Online fundraising grows

Driven mainly by “recurring” donors and “repeat” donors, online fundraising grew steadily in 2012, a new study says.

Among roughly 500 organizations that sent 4.2 billion emails and raised $1.12 billion in 2012, online fundraising grew 27 percent from recurring donors and 20 percent from repeat donors, according to Blackbaud’s Online Marketing Benchmarking Study for Nonprofits.

A recurring donor regularly gives a specified amount over a set period of time, while a repeat donor is one that gives again after making an initial gift.

Open rates remained consistent with 2011, while click-through and response rates continued to drop, says the study, which included only organizations that had used Blackbaud’s Luminate platform for at least three years.

Response rates on appeals tell over 18 percent from 2011, a decline that reflects “a saturated channel with undifferentiated messaging and campaigns,” the study says. “This is present in direct mail, telemarketing and face-to-face solicitation.”

First-time gifts grew 3 percent while advocacy posted an increase of 8.7 percent in actions taken, and advocates who also made a contribution grew 11.9 percent.

Food Banks and organizations with smaller email files outperformed other “vertical” fields of interest on a median percentage basis, the study says.

Canadian organizations, higher education, hospitals, hospital foundations and Jewish organizations also posted strong performances, it says.

Those vertical performances”may be explained by the trend of donors becoming more cautious, and giving to charities to which they feel connected,” the study says. “There is a trend for this behavior, particularly with colleges, hospitals, and similar groups.”

Todd Cohen

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Apparo brokers tech solutions for nonprofits

By Todd Cohen

CHARLOTTE, N.C. — The Mint Museum in Charlotte has a five-year strategic plan, including specific “deliverables,” along with tactics and assignments to produce them.

But different departments within the Mint tracked all that information separately, using Word or Excel documents, for example.

“Having a better, fully integrated system will help the departments collaborate around the deliverables,” says Kim Lanphear, executive director of Apparo, a nonprofit formerly known as NPower Charlotte Region.

After meeting with Mint officials, Apparo contacted CTS, a local technology consulting firm that is one of Apparo’s corporate partners, and brokered a three-phase project that has engaged two CTS employees who are working with the Mint as skilled volunteers to solve its problem of fragmented information systems.

And Duke Energy has agreed to fund the project, including the cost of Apparo’s consulting time to set the scope of the project, sit in on all project meetings, work to prevent “scope creep,” make sure deliverables are completed on time, and serve as the “go-to” player for the client and the skilled volunteers, Lanphear says.

Apparo — it takes its name from the Latin word for “provide” — works to “convene business solutions” for nonprofits, Lanphear says.

Its work with the Mint reflects a shift in its focus from providing technology consulting and training for nonprofits.

Formed in 2003, Apparo was one of up to 20 loosely affiliated NPower nonprofits throughout the U.S. that were supported by Microsoft and provided tech assistance to nonprofits in their communities.

Apparo, which operates with an annual budget of nearly $1.4 million and a staff of five people working full-time and five working part-time, also developed a line of business serving as the outsourced information-technology department for 27 local organizations, including United Way of Central Carolinas, Foundation for the Carolinas, Arts & Science Council, and The Duke Endowment, and many smaller agencies and foundations.

But Apparo recognized that its business model of providing help-desk services and managed services depended on generating enough volume to keep its rates low while supporting the level of staff know-how and skills it needed to deliver those services.

So this year, Apparo partnered with CDI Managed Services to work with any of its nonprofit clients that opted to work with CDI.

CDI now is working with 27 nonprofits that had been clients of Apparo, which is handling the billing for 11 of those nonprofits that are smaller, or those with fewer than 10 workstations each.

“We’ve been able to negotiate below-market rates for nonprofits,” Lanphear says. “We try to create sustainable models for these nonprofits.”

The model that Apparo itself is adopting grew out of a three-year grant of nearly $3 million it received in 2008 from the John S. and James L. Knight Foundation to develop collaborative solutions to nonprofit tech problems.

The new model focuses on matching the resources of skilled volunteers with the needs of nonprofits, facilitating the relationships, securing funding to cover its costs and those of the volunteers, or about $5,000 to $7,500 for each project, and making sure the nonprofit client also contributes funding.

“If they’re not invested,” Lanphear says, “they’re not as good about giving time and resources.”

Key to its model, she says, is to bring nonprofits together to talk about common needs and help them think about common solutions.

Another key, says Lindsay Jones, communications manager at Apparo, is “to inspire people who are part of the corporate technology community in Charlotte to partner with us to fund some of these engagements,” using the “skills they use every day in their jobs to make a difference in solving everyday business challenges that nonprofits face.”

Data seen driving change in social economy

Digital information is playing an increasingly pivotal role in the emerging “social economy” as “doers” and “donors” look to philanthropy, political giving and impact investing to find the most effective options for putting private resources to work for public good, a new report says.

And as they compete in the social economy, which includes the broad range of “business ventures, charitable efforts, philanthropy, and investment capital geared toward producing positive social results,” nonprofits and organized philanthropy will need to be smarter about the way they share data, handle mobile payments, and deal with the issues of transparency and privacy, says Philanthropy and the Social Economy: Blueprint 2013, a report from GrantCraft.

“We are standing at a new ‘starting line’ for data in 2013,” says the report, which was written by Lucy Bernholz, visiting scholar at the Center on Philanthropy and Civil Society at Stanford University.

That starting line, the report says, “is about putting the data we have to use, looking for relationships between nonprofit/philanthropic data and larger data sets from the public and private sectors, and experimenting with new practices that start from the premise that we now have access to enough useful data that we can move on to explore what to do with it.”

While philanthropy and nonprofits play important roles in the social economy and occupy a “privileged long-term position that allows them a front row seat to the changes underway,” the report says, they “are not the unchallenged center of the economy any longer, nor should we assume that their status, impact or privileged positions are unalterable.”

The next phase for the social economy, the report says, will be driven by a new discussion about “the unique role of organizations like those we know as nonprofits and foundations.”

Data overload

In a world of “digital overload,” with foundations, donors and nonprofits “soon to be drinking from the ‘data firehose,’ the most successful organizations will be those that “figure out how to manage this and thrive within its contexts,” the report says.

Some organizations will deal with data overload “by hiring data analysts to manage data flows, analytics and learning,” while an increasing amount of data “will be made public and transparent for the rest of the sector and any curious others,” it says.

“Data are a resource like money,” it says. “They are critical to success, unevenly distributed, and fundamental to the pursuit of privately resourced, public benefit activities. They are tools for reinforcing or redistributing power.”

Yet the decades of the “information age” have gone “essentially unnoticed by most foundations at least in terms of sharing their information quickly, readily and in a form that would allow easy comparison,” the report says.

By 2009, for example, only 29 percent of foundations “had hung out their nameplate on the Internet,” it says.

That has changed, it says, with over a dozen “meaningful efforts at sharing philanthropic data,” representing “real progress toward a ‘data backbone’ for nonprofits and philanthropy.”

Second phase

With new tools for “sharing raw data and make it useful to the public,” philanthropy has entered the “second phase of a data age” that will focus on “using it ourselves,” the report says.

That phase, it says, will be marked by “finding new ways to compare, analyze and present the data; asking new questions with it; and using the information to inform out work.”

Aggregated foundation grants data now can begin to be used “in ways that simply weren’t possible before,” it says.

With access to over 170 online giving platforms, the report says, the tools that individual donors have for giving are “light years ahead of most foundation check-cutting processes in terms of real-time information, targeted feedback loops, and the ability to  galvanize additional support by reaching out to social networks.”

And, in isolation, data about foundation grants and nonprofit data from IRS Form 990 are of limited use, the report says.

“They may reveal trends in funding interests, geographic density, and patterns of shared strategy,” it says. “But they say little about either an individual enterprises’ operational strengths or the financial/operational healthy of a group of organizations. These data tell us almost nothing about an organization’s strategies or the results it is achieving, nor do they shed light on the status of the larger issue, be it health access, student reading scores, or the number of hungry elders in a community.”

Foundations and nonprofits, the report says, “still lag behind governments and business in making good use of data.”

Digital engagement

Mobile phones and other digital devices represent the next phase of giving and volunteering, the report says.

“We’ll make smaller, more frequent donations, sparked by social network requests, by tapping a bank account or credit card number with a single swipe,” it says. “Freelance fundraising for our own favorite causes or organizations will be easier.  Crowd-sourced and -funded groups will be clean beaches, feed the homeless, help the elderly, respond to disasters, all while not relying on or turning to an organization for help.”

Because mobile payments can be handled through a smart phone, the report says, the individual donor “has all the pieces of big philanthropy — information and money — in one device. The technology has leapfrogged the big institutions in favor of networked individuals.”

Those developments are “not all positive,” the report says. “Ever-smaller donations to organizations can require ever-greater organizational investments in technology to manage.”

Mobile donations and digital data also raise issues of private and security, and underscores the gap  between people with access to a smart phone and those without access.

And while “networked individuals are good at starting things,” the report says, “the jury is still out on how effective they are at maintaining services over time.”

Privacy and transparency

In the social economy, nonprofits “will be defined by how they use their data for public good while protecting the personal privacy rights of all who contribute that data,” the report says.

Initially, it says, nonprofits will define themselves through “good practice,” while later they may be defined through legal requirements.

“We will all be well served if nonprofits take a leadership role in defining and demonstrating the practices they want to see encoded in future regulations,” it says.

Nonprofits continue to earn “higher trust ratings” than business or government, the report says, and how they use personal information will influence that standing.

And as the nonprofit sector tries to catch up on data, transparency and innovation, it says, “we need to differentiate data about people from data about enterprises.”

Organizations that seek to use private resources for public good need to get the issues of “private” and “public” right, the report says.

The way that enterprises “navigate the tensions of private data and public good will become a differentiating factor for organizations in the social economy — not all will make the same choices,” the report says. “These practices and choices about data may eventually serve to distinguish and define organizations within the social economy the way financial profit motive does now.”

Regulation in the social economy

Organizations and financing systems in the social economy are “not created equal,” the report says.

“Nor should they be,” it says. “They should be complementary. For that to be possible, we need to think about accountability, governance mechanisms, the use of free labor (volunteers), the role of incentives and oversight, and information ownership.”

As politicians resume talks this year about the tax code and limiting charitable tax deductions, the report says, the nonprofit sector “will need to make new arguments to preserve those privileges.”

And those argument “should not just be standard issue self-preservation,” it says.

The political battle may be “fought narrowly over maintaining the tax deductibility of charitable gifts,” and may not include “serious discussion about the most effective ways to provide incentives for private involvement on behalf of public benefit” or any discussion of “data as a public good” or “more substantial regulatory change.”

Yet regulatory change is needed in a social economy increasingly driven by “new networks of ‘doers’ and ‘donors’ using their non-hierarchical, distributed authority, open source model of the Internet and using it for political action and community change,” the report says, citing Future Perfect, a 2012 book by Steven Berlin Johnson.

“We’re reaching a point where impact investing and philanthropy are increasingly intertwined,” the report says, an emerging hybrid characterized as “enterprise philanthropy” in From Blueprint to Scale, a 2012 study from the Acumen Fund and Monitor Institute.

“Whatever you call it,” the report says, “more and more donors and institutional funders are looking at how they can best use a dollar — whether as a donation or an investment — based on the outcome they hope to achieve.

While the thinking of donors and funders now is shaped by rules government donations and investments, the report says, those rules “don’t always serve the larger purpose.”

And with data “beginning to gain traction in practice” as a philanthropic resource, the repot says, “it would be wise for philanthropy and nonprofits to take up the policy issues of data use, ownership, and privacy themselves, rather than wait for a regime to be imposed.”

— Todd Cohen

Nonprofit use of data mixed

Nonprofits are tracking data on their operations and programs but face hurdles in gathering and building data into their business, a new survey says.

“Too often, barriers keep nonprofits from collecting and integrating important data into their daily work,” says the 2012 State of Nonprofit Data Report from NTEN and Idealware.

Ninety-nine percent of 398 people from nonprofits in 17 states responding to the survey in April 2012 are tracking some sort of metrics.

But many nonprofits also face significant barriers, including collecting and working with data, lack of expertise, issues of time and prioritization, and challenges with technology, the survey says.

Eighty-nine percent of nonprofits are tracking financial data and find it useful for making decisions, while 50 percent are tracking data about outcomes for clients and constituents, 41 percent are tracking external data about their issue area, 39 percent are using data to make budgeting decisions, and 26 percent are using donor data to make program decisions.

Based on six one-hour telephone focus groups with 38 people from nonprofits, consulting firms that work with nonprofits, and foundations, the survey also included recommendations on how nonprofits can become more data-driven.

Nonprofits, for example, should “start small” in using data, it says, picking a “discrete project with a beginning and end,” it says.

“Try defining one thing you’d like to improve or change, define one metric to measure it that would be useful and not too difficult to track, collect that data over time, and then use the data to help understand whether you’re making change in the organization,” a consultant told the survey. “If staff see that this data is useful, it can start the ball rolling on collecting more metrics to support a data-focused culture.”

Nonprofits also should connect their goals to their metrics, developing “quantifiable goals related to what you’re trying to do and determine the best way to measure whether or not you are meeting them,” the survey says.

They also should not begin by “obsessing about outcomes,” it says, because outcomes can be “some of the most difficult” data to track.

Instead, nonprofits should begin their data strategy with other metrics “that are easier to pin down, like financial, fundraising or program status,” it says.

And funders should “think critically about what you can expect nonprofits to be able to produce,” the survey says. “It’s reasonable to ask them to measure their own activities, but measuring their impact on a community might well be a research project that would run into the hundreds of thousands [of dollars] even for a trained evaluation firm.”

The survey also recommended that nonprofits learn from one another about using data, change their organizational culture to value data, beginning with board members, and train their staff to know how to use the organization’s database, understand what data the organization is collecting, and see that “data-based decision-making can help them do their jobs.”

Nonprofits also should evaluate the existing ability of staff for data collection and evaluation, and decide if training “can increase their comfort with data.”

Todd Cohen

Software veteran starting firm targeting smaller nonprofits

By Todd Cohen

Jay Love, who has headed two nonprofit software companies that became industry leaders before being sold to industry giant Blackbaud, is starting a new company that aims to compete with Blackbaud for small and mid-sized nonprofits.

The new company, Bloomerang, is developing software designed to help nonprofits reach, retain and manage their relationships with donors.

Love, who in August joined Avectra as senior vice president, is partnering with the McLean, Va.-based software company on his new venture, which will be based in Indianapolis.

He will continue to lead the nonprofit practice for Avectra, which provides constituent relationship management software for membership-based associations and nonprofits.

Avectra will focus on larger nonprofits while acting as the marketing partner and global reseller of Bloomerang, which will target smaller nonprofits, or those with annual revenue of up to $3 million, and share leads with Avectra for mid-sized nonprofits, or those with annual revenue from $3 million to $10 million.

Love estimates that market represents 95 percent of registered nonprofits in the U.S.

He says he had secured private investment of roughly $2 million for Bloomerang and plans with his investors to own and operate the company for the long-term.

Rob Signorelli, who was chief architect at eTapestry, a company that Love started in 1999 and that was sold to Blackbaud in 2008 for $25 million, will serve as chief technology officer for Bloomerang.

Adrian Sargeant, a fundraising consultant and visiting professor at Indiana University,  is advising Bloomerang and has licensed his research and theories on donor retention and loyalty to the company, Love says.

Many nonprofits lose 40 percent of their donors every year, he says.

The new software, which is being tested in November and December and launched in January, will include a dashboard and will generate reports that feature a rating scale that indicates the “level of engagement” for every name in the client’s database, segments those donors, and suggests actions to increase the retention of donors in each segment.

For a fundraising appeal a Bloomerang client is planning, for example, the software will recommend the nonprofit send a different letter to a long-time donor than the one it sends to a prospective donor.

Sargeant estimates that increasing the retention rate of donors by five percentage points can double the lifetime value of donors in a nonprofit’s database, Love says.

Love’s first nonprofit software company was Master Software, which he served as CEO from 1984 until it was sold to Blackbaud in 1997 for about $11.5 million.

He then served as vice president of sales for Target Software, which with its sister company Target Analysis Group was sold to Blackbaud in 2005 for $60 million.

He next started eTapestry, and most recently served as CEO of Social Solutions, which provides case management software for nonprofits.

Love says Master Software was sold in 1987 to Epsilon Data Management, which without his knowledge sold the company to Blackbaud in 1997.

And he sold eTapestry because his institutional investors wanted a return on their investment, he says.

He and other investors in Bloomerang, he says, are “investing in this for the long term.”

Online fundraising grows

Nonprofits continue to see growth in online fundraising, mirroring the growth rate for retail e-commerce, a new study says.

Online revenue for nonprofits in 2011 grew at a median rate of 15.8 percent, with 73.4 percent of all organizations raising more money than they did in 2010, says The Convio Online Marketing Nonprofit Benchmark Index Study.

Median online revenue growth was down from 20 percent in 2010, when online giving surged in response to the Haiti earthquake and when special-event fundraising was higher.

The study, based on data from over 700 nonprofits in the U.S. and Canada that have at least 24 months of online usage data and raised a total of over $1.22 billion online in 2011, also says online fundraiser grew faster for smaller organizations than for larger groups.

Online giving grew at a median rate of 26.7 percent for nonprofits with files containing 10,000 or fewer email addresses, double the rate for nonprofits with over 250,000 email files.

First-time online gifts represented 37 percent of total median online revenue.

Median growth in online revenue from sustainer programs, which represented 6.9 percent of total online giving, totaled 38.7 percent, with significant recurring giving programs found in associations and membership groups, Canadian organizations, food banks and public-broadcasting stations.

The median donation size grew to $92.67, up 2 percent from 2010.

Online legislative advocacy grew a median of 17 percent, with advocates representing 12 percent of total email files.

And the median number of online donors also advocating grew 14.6 percent, while advocates that donate online grew 24.6 percent, a nearly four-fold increase from 2010.

Canadian nonprofits experienced a 77 percent increase in online advocates and a 7.4 percent median increase in the average monthly gift.

Based on data from eMarketer, the study says, growth rates for online fundraising roughly tracked growth rates for retail e-commerce – 27 percent, 16 percent, 14 percent , 14 percent, 20 percent and 16 percent for online fundraising from 2006 through 2011, respectively, compared to 23.5 percent, 20.8 percent, 18.6 percent, 17.2 percent, 16 percent and 15 percent for retail e-commerce.