Search ads provided the highest ROAS to Nonprofits

Insights on digital advertising from M+R Benchmarks Study 2021

“Total online revenue grew by 32% in 2020.”

This is the big headline of this years M+R Benchmarks Study that was revealed recently. One of the most insightful studies that the Nonprofit industry witnesses every year. 

This year the 2021 M+R Benchmarks Study set a new record - “A total of 220 nonprofits representing a wide range of causes contributed time, data, and thoughtful responses to hard-hitting questions.”

Additionally, for the first time, the M+R Benchmarks Study includes a significant cohort of 55 nonprofits based in the United Kingdom.

The 2021 study has focussed on Digital Ads, Social Media, Email, Website, Text Messaging and Ticket Sales. For my first article, I am going to focus on Digital Ads.

Digital Ads

This year the report states:

“Nonprofit spending on digital ads increased by 33% in 2020, with nonprofits spending an average of $0.10 for every dollar raised in online revenue. (This is a measure of the level of spending relative to the total budget, not a direct measure of return on investment.”

Last year the M+R Benchmark Study 2020 informed that the Nonprofit spending on digital ads increased by 17% in 2019, with nonprofits spending an average of $0.07 for every dollar raised in online revenue. 

There is no rocket science here since COVID-19 forced Nonprofits to go online aggressively and focus on Direct Fundraising(60%). Detailing out the distribution the report states that 60% of budgets went to direct fundraising ads, and 14% was spent on lead generation. Branding, awareness, or education ads made up 25% of budgets.

Large organizations spent 60% of their digital advertising budget on fundraising, with 25% of budgets allocated to branding, awareness, or education.

Smaller organizations, on the other hand, spent 64% of their digital advertising budget on branding, awareness, or education, and only 8% on direct fundraising. This could be a reflection of the extra work smaller organizations must do to get their name out there, particularly in crowded digital advertising space.

This has been the case pretty much last year. Smaller organizations investing 46% of their budgets in brand building, 32% in lead generation and 21% indirect fundraising.

The state became worse during the COVID-19. The primary focus was on the brand building when it should have been on direct fundraising. This is due to the money power of the larger organizations, ignoring online fundraising and other ground realities of a smaller organization to survive.

Hence smaller organizations need to focus largely on mediums that they own rather than on digital ads.

Because returns on digital ads are directly related to the spending or the budget that you invest. In 2020, nonprofits included in the study spent an average of ten cents on digital ads for every dollar raised in online revenue. 

“A nonprofit that raised $1 million online in 2020 spent an average of $100,000 on digital advertising.”

When it comes to the distribution of budgets on various online channels Search leads the races followed by social, with video also racing its way ahead.

Large nonprofits made advertising investments consistent with those topline averages. But Medium organizations prioritized search and social ads more heavily, spending 45% and 40% of their budget on those channels. Small nonprofits, on the other hand, spent 73% of their budgets on social media advertising, but only 12% on the search and 15% on display.

If you see the distribution graph - smaller nonprofits have invested 73% of their budget on social and only 12% on search. Ideally, it should be the reverse especially when search had the lowest cost per donation in 2020 at $29, with social media not far behind at $40. Display and video were substantially more expensive, at $116 and $147 per donation.

Fundraising isn’t the only purpose of digital advertising. Nonprofits also use digital ads to build their supporter base, whether it’s recruiting people to join an email list or encouraging people to sign up for SMS alerts. 

“In 2020, the average cost to acquire a new lead through digital advertising was $2.60.”

Search also stands out for what nonprofits are getting back.

$4.78 of nonprofits’ revenue that can be directly sourced to every dollar spent on the channel (a measure known as Return on Ad Spend, or ROAS).

There has been a massive $17.77 return for every dollar spent by the Hunger and Poverty Nonprofit organizations. This also because of the pandemic when people have come forward to help the needy and poor.

The digital advertising world is messy and complicated. Tracking the last dollar is a tricky job. The report gives an example where a supporter might see an Instagram Stories ad, then see a display ad while they’re browsing the New York Times. They may not click on either of those, but those ads prompt them to search for your organization, click on a search ad, and give.

From supporters who were served ads but landed on a donation page through some other means, donations like these are attributed as view-through revenue. This kind of giving accounted for 24% of all digital ads giving in 2020. Yet if your attribution model only accounts for the “last touch,” your search ad gets all the credit for that gift, even if your social media and display ads played a role in promoting that gift.

So if I had to summarise the Digital Ads section for medium and small Nonprofit organizations then this is it:

• Allocation of budgets is the initial secret of digital advertising. The search followed by Social should be the way. Don’t just go mad behind social media. Check your Google Analytics for your website data.

• We are in the middle of a pandemic and it is going to be a tricky situation for smaller Nonprofit organizations. Funds are the priority but people will hesitate to give because they don’t trust you. However, doing the extensive brand building is a futile exercise. Divide it accordingly and give more weightage to direct fundraising. If you don’t have the money you are out of the business.

• Track your journey. If you are not then you are doomed.

The report ends the section with an interesting thought:

“Much of nonprofit direct response is complicated and messy. There are no clear lines, no easy choices. What works for one organization may completely fail for another. The beauty of digital advertising is that it allows nonprofits to better understand who they are talking to, reach those audiences wherever they are, and respond to what their actions tell us they care about.”

This is the first part of the report. I will share my thoughts on other channels like Email, Social Media and Website in my next article. I don’t want to make your Tuesday messy by flooding too many data points.

Especially when India is almost under the clouds of lockdown, at least Bengaluru is going from today for a fortnight.

Stay safe, don’t go crazy by stocking booze. Lockdowns are part of our life, I believe that we are now pretty much used to it.

Just that the working and poor are going to be supremely fucked.

Bye!