June 12th, 2007 by Gavin

Over on the NTEN blog, there’s been a discussion of charitable giving — posing the question: “Does online engagement lead to more money?” A simple question, but further down in the discussion there was an implication that online engagement generated not just “more money” for the individual organization but “more in general” — actually increasing the total charitable pie, so to speak. I think not.

I’d like to throw some facts into this discussion, just for the fun of it. I do this because I think there is romanticism with online fundraising and “online engagement” that perhaps borders on fiction.

Now I caution you here. Facts can be tricky things. To quote the ever quotable Mark Twain: “There is something fascinating about science. One gets such wholesale returns of conjecture out of such a trifling investment of fact.” My investment here is rather trifling, but I’ll risk it for the wholesale returns, conjecture or otherwise.

First, when you look at the facts, it’s clear that “giving,” writ large, has been changed by the internet. We’ve got “donate now” buttons, viral campaigns, and all sorts of tools for direct engagement. I’ve argued here and elsewhere that this internet thing is all about having a one-to-one personal conversation with thousands, if not millions of people. It changes and expands the nature of the conversation. Fund raising, community organizing, social networking is all about that conversation, as is engaging people, engaging their collective ideas, and their collective energies.

Moreover, it seems a no-brainer to say that the more you engage with your constituents the happier, more involved, more “part of the action” they are. At least if that engagement is within reason — you start spamming me every day about anything and I’ll shut down pretty fast, even if I like you.

(Note to self: Stop spamming friends — you’re probably not as witty as you think you are.)

And, it’s also a no-brainer that the “fresher” the address the better. Email addresses are like fish — they don’t age well. Regardless of how you got it, or what you paid for it, old tilapia is pretty worthless.

Nevertheless, I find the argument spurious that online engagement would increase the size of the pie. There are plenty of things on the internet that claim to increase the size of this or that, but this ain’t one of them. Clearly, online engagement might affect the individual organization ability to fundraise — the organization that does it better, delivers a better message, a better appeal — but there is no evidence of the pie changing shape or size because of it; not the pie; nope.

[Note: this is not true in the area of politics and online fundraising. I’m talking charitable giving here. Political contributions — to 527’s, to your congressperson, or to your local party, whatever it may be — are not considered charitable. Political contributions — money and politics — have been substantially altered by the internet. More money than ever before — that bigger pie does not leave a good taste in my mouth.]

With charitable giving, in fact, I would argue that online giving, regardless of what for or where, has merely shifted dollars from existing modes, adding more nails to the direct mail coffin, workplace giving, and the like.

However, so far the “shift” online is relatively trivial. According to Giving USA – 2006 online giving was around $2 billion in 2004. To put that in perspective, that’s less than 1 percent of total individual giving for that year; 1 percent.

So far, that means we’ve gone from 0 percent (pre-internet) to 1 percent. I’ve heard that number for several years now. I expect it to increase, but only at the expense of other, traditional modes of giving. Just between you and me, it’s not been growing that fast — I keep expecting it to grow, but it hasn’t — especially considering the overall growth of giving in general.

The analogy that pops to mind here is retail sales — namely book sellers and bookstores. If there is any industry that has been radically turned on its head by the internet it’s the book business. Rhetorically, I ask:

Has the book industry been changed by things like Amazon?

Absolutely, I answer. There is no question. Just ask Borders, or Crown Books, or Barnes and Noble.

Has the internet changed the total market for books, increased the pie, so to speak?

The answer is probably no. Individually I can safely say no. My capacity to read, and hence my appetite for books remains the same regardless of whether or not I order the book online or find it at my local Borders Books. Amazon did not increase the world’s appetite for books; instead, they just took business away from the rest of the pack. This reminds me of one of my favorite sayings: “The lead wolf eats no bones.”

The facts are: giving tends to be a function of three things, and these things don’t seem to be changing:

General economic wealth, measured, for example in terms of GDP
Demographics – as one ages, one tends to give more. Part of this is due to the fact that as one ages, one tends to be wealthier (see item 1). As always, demographics are destiny.
Disasters – specifically the Christmas tsunami, and the hurricanes Katrina and Rita.

The good news is the pie is getting bigger. Consequently online giving is growing. But online engagement does not seem to be the cause. Giving is a function of the wealth of the nation, our aging boomer population, and is “spiked” now and then by Mother Nature (as well as an inept government or two.)

Let’s look a little closer. Adjusted for inflation, the charitable pie has grown from $91 billion in 1965 to a whopping $260.28 billion in 2005. The high, by the way, was in 2000 with $260.53 billion – and then the tech bubble burst.

[Of note: during this same time period — 1965 to 2005 — the number of 501(c)3 organizations looking to divvy up that pie has grown from around 626,200 in 1965 to over 1,045,979 in 2005. That’s almost double.]

Regardless, when you control for the factors that do change the pie-size — increases in overall wealth in the US and the aging, raging boomers — looking at, for example, giving as a percentage of GDP, the lines are pretty flat.

Technology, the internet, and all those “donate now” buttons ain’t done diddly to change that. If the size of the pie were steady, I think you’d clearly see that online giving is just stealing someone else’s slice. I’d bet it would go far to explain the ever decreasing returns from direct mail, for example.

Again, according to Giving USA – 2006, with the exception of a few years on either side of 2000, giving as a percent of GDP runs between 1.7 percent and 2.1 percent. The years either side of 2000, and 2000 itself, were unique — exuberant I think was the word. At that time, those numbers were bumped up by record contributions to foundations, religious organizations, and educational institutions, over $24.7 billion in 2000 alone. A substantial amount of that is directly linked to the market conditions and a few large donations. (Such as a new foundation in Seattle — I’ll let you guess which one.) Since then, the numbers have fallen back to just around 2 percent for 2005.

So, the pie is growing. But it’s not a function of the internet. Some fundraising has just shifted — much like retail has been forever changed — to a more efficient way to reach and engage their constituents. We can expect that trend to continue. And, I suspect we can safely forecast the death of direct mail in the next decade, but don’t tell anyone I told you.

Looking more closely, according to Giving USA – 2006, the number of online donors increased significantly in 2005 over the previous year. Over 13 million people donated online after Hurricanes Katrina and Rita, for example. Moreover, among post-boomers, 15 percent of donors actually prefer email appeals over direct mail. I personally prefer anything over direct mail.

But be cautious with those facts, most of those increases in online giving were a function of Katrina and Rita, not the internet per se. Whether those donors come back remains to be seen. The traditional trends say otherwise. Disasters are unique.

Finally, when you look at where the money goes, and where the money comes from, then facts get pretty interesting:

The majority of donations come from individuals. Those pesky foundations only account for somewhere around 11 percent, individuals account for almost 77 percent. The rest is corporations and bequests.


The majority of the money goes to religious organizations. That’s right; the best form of fundraising is using a silver plate and passing it around a passel of pious people. Over 35 percent of all donations go to religious organizations, followed, in turn, by donations to educational institutions (the ol’ alma mater), and then to health organizations, like the American Cancer Society.

Of note, giving to religious organizations is dropping — down from a high of over 50 percent in the late 60’s to 38 percent today. Strangely, that number has been balanced by increased giving (as a percentage of total giving) to educational organizations, now over 15 percent, and foundations at almost 10 percent… Go figure.

So, what’s this all mean? It means fundraising is about message, about substance, not about technology. To the extent that the technology enables that, well, that’s a good thing — especially because doing it online is (or should be) cheaper, faster, and easier than sending out masses of trash disguised as direct mail. If you can engage your constituents, enable that one-to-one personal communications, and do it online, well you’re ahead of the game, but remember: the technology is irrelevant. It’s the message damn it, not the method. It’s not the silver plate, but all that goes with it that makes the difference.