According to the National Center for Charitable Statistics (NCCS), over 1 million public charity nonprofits existed in the United States in 2009, funded by $1.4 trillion in revenues from contributions, gifts, and grants (22 percent); program service revenues, including government contracts and fees (67 percent) and other sources, including dues and special event income (11 percent) (NCCS, 2010). A large number of these organizations are human services nonprofits employing social workers and providing mental health, housing, and other types of basic direct services to clients needing assistance. These nonprofit organizations are facing financial conditions that are perhaps the worst in the last three decades. Federal funding for social services is expected to stay flat or decrease (Calmes, 2010). States are experiencing revenue shortfalls that average nearly 12 percent less in 2009 than in 2008 (Pew Center on the States, 2009). Foundation funding has fallen (Foundation Center, 2009). Finally, individual giving to organizations that work with the poor has decreased (Center on Philanthropy, 2009).
The effects of these diminished funding streams are serious. Federal grants are much more competitive than before, states are delaying payments for long periods of time to nonprofits that provide services, and nonprofits are finding themselves eating up their cash reserves, leaving them vulnerable to going out of business. Only 18 percent of surveyed nonprofits expect to break even in 2010 (Nonprofit Finance Fund, 2010).
Because each of the ways that nonprofit organizations have traditionally raised funds is becoming less productive, alternative means of raising funds should be explored. This article presents three techniques derived from for-profit Internet marketing efforts that are promising additions to current efforts by nonprofits. Internet marketing is an unknown area for most nonprofits, and nonprofits have not appeared as a topic at any of the sessions of the Internet Marketing Conference since its inception in 2000 (Internet Marketing Conference, 2010). Although the techniques discussed here are used by some businesses, even in the for-profit world there is considerable ignorance about the best approaches to Internet marketing. Here, affiliate marketing, online donations and memberships, and information products are defined and discussed in turn.
Affiliate marketing is a process by which an organization drives traffic from its Web site to another organization's Web site to promote a product or service for a percentage of the sale price (Brown, 2008). It is vital that the product be of significant benefit to the individual buying it, else the nonprofit will get a black eye for lending its name to an inferior or useless product. Affiliate marketing is different from hosting advertisements on a Web site because the nonprofit can make a very strong link between its mission and the sale. (This should keep the nonprofit on the correct side of the unrelated business income tax, but it is wise to consult an experienced lawyer to be sure.) With Internet affiliate marketing, the organization is really advertising one or a few products at a time, not an entire commercial entity.
Affiliate marketing is not the same as signing up as a member of a company's charitable donation network, as when a local grocery store chain provides an organization with a card that is scanned, with a certain percentage of the amount purchased going to the nonprofit. Agencies should sign up for such programs and promote them. But, in this situation, there is no clear connection between the nonprofit's mission and the grocery store. It is simply a way to receive corporate donations.
A nonprofit can begin affiliate marketing in two ways: (1) by linking to a company (as in the grocery store example) and (2) by promoting specific products that are directly beneficial to the targeted audience. …