Television ads for kids’ cereals used to end with an extraordinary claim: these Sugar-Crusted Double Marshmallow Chocoroos™ are part of a balanced breakfast! And they’d show a bowl of wondrously dyed cereal next to a glass of orange juice, a glass of milk, four slices of buttered toast, fruit salad, three eggs over medium, a short stack of pancakes, and another glass of orange juice, somehow?
The obvious takeaway is that you should probably not take nutritional advice from the makers of Gooey Frooty Gobsmacks™. But the harder truth is that it’s extremely difficult for people to agree on what actually constitutes balanced nutrition. Different tastes, restrictions, priorities, allergies, nutritional needs, cultural expectations, and more lead to infinite variation on what we mean when we say “balanced.”
That same holds true when we’re deciding how to allocate resources, investments, and objectives in a digital ads campaign. The challenge isn’t so much that a given platform or audience is good or bad, any more than High Fructose Happy Flakes® are healthy or unhealthy on their own. It’s about building that balanced diet that moves your program forward. Now let’s get cereal serious and take a look at how nonprofits struck that balance in 2022.
The first decision a nonprofit needs to make is the size of the digital ads budget (“zero” is an option, but not a good one — we’ll see in a moment how important advertising is to a thriving digital program). Last year, nonprofits reinvested $0.11 in digital ads for every dollar raised online. That means that a nonprofit that raised $1,000,000 through online channels in 2022 would have spent $110,000 on digital ad placements.
This spending represents an increase of 28% over 2021 digital ads investments, and we see significant variation in both the level of investment and the year-over-year change between sectors.
Cultural nonprofits were the only sector that reported a decline from 2021 digital ads spending. Meanwhile, Disaster/International Aid increased digital ad spending by a whopping 89% over the previous year, with emergency response efforts in Ukraine likely the driving force.
It’s worth noting that despite the increased investment in advertising for Disaster/International Aid nonprofits, the ratio of spending to revenue was $0.10 per dollar — just about the overall average for all nonprofits. That suggests that the growth in ad spending kept pace with an increase in revenue, and that despite the increased investment there may still have been room for effective additional advertising efforts for Disaster/International Aid nonprofits.
Now that we have a sense of the scale of ads spending by nonprofits, let’s dig into how they distributed that investment.
The largest portion of ad budgets was devoted to direct fundraising. Overall, 56% of ad spending went to direct fundraising, and the range by nonprofit size was relatively small.
Large nonprofits (those with annual online revenue over $3MM) spent 56% of ad budgets on fundraising; Medium nonprofits (with annual online revenue between $500k and $3MM) had the largest portion of digital fundraising, at 58%; and Small nonprofits (with annual online revenue under $500k) reported spending 54% of ad budgets on fundraising.
Looking beyond fundraising, nonprofits of different sizes expressed different priorities through spending. Large nonprofits spent just 13% of budgets on lead generation, and instead emphasized fundraising and branding, awareness, or education ads (29% of all spending). Acquiring new subscribers ate up a greater share of spending for Small (22%) and Medium (23%) nonprofits.
Those differences in spending reflect variation in strategy, goals, and opportunities. Now let’s take a closer look at how nonprofits distributed ad budgets by channel, specifically for fundraising advertising.
Nonprofits of all sizes spent about a third of fundraising ad budgets on search. It appears that there is broad agreement that search is an important part of a balanced fundraising ad diet no matter who you are, with essential vitamins and minerals. We’ll see some of the reasons for that when we review return on ad spend.
Beyond search, we see a greater divergence by group size. Large nonprofits invested more in Meta, while Small nonprofits prioritized display. As privacy changes by Apple and the deprecation of cookies continue to affect the digital ads landscape, Meta has been challenging for everyone. It may be that Small nonprofits felt these challenges more strongly than Large nonprofits, and scaled back accordingly.
While Twitter and TikTok were not significant channels for fundraising advertising, Large nonprofits did spend $5 of every $100 on video. Larger budgets can open up possibilities in emerging channels, or those with uncertain return or high costs of entry. As nonprofits continue to seek new audiences, we may see greater investments in these other channels in the coming years.
We’ve examined the balance of ad spending by goal and by channel. We can also think about ads budgets as a binary split between prospecting (acquiring new supporters) and retargeting (reaching existing ones). Overall, nonprofits devoted a greater share of budgets to reaching prospects than existing supporters. For every dollar spent on retargeting, they spent $1.19 on prospecting.
Now that we have a better understanding of the choices nonprofits made, we can explore performance, starting with return on ad spend (ROAS) for fundraising advertising.
Remember how nonprofits of every size devoted a third of all spending to search? Well, nonprofits of every size and across all sectors also saw the highest ROAS of any channel with search advertising. This makes sense: search spend tends to be focused on the brand, and you can bet that the people Googling ‘donate to [nonprofit]’ are some of the best people you can spend money to reach!
An immediate question arises: if search has such a high ROAS compared to other channels, why didn’t nonprofits devote even more resources to this channel? Why isn’t the whole program just search? Why can’t you have pizza in the morning, pizza in the evening, and pizza at suppertime?
The problem is, of course, that the search audience is finite. Once a nonprofit has hit a spend level high enough to reach most or all users with relevant queries, they’ll need to look elsewhere to continue to expand their audience.
Meta had the next-highest ROAS overall, but we saw huge variance between sectors. For Hunger/Poverty nonprofits, the Meta return was $1.07 for every dollar spent. For Rights nonprofits, the ROAS was just $0.17. The wide range we see may be due to the overall uncertainty in targeting on Meta due to new privacy settings for Apple and Google. As cookies are deprecated and users become more difficult to track, nonprofits will need to experiment more in their tactics and targeting, and we can expect less consistent results.
While search advertising was a relatively level playing field, Large nonprofits appeared to have a distinct advantage in other channels. For display advertising, Large nonprofits reported a ROAS of $0.65, compared to $0.28 for Medium and $0.21 for Small nonprofits.
This makes sense if we think about display performance as being primarily driven by establishing and aggressively reinforcing a nonprofit’s brand. The bigger or more prominent your brand is to begin with, the more effective display will tend to be. This doesn’t mean that Small nonprofits shouldn’t invest in display — quite the opposite! — it just means that they have more of an uphill battle.
The changes in online privacy protections are affecting more than ad performance; they are also making it more challenging for nonprofits to assess their programs. We found that view-through revenue accounted for 26% of the total ads return — but this number should be taken with a grain of salt, and likely undercounts the impact of advertising.
View-through revenue is tracked in a variety of ways, but most methods require third-party cookies, which are blocked (or partially blocked) on some browsers already and will be fully blocked on the largest browser (Chrome) starting in 2024. Successful display and video advertising in particular depends on view-through revenue, so these changes will make it more difficult to measure the full value of these channels.
For the next couple years, nonprofits should expect continuing challenges in measuring and optimizing display and video (not to mention emerging channels like podcasts and connected TV, which we group under “other” in this study). As is often the case, there will probably be an advantage for nonprofits that are able to make early investments in testing.
All of the above findings are based on paid placements, but many nonprofits include Google Grants as part of their digital advertising mix. These campaigns are run with ad credits; we’re presenting them in terms of “dollars spent” for consistency’s sake, but just remember that those dollars are not actually coming from nonprofit budgets.
Google Grant ads are not nearly as effective as paid advertising. The ROAS for these campaigns is just $0.07 overall. In comparison, the average ROAS for paid search was $2.75, a whopping 39 times higher. Even though Google Grant placements are free, the net return is still significantly lower than paid search.
There are a few reasons why paid search outperforms Google Grant ads by such a wide margin, but mostly they boil down to the fact that Google wants it that way.
Google imposes restrictions on Grant ads, including a spend cap of $10k per month (below what many nonprofits need to capture all searches for their brand terms) and a cost-per-click cap of $2 (well below our average search CPC of $3.63). These restrictions limit nonprofits’ ability to capture the high-value traffic that drives up ROAS in paid campaigns, and may create a self-fulfilling prophecy: nonprofits know that Grant lacks the flexibility of paid accounts, so they choose to move their most important campaigns into a paid account.
Perhaps most notable, Google displays Grant ads below paid ads. If two nonprofits are bidding on the same term, ads from a paid account will always appear above the one bidding from a Grant. Users tend to engage with the first search results they are served, which makes paid ads much more likely to capture the click and eventual donation.
None of this is to say that Google Grants are not worth including as part of the overall advertising mix for nonprofits. For example, nonprofits saw 431 site visits for every $1k in Grant spend. If an nonprofit were to spend their full $10k budget every month, that would be the equivalent of 51,720 additional site visits in a year. Those visits can generate email signups, petition signatures, and volunteer recruitment, or help meet any number of important goals.
As we’ve seen, a balanced ads diet includes lead generation in addition to direct fundraising — and Small nonprofits in particular tended to prioritize lead generation in their budgets. While these ads aren’t intended to generate an immediate return, they are critical to building a growing base of support.
We’re taking a fresh approach to measuring the impact of lead generation advertising this year by measuring the ratio of ads-acquired leads email list size at the start of the year.
Here’s what that means: if the median nonprofit had 100,000 email subscribers at the beginning of the year, they acquired 9,000 new leads via ads over the course of 2022. When we understand how important a growing list is to a healthy email program, and how difficult list growth is (overall, email list size declined slightly last year), that is an enormously consequential result.
We explore what this all means in more detail in our Tasting Menu section, but the takeaway is clear. Ads and email programs are deeply intertwined, and ignoring one can severely damage the other.
Cost per lead varied widely by nonprofit sector, and even more so by platform.
Meta generated leads at the lowest cost, with an average cost per lead of $4.39. While Large nonprofits reported more favorable results across many of our ads metrics, that did not hold true here. Medium ($3.34 CPL) and Small ($4.71 CPL) both had lower costs than Large nonprofits ($4.89 CPL).
Adoption of other channels for lead acquisition is not nearly as widespread as for Meta, and costs per lead were generally higher. Part of this may reflect the relative immaturity of the platforms, and the challenges of optimizing content. Nonprofits that are able to experiment with TikTok and YouTube may gain an edge in optimization, and may be willing to pay a premium for leads that represent younger, more diverse, or otherwise distinct supporter audiences.
Not every nonprofit will be able to make these investments. Some will choose to prioritize direct fundraising, while others invest in raising their brand profile. Nonprofits will need to think holistically about their digital programs, and how email, ads, and other channels can be mutually reinforcing. The distribution of time and resources will change as channels emerge, mature, and decline.
It’s complicated, of course it is. But it’s all part of a balanced breakfast.