Donors warm up to online giving

Giving topped $300 billion in 2007. A small but rising percentage of those gifts came via the Internet.

The Web has radically changed the way we shop, conduct our finances, get our news, and participate in politics. And it’s changing the way we give.

America is a giving nation: In 2007, for the first time in history, more than $300 billion dollars went to charities, according to the annual report of Giving USA Foundation released June 23. While online giving is a small percentage of that total, many signs suggest that e-philanthropy’s time has come.

Traditional means of fundraising – direct mail and telemarketing – are growing less effective and more expensive each year, according to the Chronicle of Philanthropy. Online fundraising in the United States has grown rapidly from $250 million in 2000 to an estimated $6.9 billion in 2006, according to the ePhilanthropy Foundation ($13.2 billion globally).

Not only is online giving favored by tech-savvy younger generations, but 51 percent of wealthy donors in a recent study said they prefer to give via the Internet. “The Wired Wealthy” study also revealed that 46 percent intend to make a greater percentage of their donations online in the next five years.

New websites and technologies that offer donors more immediate and personal forms of giving, including direct engagement with favorite causes and grass-roots projects, are mushrooming. And first gifts given online are 1-½ times larger than first gifts via mail; repeat gifts are also larger.

“The future of online giving is now,” says Garth Moore, managing director of interactive services for Changing our World, a philanthropic-services firm. “Despite the economic downturn, I think we are going to reach $10 billion in online donations by the end of this year.”

Weak economy dims giving picture
But there are clouds as well. Charities are worried about the impact of economic difficulties on overall donations for 2008. Charitable giving generally tracks with the economy, and the $306.4 billion total given in 2007 represents 2.2 percent of the nation’s gross domestic product.

In its annual survey of online fundraising by large charities, released this month, the Chronicle of Philanthropy said the charities continued “to rake in ever-larger amounts of donations,” but that the increases hadn’t been enough to offset declines in direct mail.

Still, some groups fared well. Heifer International, for instance, raised more than 28 percent of its donations online, and the United Way of America brought in $257.4 million via the Web.

The Internet also has been a boon for numerous small charities, providing a cost-effective way to reach people.

“It has opened up new channels for a lot of smaller nonprofits with limited budgets to actually make an impact – and may be one reason there are so many more nonprofits today,” Mr. Moore adds.

Innovative websites have helped boost the growth of giving globally. Kiva.org, a person-to-person microfinance site, enables individuals to become direct lenders to specific entrepreneurs in the developing world. UniversalGiving.org helps donors engage with projects in countries and causes of their choice – projects that have been carefully vetted for quality. “We don’t take any cut in your donation – 100 percent goes to that project,” says Pamela Hawley, founder of UniversalGiving.

The Web service has seen tremendous growth: 85 percent from the first quarter of 2006 to 2007, and 101 percent from the first quarter of 2007 to 2008. She attributes such growth to the “gift packets” they’ve introduced, such as $20 to help provide “a lifetime of clean water” for a family, or a similar amount for eyeglasses to “save the sight of a child.” People can also design their own packets, she adds, like the 10-year-old who is sending soccer balls to youths in Ethiopia.

“What seems to be compelling is that we aren’t asking for a change in [donors’] lifestyle – they already give gifts for birthdays or anniversaries. We’re just asking them to give something more meaningful,” Ms. Hawley says.

More donors give globally
The Giving USA report found that “international affairs” charities experienced the most dramatic growth – 16 percent – among all giving sectors in 2007. A recent study by Campbell & Company of generational giving reveals that young people born after 1981 care about causes that make the world a better place, while those born earlier tend to focus on giving help closer to home.

In fact, social networking sites such as Facebook and MySpace may be the new seedbed for young philanthropists. A “Causes” application on Facebook enables members to recruit their friends to their favorites causes and charities. Facebook participated in a “Causes Giving Challenge” last winter along with the “America’s Giving Challenge” sponsored by Parade magazine, the Case Foundation, and Network for Good. The challenges aimed to introduce millions to the idea of using new Web 2.0 (interactive) technologies “for good.” More than 80,000 people donated, raising $1.7 million for some 3,000 organizations.

“The major giving population is aging and a whole new generation of givers is coming that is fluent in the online environment,” says Charles Mauro, of Mauro New Media, in New York. “Any nonprofit not aggressively moving into the online giving space now is going to be losing an entire generation of potential givers.”

About 75 percent of people who give do their research online before they give, Moore says. Some adventurous folk even search out projects on their own. Amy Logan, a freelance writer in the San Francisco Bay area, found the organization, HEAL Africa, through her own efforts, and she and her husband donated $3,000 to build a safe house in the Congo for women fleeing sexual assault. “I did research on the organization on the Web to make sure it was legit, and spoke via telephone with the director before sending the money,” Ms. Logan says via e-mail.

At the same time, seeking to instill the value of giving in their 6-year-old son, she went to the website of World Vision to purchase a monthly sponsorship of a Honduran boy, who was born on exactly the same date as her son (a site option).

“Then, I found him a Honduran leatherback sea turtle at the website of World Wildlife Fund that needed adopting, for $25,” she says. “We hope to visit Honduras in the next year or two to visit our new friends.”

New tools have even appeared to spur giving without money during these rough economic times, when people tend to cut back on contributions. GoodSearch.com allows donors to give to their favorite charities every time they conduct an online search on Yahoo (which donates a penny per search), and GoodShop.com donates a percentage of every purchase made from more than 700 retailers. Some 60,000 charities are already benefiting.

While people differ on how quickly ePhilanthropy will extend its impact, Mr. Mauro is bullish. “Online giving is fundamentally going to alter the entire landscape of giving over the next five years,” he predicts.