Crowdfunding – Kick-Starter or a Perpetuating Boost?

Donor Detectives Team

Donor Detectives Team

In my interaction with clients, some of them have sought my opinion on leveraging the growing popularity of crowdfunding. Crowdfunding – constituents coming together to fund an initiative has been on the rise, boosted by the omnipresent internet and social media. Take for instance the Giving Tuesday event that has become a mega crowdfunding event in just 3 years of its existence.  Crowdfunding helps nonprofits build meaningful engagement, inform about their work, spread their message, and expand their donor base to increase their overall funding and impact. And thus, this brings some key questions to the fore – “Does crowdfunding merit more attention than an annual or one-off event?”, “Should it be implemented on crowdfunding platforms as opposed to using a nonprofit’s own website or microsite?”

What stands out about crowdfunding is that it is not only an engaging online medium but also more effective. It is focused on monetization, a step ahead of the regular ‘slacktavism’ of providing likes, forwards and comments prevalent in social media. The statistics of the success of crowdfunding vary by source (crowdfunding platforms, nonprofits themselves, consultant’s et al) but by and large, metrics indicate:

  • Average crowdfunding donation amounts are way higher than usually donated in a campaign
  • The average % of donors that are repeat donors on the crowdfunding platform is > 25%
  • The potential outreach is way higher at a lower price (on a head-to-head comparison of social media with direct mail)

Crowdfunding Platform vs. Website

The combination of these facts would position crowdfunding as a viable, sustainable source for fundraising for nonprofits. So is it then more advisable to launch your crowdfunding campaigns off readily available platforms or leverage your own website? Here’s what I see:

  • Crowdfunding platforms do not necessarily have an established constituent base that you can tap into to potentially expand your donor base. Compare this to your own website/microsite/Facebook page that is a ready pool of relevant prospects
  • Most crowdfunding platforms still need you to rally your network through social media tactics –to drive more traffic and finally to donate
  • Essentially, the prospect pool that you would have rallied to donate through the crowdfunding platform overlaps greatly with the group who you could have solicited to donate through your website
  • Use your own website or a crowdfunding platform. There are pros and cons of each. Crowdfunding platforms may be best suited for situations where nonprofits are yet to establish a robust online presence.

One off or Through The Year?

String all the facts of the previous section together, and it would seem that when you move to something more frequent than the one-off/annual/a couple of times event, there will be some cannibalizing of other online efforts. Also consider the expenses of the crowdfunding platform. Nonprofits who have their own website or Facebook presence are paying for acquisition on two different platforms.

Currently, there’s not a lot of longitudinal data points – performance or behavior wise, to understand the potential for multi-events. Understanding the impact of online and crowdfunding efforts on each other needs to be considered. In fact, all the statistics and infographics being provided in crowdfunding are based off limited or even skewed data and need to be used with caution.

"Crowdfunding or not, a multichannel integrated approach has the best chance for success."  

And Yet, Crowdfunding Is Exciting and Has Tons of Potential

When executed with a strategy that is thought through till the very end, Crowdfunding has the potential to raise large sums of money for a nonprofit organization. It’s a relatively new concept and therefore you need to test to find out what works best for your organization.

The power of online presents limitless options on how you can recruit new prospects and raise funds. There’s crowdfunding, there’s participatory fundraising, social media viral campaigns and so much more. Combine these and you can have a unique strategy to attract new donors. And I cannot emphasize enough, crowdfunding or not, a multichannel integrated approach has the best chance for success.

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