Flouzo : Donations, A Business Model, Really? Wikipedia's Example

Feb 13

Donation campaigns Donations, A Business Model, Really? Wikipedia's Example by Trevas Walker

If you talked to most business experts about garnering capital through donations they would probably laugh in your face. Of course there are always colleges, and other non-profit organizations who are run mostly through donations. Swarthmore college in Phoenix, for example, finished their seven year fund raising campaign (on Dec 31, 2006) with over $245 million in donations. Start quoting numbers like that to those same “experts”, and I bet you would get their attention.

Even online organizations have found huge success with this type of business model. Wikipedia is an excellent example of this. The non-profit organization finished the 2006 year off with close too $1.3 million in donated funds. This year they are expected to do much more.

If you look at the exponential growth of Wikipedia in the past 3 years it is really quite phenomenal. In 2004, they stated income of $80,000. For the 2005 fiscal year their income was almost 5 times that at $379,000. Then, with their major fund raising campaign, in 2006 they finished the year off at over $1.5 million in revenues (again almost 4 times the revenue of the year before). If they experience the same growth for this fiscal year, that would mean they would bring in $6 million for 2007.

Since 96% of the previously mentioned figures come in from donations; it quickly becomes apparent how viable this type of business model really can be. Wikipedia has recently finished their 2007 fund raising campaign – and although their yearly income totals have not been announced yet, the campaign itself was a huge success.

With this years campaign their main site showed only the current number of donations, and not the running totals. Wikipedia wanted to put the spot light on the number of contributors this year instead of on the dollar figures. If you dig deep enough, however, the running total for the current campaign can be found. To follow are comparison of how Wikipedia's major fund raising campaigns have grown over the past 3 years. They do run smaller campaigns through out the year, but their major fund raiser is always their fourth quarter fund raising campaign. Since in 2005 and 2006 almost 75% of their income was garnered through their fourth quarter campaign, it is the best time of year to compare for growth.

As you can see, year over year, Wikipedia has seen huge success and growth with their Q4 campaign totals.

Along with rather large growth in $ there has also been consistent growth in the number of contributors.

The last chart I wanted to share shows year over year averages for their fourth quarter campaigns. For the 2007 campaign the average donation actually dropped.

An easy explanation for this is the length of the campaign. In 2005 and 2006 the fourth quarter fund raiser laster 20 and 21 days. For the 2007 campaign they ran it from October 22 right through to January 6th , 2008.

Considering that they had more than 44,000 donation for this last campaign, the extended time frame obviously worked out well.

What is it then that makes Wikipedia work so well with this type of business model? It's quite simple really. It is all about ownership and community.

All of the content on Wikipedia is user contributed. This gives users a sense of ownership over the site. A lot of the work is also a collaborative effort between many individuals. This builds a sense of community surrounding the site. Those two things combined make it the perfect type of project for this kind of business model. Users are active participants in a community and want to see the project continue.

So back to my original question; can donations really be a business model? The answer of course is yes. All it takes is a community of active participants who have a sense of pride and ownership in your project.

You can download the data used to create the spreadsheets here: