How Much Should You Spend On Digital Fundraising?

digital fundraising

The Quick Answer

In 1995, Robert Metcalfe, the inventor of Ethernet, predicted that the Internet would collapse within a year. He was dead wrong. Today, approximately 3.8 billion people around the world have an e-mail address and 2.3 billion have a social media profile. In the wake of Hurricane Maria, a single viral tweet from Lin-Manuel Miranda helped add another $1 million to the Hispanic Federation’s relief effort within one day. Just a few weeks ago, Bernie Sanders crowdsourced $6 million, also in 24 hours.

For nonprofit executives and fundraisers, the question is no longer should we invest in digital fundraising, but how much?

A general guidance is this that development departments should invest 7% of their time, money and resources into digital fundraising.

This guidance is based on the proportion of online giving to total charitable contributions in the US. According to Giving USA’s report on charitable giving in 2017, $30 billion was attributed to online giving, which reflects 7% of the total $410 billion in charitable contributions made in 2017.

Keep in mind, 7% is a general guidance meant to get you thinking about your own digital fundraising. There are many variables to take into consideration that are specific to your organization which may lower or raise that percentage.

There are plenty of good reasons for a nonprofit to go above 7%. For instance, social justice, environmental and animal welfare causes all do very well online. If your nonprofit already has name recognition, that’s another reason you may invest more than 7%. Your nonprofit may have a particularly robust monthly giving program, and monthly giving programs thrive in the digital world.

Return on Investment

The Internet is a daunting frontier with considerable potential, but digital fundraising still lacks the return on investment that a major gift or private grants program can return.

At a recent Growth for Good conference on digital fundraising, it was reported that the return on investment for display ads is a low 67 cents for every dollar spent. The return on investment for social media was 97 cents for every dollar spent. Negative returns.

The hard news is that most nonprofits are not breaking even with their digital fundraising investments.

There are two main reasons for this. One, nonprofits are still learning how to best utilize the Internet in a strategic and cost-effective way. Two, digital fundraising itself is still in its infancy relative to other, more lucrative forms of fundraising.

A sophisticated strategy around digital fundraising is one that is modest and steady, keeping a three to five-year view of its ROI. Online giving continues to increase every year and will continue to do so for the foreseeable future. You don’t want to over-invest in digital fundraising while the return on investment is still low, but when the time comes where online giving is producing a valuable return, you’ll want to make sure you’ve spent time building your digital infrastructure.

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Brian Dhaniram

Brian Dhaniram

Senior Development Associate at LAPA Fundraising
Brian manages LAPA Fundraising’s government grants program and is involved in high-level donor prospect research. In 2016, Brian co-founded Mission Flint, a grassroots nonprofit organization dedicated to distributing clean water to residents of Flint. He has spoken at the United Nations regarding accessibility, universal design, and the applications of big data.
Brian Dhaniram
Brian Dhaniram

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By |2019-03-26T21:40:19-04:00March 27th, 2019|Fundraising, Online Giving|

One Comment

  1. Darrow Zeidenstein March 28, 2019 at 10:45 am - Reply

    Brian,

    Your conclusion may be more-or-less correct, but the reasoning behind it is faulty. As you know, much of that online giving is transactional–an expedient way to make a gift. Especially in higher education, much of the meaningful engagement with alumni takes place off-line and/or in 1 to 1 meetings. If total online giving rises to 40% over the coming decade, does that mean we need to dedicate 40% to digital marketing?

    Your well noted cautionary remarks about negative ROI on digital fundraising should be taken into account as organizations figure out their digital strategy and the budgetary investment in that strategy.

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