The Digital Fundraising Imperative: Why nonprofits must embrace online fundraising now

Nonprofits today raise money through a variety of channels and, in spite of the fact that we live in a largely digital world, many of those channels are very ‘analog’. This is a product of a couple factors: these channels cater to a majority of the current donor base and change management against this is difficult to manage when the existing channels are ‘working’.

So, what’s the disconnect?

The problem is that this will create a massive trough in donation revenue for nonprofits that do not properly address digital fundraising in the very immediate future. And the challenges of not addressing digital are going to be felt across a variety of fundraising channels, not just classical online donations.

Before we address the future challenges it’s important to talk about today; the pandemic was a forcing function that caused most nonprofits to address their digital experience. As a result, many nonprofits believe that digital has been addressed and is ‘working’ for them today. In spite of this sentiment, however, we know that most nonprofits are leaving digital donation revenue on the table every single day.

The challenge is that most nonprofits don’t have the resources necessary to manage a constant cycle of iteration and improvement of their digital channels. This creates what is called a ‘false ceiling’; we don’t have the resources to do better so, we are doing as well as we can expect to do.

It’s time to expect more from digital

But, this does not have to be the case. Every day we see nonprofits surpassing industry averages and improving upon their previous benchmarks for digital productivity. Still, so many organizations feel that they shouldn’t expect to do more through digital.

NextAfter’s 2024 Fundraising Benchmark Report tells us that organizations who are leaning into digital are already growing faster than those who are not. In today’s world of fundraising it’s estimated that 10-20% of donation revenue is generated through online channels; that number is projected to grow to 30-50% by 2034. This represents either great opportunity, or great risk depending upon the approach nonprofits take to addressing this channel. Lets take a look at a couple of examples to help bring this to life.

In the table above you’ll see that — even if you do nothing to improve the channel — the % of digital donation revenue grows from ~10% (low end of the current low estimate) to ~30% (low end of the projection for 2034) ie. your online donation revenue will grow materially.

Note: the table also assumes that your capture rate remains the same over time, which should not be taken for granted; M&R benchmarks reports 2024 report states that conversion rates industry wide actually went down from 15% to 12% last year to this year. This is part of what contributes to the sense that ‘digital is working’.

For most nonprofits, digital revenue is only growing because digital’s slice of the pie is growing. Actual execution on digital conversion may be staying the same, or even degrading for some. Given the pace of change in technology and donor behavior, your approach to digital needs to be constantly iterated upon in order to ensure it’s operating at optimal performance. Most organizations do not have the resources to support constant testing and iteration: either internal resources are scarce, outsourcing testing is too expensive, or the volume of traffic is not high enough to quickly make a determination as to whether the results of a test are conclusive.

The scenarios in the table above consider both the growth of digital and improvement in capture rate; as you can see the compounding impact of capture rate improving, while the market grows, leads to significant impact on total digital donation revenue over that span of time.

Conversion increases are almost guaranteed

Now, it’s important to note that even though 100% improvement sounds like a huge change, we actually see this consistently. While industry average conversion is now reported at 12%, across our customer base we see an average of 30% conversion. So this 100% improvement compared to industry averages would not be the outlier, but rather would be closer to the average improvement our customers are seeing.

What also needs to be considered is the volume of donor acquisition that will be moving to digital during the next decade. Digital, in large part, will be the way organizations acquire a large % of their new donors. This is going to impact fundraising channels that remain more ‘analog’ even as more fundraising transitions to digital.

Let’s use major giving as an example; many major donors don’t start that way, they grow into that over time as their comfort level with the organization and their attachment to the mission grows. Consider this: the percentage of future sustainers with the potential to be major donors are more and more likely to be initially acquired through digital channels. If organizations do not prioritize digital, it’s not great news for the pipeline of major donors into the future. The same challenge of top of funnel donor acquisition applies to other channels like events as well.

This becomes a significant risk for organizations, especially in times where they are behind their targets and are chasing to catch up. The first instinct is to remove focus from broad based donor acquisition channels and place that emphasis on things like mid and major donors. This is a predictable response to a moment of challenge but is not with out mid to long term consequences. Eventually, the effectiveness of that short term strategy will wane and if the organization will find themselves facing a trough in performance across all channels that will be difficult to manage out of.

Embrace revenue growth, embrace digital

In conclusion, the future of nonprofit fundraising lies in the digital realm. While traditional methods still hold value, the potential for growth and increased donor engagement through digital channels cannot be ignored.

Nonprofits that embrace and invest in digital fundraising strategies today will not only secure their financial stability but also position themselves as leaders in the sector. By overcoming the ‘false ceiling’ and continuously iterating on their digital approaches, these organizations can unlock new levels of success and ensure their missions thrive in an increasingly digital world.

Adam Johnson

President, Fundraise Up