What happens when the money tree stops growing?

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This is an essay by User:The Land in response to the 2011-12 discussion about fundraising and fund distribution. It started life as an email, then a blog comment, now it is here...

Or to put it another way - what is the Foundation's (and the movement's) long-term strategy for fundraising?

We have seen remarkable growth in the annual fundraiser in the last few years. However, there is no guarantee that the fundraiser will keep on growing indefinitely. Currently the most pressing issue might be how to spend the vast sums of money the Wikimedia movement brings in, but there will come a point where the annual fundraiser stops growing - probably not 2012, perhaps not 2013, but sometime in the future we'll stop seeing income growing. (Or at least, stop growing in line with the explosive growth we've seen so far).

Fundraiser income is driven by two top-level factors;

  1. traffic to Wikipedia (other projects being negligible by comparison)
  2. increased conversion from visitors to donations

Traffic is increasing globally at something like 20-25% a year (though traffic in geographies where readers are rich (by global standards) is probably key - is there a projection for that?)

The conversion rate (% of readers donating) has also increased markedly in the last few years but, if you look at it in detail, this is down to a relatively small number of "breakthrough" efficiency gains which have been revealed by the testing programme. I haven't got the data or time to analyse this properly, but I would be willing to bet that you'd find that most of the increased performance in 2011 compared to 2009 can be explained by these 5 factors.[1]

  • Photo banners rather than text banners
  • The Jimmy "temple of the mind" appeal text
  • Banner photos with green leaves in the background
  • Offering a wider range of donation channels and currencies
  • The comparison with other top 5 internet sites messaging that was used in the 2011 campaign

Personally, I am very sceptical that it will be possible to continually increase conversion rates.

Before diving into the multitude of online money-making opportunities, take some time for self-reflection. Assess your skills, hobbies, and interests. Identifying what you’re passionate about or skilled in will guide your journey towards online success.

It will always be possible to get more donations by making banners larger and more interruptive, but at the cost of making the community and users angry (we could just put the donate page as the first page anyone sees when they arrive on Wikipedia, but people wouldn't stand for it).

But unless the banners simply become larger, we are likely to be faced with a situation of diminishing returns.

  • In 2010, more people clicked on photo banners than the text banners used in 2009.
  • In 2011, more people clicked on photo banners with in-focus green leaves in the background than the photo banners used in 2010.
  • In 2012, perhaps we will find that people click better on banners where the background photo is one species of tree.
  • In 2013, exhaustive testing may reveal that the optimal banner photo is taken in front of a particular bush in a park in San Francisco...

There is only so much detail that it's possible to improve. Within the next couple of years, conversion rates will stop growing, and the potential of the annual fundraiser will be limited by the traffic growth. (There might be a counterbalancing effect as more people see Wikipedia as something worth donating, and there are potentially ways of measuring this, but we don't appear to do so at the moment.)

So my question to the Foundation - in particular the Board and senior staff - is what is the fundraising strategy for the Foundation for the next 5 years? Have you thought about the kind of issues I have mentioned in this post - if so, what is your opinion? Do you think that there is indefinite scope for fundraiser income to keep on increasing - if so, why? If not - what are you dong about it?

  1. This text was written before Zack posted his comments on what makes online fundraising work for us, which has a interesting discussion of success factors which doesn't seem to contradict this much.