquired donors.
Acquisition gift amount is a major determinant of donor lifetime value. The typical online donor is far more valuable to organizations over the long term than the typical direct mail donor on a gross revenue basis. For example, for new donors in 2004, the typical online donor was acquired at the $25-34 level, while the typical mail-acquired donor was acquired at the $15-24 level. Three years later, in 2006, the average three-year revenue per donor for these 2004 acquisitions was $125 for online-acquired donors, versus only $62 for mail-acquired donors. However, when controlling for acquisition gift level, mail-acquired donors actually yield higher revenue per donor over several years than online-acquired donors.

What does all this mean for your non-profit?  As online giving continues to grow, we you need to create new strategies and fundraising plans to effectively attract and cultivate younger donors. Also, because retaining the loyalty of younger donors can be hard, you should find new ways of making the experience of giving online appealing.

What is your non-profit doing to attract younger donors? Does your organization go out of its way to recruit younger donors? Share your comments on this topic and we'll profile your organization on our blog. 

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Lori Halley [Engaging Apricot] Lori Halley [Engaging Apricot]

Posted by Lori Halley [Engaging Apricot]

Published Thursday, 08 March 2007 at 6:35 PM

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