Fundraising Into the Future – and BEYOND!

There’s a debate in the fundraising industry about the future.  Not whether we will all have jobs;  no, everyone’s pretty sure about that. The world’s problems aren’t going away, and in fact we seem to be creating problems at about the same rate we’re solving them, so the world will probably need NGOs in the foreseeable future, (and they will need funding), but that’s another blog.

No, the debate is about the digital revolution.  First we had the “internet” (small “I”), then the Web, and now we have the portable Web – its called a “smart phone” in case you just climbed out of a cave – and a new place where people talk to friends and family, share things, even donate already, called social media, which right now is mostly Facebook and Twitter, but which will grow and diversify with Tumblr, and Pinterest, etc.

So the REAL QUESTION is this:  has the advent of the digital medium “changed the game” of fundraising?  Or has this simply expanded the methods we use to fundraise?   To put it in MBA terms,  do new digital activities raise *incremental*  income, that would NOT have been raised otherwise, if we couldn’t ask for donations over the Web or phone? Or is it just taking over the more tied-and-true methods?

To answer that, we really only have to ask ourselves one question:  are people DONATING more?  Globally?  I mean, think of Amazon.com. Do people buy MORE books now that Amazon makes it so easy, or do they simply buy them differently?  Or, has Amazon.com actually created more readers?

To come back to donating, it seems the answer is:  a little bit of both.  More people do seem to give now, and those who gave before do give a little more.  But there is also a third answer.

Let’s look at the data:

Global giving is tracked fairly well in the United States, and every year, US citizens donate about US$300 billion dollars to charities and nonprofits. (If you want to know where this money all goes, the answer is: mostly religion and education. The rest of us fight for the remaining 20 percent or so).  The key metric, however, is that this amount has grown over the years only at about the same rate as inflation (in other words, at the same rate as the money supply.)  The Combined Average Growth Rate (CAGR)of charitable giving in the US, which has gone from (roughly) US$ 110 million in 1970 to US$ 300 million in2010 is about  2.8%, as we can see.  The inflation rate for the US is, historically, between 2 and 3%.

So overall, in the big trend, the advent of digital giving has not turned us, globally, into an army of Rockefellers or Carnegies.  US citizens still give pretty much 3% of their income to charity (in the UK, its closer to 4% by the way) .

But there has been a shift.  Look again at the bar chart:  You can see that, for years,  global giving rose steadily until about 1995, and the CAGR for that time was a bit over 2.1%, from 110 to 180 billion.  But from 1995 to 2000, it rose from 180 billion to 240 billion in just five years, 60 billion in just 6 years (of data). That’s almost 5%.  And then in 2000 to 2004, it didn’t just flatten, it shrank.  Then rose from 240 to its current 300 billion, and then it shrank again, and now we’re back to 2005 rates, with another spike in the middle.

So giving suddenly increases, and then it spikes, and then recedes, but all generally within the same range, after years of being steady? Yup, that’s right.

Well,  what happened in 1995 that caused giving to start these updwards (and downwards) trends?  Duh.  Web giving.  Welcome, new donors:  International Red Cross, Concern Worldwide, and a few other visionary groups were suddenly able to provide real-time crisis images and news onto the Web, along with real-time opportunities for giving. And new donors, younger donors, did  begin to give.  Not in huge numbers, but enough to start the scale moving up a bit more quickly. In the same way that pornography drove the VCR revolution, international crises have driven the growth of digital giving, going to scale during the Asian tsunami in 2004, and the Chinese earthquake in 2008 in Sichuan, where more than a billion and a half dollars were donated in one direction, just a few months, and much of it online. (And, in turn, the 2010 Haiti earthquake heralded the real appearance of mobile giving, where relief groups got huge responses for requests for mobile-related gifts.)

So the helicopter view actually tells us three things: more people are giving (at least, we had a trend for a bit there), they are giving a bit more, but even more importantly, they give when they need is there, but then many of them stop when the need is not there.  So what we are doing better now, via the digital medium, is responding to crises, and perhaps even more importantly, we are moving money around a lot faster, and getting money to where it needs to be a lot better.  But only when it is needed.

So:  game changer, or not?  Honestly, difficult to tell.

(end of Part 1.  Tune in soon for Part 2!)