The Future of Online Fundraising

I have seen the future of online fundraising.  It is a Bitcoin wrapped inside a game wrapped inside a startup.

In today’s battle for public attention and action, web-enabled technology is the great equalizer.  Savvy causes have embraced the social graph and are driving strong connectivity with their communities.  They are speaking to new donors in ways not understood by today’s largest and most respected charities.  This shift in attention has only begun and will accelerate into a full-blown cause revolution over the next decade.

I’m tracking three technology-powered trends that will cause major disruptions to the fundraising world in the next five years.

The Longtail of Causes

In 1937, economist Ronald Coase wrote his seminal article titled “The Nature of The Firm” in which he argued that the size of the corporation is correlated with the cost of information.  Large firms had evolved to dominate the 20th century economy because the cost of getting the information necessary to conduct business successfully was so expensive.  Massively hierarchal organizations – the rise of middle management – were a direct result of this effect.

The rise of the largest non-profits mirrors the growth of business – albeit several decades behind their for-profit brethren.  The cost of finding and reaching donors and beneficiaries across the country necessitated large organizations, and large organizations required massive projects to support the investments they were soliciting and receiving.

Merely a decade ago few expected the emergence of forces that would throw Coase’s law into reverse, and change the game in the necessary complexity and size of the firm.  Moore’s Law, Metcalfe’s Law, and the power of the internet are now driving down the cost of information to the point where almost everything you need to effectively compete in the marketplace can be obtained from your browser and procured at almost no cost.  This rings especially true for causes.  Because a new cause can use technology to present a compelling argument to a target-rich online donor environment at very little cost, these new, small, nimble organizations are picking off some of the most lucrative and active donors from larger causes.

Couple that with the general desire to personally connect with the people your donation helps, and the Millennial Generation’s desire to deeply change the world for the better, and you have a massive disruptive force that will restructure the cause marketplace over the next decade.

The Game Layer

A fundraising event in 2012 features a scavenger hunt with teams competing in real-time, both online and in cities across the globe to collect photos, videos, and donations, with their social networks cheering them on.

Elsewhere, a wildlife charity has the number 1 game on Facebook – “Circle of Life” – where throngs of casual gamers nurture the ecosystem of an African water hole.  And yet elsewhere, a shopper at Target “checked-in” to get a share of Target’s charity budget to flow to their favorite cause.

All three scenarios are examples of the Game Layer: A set of technologies and social connectivity that will be pervasive in the next 5 years.  Today, startups like SCVNGR and Foursquare are pioneering the game layer.  It’s only a matter of time.

The Rise of Alternative Currencies

Thank you for your donation!  Would you like to pay by Credit Card, eCheck, Paypal, SocialGold, MoJo, Facebook Credit, LindenDollar, or Bitcoin?  Or perhaps you would like to transfer unspent gift card value?

The world of alternative currencies is about to get very interesting.  As more dollars, euros and yen are converted to “In-world currencies”, causes will be there to solicit them.

Yet for many non-profits today, accounting practices are woefully static and manually intensive.  For some organizations, it takes 3-5 people to touch an online donation before a receipt can be issued.  Even basic compliance matters like the proper treatment of donor financial information can be a tremendous task for these causes.  These organizations are woefully unprepared for opportunities to tap into alternative currencies.  Comparatively, the more socially savvy “web-native” causes should have an easier time optimizing around these kinds of opportunities.

The decade ahead poses tremendous challenges for mainstream non-profits and opportunities for nimble, tech-savvy causes.  Large organizations need to embrace technology and re-engineer their online experience to make headway with the Millennial generation.  Smaller causes need to stay focused on connecting with and serving their constituency, and leverage their active online community to connect them with emerging concepts that will accelerate their efforts.

 

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