Last year, over US$290 billion in America was donated to charities, but surprisingly, less than 10% was donated online. With 240 million Internet users in the U.S., accounting for approximately 77% of the American population, the amount of online donations is surprisingly small. The good news is this figure has also been steadily increasing in the last few years. The knock-on effect is that regions far away from the U.S., such as the Middle East and Africa, could potentially benefit if the Internet can help bring international causes closer to American donors.

"Reaching large numbers of potential donors is easier and less expensive using the Internet, whether through charity websites, social networking sites, or middleware platforms, such as Causes and Crowdrise," said Jason Wingard, vice dean of Wharton Executive Education, which now has a special team dedicated to outreach in the nonprofit, economic development and foundation sector.

Katherina M. Rosqueta, Executive Director of the Center for High Impact Philanthropy at the University of Pennsylvania, agrees, adding, "The Internet, mobile technology, and social media have made it easier and faster for potential donors to understand the needs of communities faraway and to give to organizations serving those communities. However, the success of these tools in unlocking philanthropic capital will only be as great as their ability to give donors confidence that their funds are really making a difference."

Social Media's Role in Online Giving

Social media has greatly altered the landscape of online giving. The number of creative ways to harness the Internet to "do good" is infinite. When the earthquake in Haiti hit in January 2010, text messages became an instantaneous way to donate, leading to an unusual spike in donations early on in the year when most people tend to donate toward the end of the year. The American Red Cross raised US$32 million through text messages. Roger Lowe, Red Cross spokesman said in USA Today, explained, "It takes less time to click. You feel like you've made a difference immediately."

The flamboyant, pretzel-shaped hat worn by Princess Beatrice to the royal wedding of Prince William and Kate Middletown was sold on eBay for an impressive US$131,652 and the money was donated to UNICEF and Children in Crisis, a British charity. The Napa Valley Vintners in California opened up their premier charity wine auction to online bidders for the first time in 31 years. The global e-auction raised nearly US$360,000 from oenophiles in China, Japan, Mexico and Europe for local charities.

GlobalGiving, a website organization, and Causes, a Facebook application, have also played major roles in using the Internet to raise funds. "Through Facebook, Twitter, and middleware platforms, [donors] can connect with one another online, discuss the merits of a cause, rally others to donate, and see how many other people are supporting their cause," explained Wingard.

In 2010, GlobalGiving raised US$7.1 million online, more than double what they raised online in 2009, according to Alison Carlman, spokesperson for GlobalGiving Foundation. The foundation works with 1,414 organizations around the world, using multimedia platforms to connect donors directly with charities.

"We've found that people feel connected to faraway projects and organizations if they understand how their contribution is valuable and will have an impact," Carlman says. "We enable individuals to search for projects on the site that match with their interests. When they donate to a project that resonates with them, they frequently receive a "thank you" email sent personally by the project leaders themselves. Every three months or so, donors receive quarterly project updates that inform them how their donations have been used. Updates frequently include personal stories and photographs of the beneficiaries."

Professor Leonard Lodish, Wharton's Vice Dean for the Program for Social Impact, agrees that the future of online giving has some real benefits. "The real potential is to make personal connections so people can see the result of their giving in very human terms, such as the Sponsor-a-Child campaigns. Internet can achieve that personal aspect and do it less expensively. The money can be going directly to the people who need it versus administrators, thereby reducing the operating costs," said Lodish.

He warns, "It's not easy to do and there will be a lot of challenges logistically. Getting people in rural Africa to develop relationships with people in the U.S. won't be simple. A lot of people can't read, can't write, or sometimes don't have any electricity. They've got to do some creative stuff."

Carlman agrees that "basic things such as Internet connectivity and social networks in the country all play a part in whether or not projects are active on [GlobalGiving], and whether or not project leaders are successful in soliciting donations."

However, Lodish remains optimistic. "Technology will change. It'll get cheaper to get connected. Wireless will become more ubiquitous in that part of the world. Maybe there will be one iPhone or iPad in the village and people can take turns doing things on the Internet."

Digital Giving Grows

Online fundraising rose an average of 35% in 2010, according to Blackbaud, a software company for nonprofits that published the 2010 Online Giving Report. International affairs organizations experienced the biggest jump of 131% in online giving, compared to 2009, partly due to the successful campaign to solicit donations for Haiti's earthquake recovery in early 2010.

Digital giving is also more common with college graduates under the age of 40 who have higher household incomes, according to the Pew Internet and American Life Project. In the wake of Japan's disaster relief campaign in 2011, college graduates were almost equally split between donating electronically or traditionally. This is an increase from the 2004 Indian Ocean Tsunami disaster, where 33 % of college graduates donated traditionally while 10% donated digitally.

Almost 75% of charitable organizations used online fundraising, and 58% of those groups saw an increase in donations. Una Osili, director of research at the Center on Philanthropy at Indiana University, explained in USA Today, "It does take some time for organizations to make the investment in online fundraising and to learn how best to integrate that" into their donor strategy.

Integrating Online and Offline

Due to the recent economic recession, the years 2008 and 2009 saw the lowest amount of donations in more than 40 years, according to Giving USA. That figure is slowly starting to climb though. In 2010, the amount rose 3.5% and that figure is expected to rise for 2011. "But the sobering reality is that many nonprofits are still hurting, and if giving continues to grow at that rate, it will take five to six more years just to return to the level of giving we saw before the Great Recession," said Patrick Rooney, executive director of the Center on Philanthropy at Indiana University, in a press release.

Personal giving accounts for the majority of donations last year, with USUS$212 billion contributed from individuals. That showed a 2.7% increase from the previous year. The statistic also exemplifies the huge, untapped potential of Internet giving since the bulk of donations come from the proverbial wallets of ordinary people.

The Nonprofit Research Collaborative, of which the Center on Philanthropy is a member, found that there wasn't a single fundraising vehicle more effective than another. Typical methods to raise money are telephone, direct mail or email, foundation grants, special events, board members, corporate gifts, payroll contributions, planned gifts, and online.

While there is an increase in online donors, research has found that direct mail is the best method to retain donors. "The Internet is becoming an increasingly important acquisition channel but has not proven to be as effective for retention. It is the ability of online-acquired donors to use another channel  that is, to start giving through direct mail