Wednesday, April 29, 2015

The Cost of Fundraising Through Social Media

This week we have a guest post written by Rich McIver. Rich is the founder of Merchant Negotiators, where he also regularly writes on the subjects of merchant account services and how businesses and nonprofits can most effectively and efficiently use them.

The Cost of Fundraising Through Social Media

Tweeting, Posting and Liking your way to increased donations should be an essential part of any small nonprofit's fundraising strategy.

But converting those social media developed relationships into actual donations is easier said than done. The average nonprofit has an online donation abandonment rate of 50-70%, meaning that more than half of the potential donors who start the online donation process for a nonprofit don’t complete it. Fixing that is a big key to raising nonprofit revenue.

One of the largest contributors to online donation abandonment is a jarring online experience that requires the donor to leave the social media platform that encouraged the donation and jump to a second or even third website to complete the donation. In fact, statistics show that each additional website you force a donor to visit causes an additional 60% of potential donors to drop off.

A promising solution to this problem is enabling donations within the social media platform itself.

First a quick history lesson…

Historically, nonprofits trying to use social media for additional donations have had little option but to drive donations indirectly. Whether the nonprofit used Twitter, YouTube, or Facebook to attract new potential donors the actual completion of the donation, has taken place elsewhere, either on the nonprofit’s own website via a donate button or via a phone call between the donor and the nonprofit. In both of these scenarios, the two step process of engaging the donor on social media and then trying to transition them to a point of sale results in a significant percentage of donations failing to occur.

Thus, social media sites have been working over the last two years to and enable donations to take place within the social media’s platform. Once enacted, this promises to dramatically reduce donation abandonment, and increase nonprofit donations. As this rollout actually comes to fruition, however, it’s becoming clear that the social media sites’ motivations aren’t purely benevolent. Most are attempting to push nonprofits to use their affiliated (and generally very expensive) credit card processing companies to conduct these transactions.

Looking at the major social media sites at the forefront of enabling donations within their platform, each has taken a slightly different tactic:

Twitter:

It was leaked late last year that Twitter was working with PayPal competitor Stripe to enable payment buttons inside of tweets. The way it will work, is that after clicking on the "buy" or "donate" button, shoppers can enter payment information without leaving Twitter’s service.

Right now it looks like Stripe will be the exclusive payment processor through which companies and nonprofits can accept payments inside Tweets. At 2.9% + $0.30 per transaction, Stripe is really expensive, so nonprofits should hope that Twitter opens it up to other providers.

Facebook:

While Twitter is still trying to roll out payments embedded within social media, Facebook has already enabled it. In late 2013, Facebook enabled donations within an individual Facebook post, in addition to donations via a nonprofit’s main Facebook page, and opened the market to multiple credit card processing providers.

The most common option nonprofits are using is PayPal, which charges a hefty 2.2% + $0.30 per transaction. But, it’s a well known brand that’s really easy to implement which explains its popularity.

Another option is through FirstGiving, which offers some donate button design styles that some nonprofits might find fit better with their Facebook page. Unfortunately, FirstGiving, which is underwritten by Chase PaymentTech, charges a staggering 4.25% to accept donations.

Finally, for nonprofits that are a little more tech savvy and price sensitive, the cheapest choice is to use a traditional processor and have them provide you a donate button for placement. Mainstream providers like CreditCardProcessing.com offer this, with rates at about 2.0% + $0.10.

YouTube:

Similar to Facebook, YouTube enables you to add a donate button and drive donations from within your nonprofit’s YouTube channel, instead of having them first come to your website. Unlike Facebook, while it is technically possible to use multiple payment processors, YouTube pushes Google Checkout pretty aggressively.

Enabling donations via YouTube requires that you first register as a YouTube Nonprofit Program, then create a Google Checkout account which is Google’s proprietary credit card processor. Given that Google Checkout charges a whopping 2.9% + $0.30 for small nonprofits to accept donations, the obvious choice is to look for a cheaper option. Unfortunately, the only way to incorporate a cheaper processor is to manually insert HTML into your YouTube channel page, which, means donors will have to leave YouTube and visit PayPal.com or some similar site to complete the donation, defeating the whole purpose. So effectively, you’re locked into using Google Checkout if you want most of the benefit of accepting donations via YouTube.

Making the donation process as seamless as possible is a proven effective way to increase your online donation rates. With Facebook and YouTube already permitting donations through their platform, and Twitter expected to announce the capability later this year, it’s only a matter of time before nonprofits can complete the circle of creating a relationship, explaining their value proposition, and accepting a donation all within the same social media platform. What is less clear, however, is whether the cost for accepting such donations, in the form of high credit card processing fees, will begin to fall as adoption among nonprofits becomes more widespread.


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