The Growing Potential of Online Giving
Never has your 18 dollars been worth so much.
The way donors and nonprofit organizations relate to each other has changed drastically over the last few years, putting more power into the hands of every individual. Last year’s economic crises have brought these changes into sharp relief, as fewer donors have funds to spare and many organizations struggle to survive.
Globalization, the growing influence of social media, and the unparalleled success of Barack Obama’s presidential campaign have led to an increased focus on the social impact of giving, and therefore a growing democratization of philanthropy. While these changes may sound appealing for potential donors, not everyone views these trends positively. They create new challenges, particularly for organizations and potentially for society at large. The Jewish community is faced with these new realities as well, and must similarly respond if it is to successfully reach its fundraising goals.
Valuing Every Cent
Consumers have grown used to seemingly endless choices and comparison shopping to find the best deals. So too, today’s donors want value for their dollar— social value. They want to understand what exactly their contributions will accomplish and to make informed decisions. If, once upon a time, organizations were able to raise funds simply by explaining the important causes they serve, today they must be able to pinpoint the exact impact of any given donation. “You don’t just buy a cup of coffee anymore,” explains John Hecklinger, Chief Program Officer for GlobalGiving, an online giving site. “If you like, you can have a cup of free trade coffee from a particular town in Guatemala. People expect an experience when they spend money on products, and the same is increasingly true for donations.”
The shift towards high-impact gifts has made giving more attractive for younger donors and those who can only make small donations. When a donor knows that even his or her 10 dollars counts and can make a concrete difference, he or she is more likely to reach for the wallet. Jeremy Goldberg, a former Obama campaign fundraiser and nonprofit consultant, points out that this individualized approach requires engaging donors by providing them with information and soliciting their input, not just asking for money, no matter how small the amount. The Obama campaign did so brilliantly, he explains, because it gave individuals a sense of ownership.
These smaller donations will be given via the internet, according to a 2006 study by DonorCentrics. The last 10 years have seen explosive growth in online giving. In 1999, just $200 million was donated online, but by 2007 that number had reached $10.44 billion in the United States alone—a growth of 5200 percent. Globally, this number is estimated at over $20 billion. Still, it is important to note that this number represents just 3.4 percent of all giving; most money is still donated offline (Ted Hart and Harvard University, Initiative on Social Enterprise, 2007). The millions of online donors may represent a high number of people giving money today, but they do not yet account for a significant proportion of the money going to social causes.
When small donations are pooled together, then of course the social impact of each gift is magnified. Over the last few years, a number of websites have provided an outlet for the general public to make small or medium-sized donations. Sites like GlobalGiving, DonorsChoose.org, Network for Good, Razoo, and JustGiving have enabled individuals to target and personalize their giving online in ways that were never possible before.
And in the Jewish world?
Jewish and Israeli organizations, some of which suffered drastic losses in last year’s economic downward spiral and the Bernard Madoff scandal, are, by many accounts, behind others in the nonprofit sector in responding to the trends. In recent years, very little effort has been made to reach small donors, and many have not fully leveraged the online options to engage more supporters. “Jewish organizations are particularly donors because they simply have never needed to do so until now,” Goldberg explains. “The expertise required to reach this population is not the same as cultivating mega-donors, and many organizations are not wired for this kind of work.” It is not surprising, many say, given the unique nature of the Jewish community. In a recent speech in Jerusalem, Jeff Solomon, President of the Andrea and Charles Bronfman Philanthropies, pointed to the strong notion of community among Jews, coupled with the unwelcoming attitude of American high society toward Jews in the early to mid-20th century, that led to the Federation system’s reliance on a small group of mega-donors. He explained that philanthropists would give to the community, and the community would decide how to allocate the funds.
Today, some organizations have begun to take steps to engage smaller donors online, placing new donation components on their websites, and using social media, such as Facebook and Twitter, to reach more donors. For example, instead of holding its annual dinner, Hillel celebrated its 85th birthday with a virtual banquet with video and conference calls that engaged potential supporters globally and encouraged gifts of all sizes. Even Federations have introduced online giving to their websites, and many, including Boston, Colorado, and Los Angeles, have introduced tools to help donors understand the value of their donations—starting from 18 dollars. Some Israeli and Jewish organizations have begun to leverage existing fundraising sites, and most recently, JGooders.com was launched to serve as an online giving platform specifically for the Jewish and Israeli nonprofit sectors.
Looking to the Future
Within the Jewish community, some community leaders are concerned about the impact of highly-targeted giving and the increased focus on narrow projects. They argue that it puts the community at risk because it reduces the sense of interconnectedness. “The emotion of community is lost,” said Solomon, “Donors would put a chip in their checks to follow them if they could.” Furthermore, critical but less “sexy” funds, like the ongoing support of community services, may struggle for funding when competing with new and exciting projects for each individual’s donation. Jewish Federations, some point out, are able to make sure that all community needs are met, regardless of individual interests.
Another challenge is the difficulty of creating a sustainable base of online, small gift donors. Turning a first-time $18 or $36 gift into a monthly or even annual donation, and then long term into a larger contribution, is especially challenging online, where it is more difficult to engage people personally and use traditional methods for cultivating supporters. The Obama campaign, and political fundraising in general, has a natural deadline that creates a sense of urgency for donors. Nonprofit organizations, on the other hand, can only run so many emergency campaigns to create that sense of immediacy.
Since most young people, Jewish and non-Jewish, are interested in these small, directed gifts, Jewish organizations must contend with young Jews who will go elsewhere if the organized Jewish community does not meet their needs. To keep them engaged in social causes, and to cultivate them to be the large donors of tomorrow, Jewish organizations will need to embrace these trends to compete with other non- Jewish causes that give them what they want in a donation experience. “Jewish and Israeli organizations must recognize the growing importance of small donors and engage them accordingly,” says Ronit Dolev, co-founder of JGooders.com. “While this model will not replace classic philanthropy, it will not only raise critical supplementary funds for organizations, but it will engage a broader base of younger donors, future donors, in their work. This will strengthen both the nonprofit sector and the Jewish People.”
Back in 2002, researchers at Harvard University estimated that by 2010, one-third of all donations would be made online. With just a few months to go, it seems unlikely that we will reach this mark. But it is clear, says GlobalGiving’s Hecklinger, that as Generations X and Y get older and have more capacity to give, a higher proportion of donations will be made online. “People aren’t going to abandon major solicitations, and in absolute terms of revenue this will continue to be the primary source,” claims Goldberg, “but the majority of donors will be those who give smaller amounts.” Organizations are quickly learning to adapt to the new realities and donors today have more choice and control than ever. While philanthropy may have become more accessible, it remains to be seen if the impact on the Jewish community and the nonprofit sector will be positive. One thing is for certain—the change you find under your sofa is becoming more valuable by the minute.