At the end of 2009 we published a 4-part review of the past year, combined with a look ahead to things coming to betterplace.org and within the social sector in 2010. Thanks to Becky in the betterplace team, we now have a translation:
Donations decreased only slightly despite the crisis
Initially there was much speculation in 2009 as to how largely the economic crisis would affect donor activity. In contrast to the situation in the USA, where in 2009 the average donation received was only half of what it was in the previous year, and almost all nonprofits reported grave financial losses, the financial crisis in Germany had (at least in the first half of 2009) a much less negative impact on the volume of donations overall. Donation incomes were indeed slightly decreased – the executive committee of the German Spendenrat figured 5% fewer donations related to anxiety over job loss and lower returns on investments by retired persons. The decrease in donations seems mainly to be the result of untypically high incomes due to natural catastrophes in 2008 in Birma and China, Pakistan and India, but also because organisations in 2009 sent fewer (expensive) donation request letters and received correspondingly fewer earnings.
Donors preferred smaller organisations
More Germans preferred to donate to smaller non-profit organisations this year rather than to the “usual suspects.” This trend was documented by an experiment at the Center for European Economic Research (Zentrum für Europäische Wirtschaftsforschung – ZEW) in Mannheim. The test involved 223 participants between the ages of 18-75 chosen to represent the German population. In the lab, participants made actual decisions about donating (in the mostly standard survey, test participants only answered hypothetical questions rather than donating money themselves).
In 73% of the cases, small organisations were preferred to large ones (small was defined as organisations earning between 40.000 and 300.000€ per year). Only 27% of participants selected larger Institutions. Behind these results is a crisis of trust: many donors are asking themselves whether their donations to large organisations disappear in the cloud of administrative and consultant honorarium expenses rather than in the work of directly eliminating social injustices. In accordance with the Spendenrat, donors today demand more clarity and insight directly into the projects and balances. (Now, we should stress that transparency in smaller organisations in Germany is not per se better than that in larger organisations, and that administrative costs are necessary to further good work. This is rather a question of the relativity and quality of the achieved work).
The trend toward smaller nonprofits coincides with a general trend in other branches. Music and bookstores have likewise experienced the replacement of the mass market by a swarm of digitalised niche markets.
Online bookseller Amazon’s many sales of poorly circulated niche books—scientific essays, poetry collections, memoirs—far outweighs their sale revenues from the few annual bestsellers. For the social sector, this implies that the small sums that you or I donate to a local association in Brandenburg or to a social project in Mozambique have a more significant impact than the funds that are given to large, well-known aid organisations.
In 2010 the “long tail” of aid will become even more meaningful
More and more users will visit platforms like betterplace.org, global giving or Help India with the aim to find relevant organisations to match their interests. Nowadays platforms give small and middle-sized organisations more visibility than previously. But even large aid organisations can gain committed donors by clearly depicting their work and transparently accounting for their use of funds.
At the same time, local projects will continue to gain increased significance, as was already shown in 2009. In this time of crisis, people are working much more on-site: at the source of the need and where, if in doubt, donors can drop by to check on a project’s work and to be convinced of its value.
In Part II of our year review, we will look at the changes that digital technologies have in the social sector, and at the development of online fundraising in Germany.