When creating donationware (Free and fully functional product that does not require payment, but instead requests a donation) your success depends on many factors, ranging from the quality and spread of your product to the current state of the economy. A key issue in getting donations is to know the right amount to ask for.
You can always leave it to the potential donor to decide how much money he wants to donate, but doing so will lead to an additional step in the process of making the donation, which will require the donor to make another decision (how much to donate). This might be a chance for the donor to revert his original decision of making a donation in the first place! He or she might think: I’m not sure how much I want to donate, this is too much money/not enough money/not exactly what I wanted – “I’ll think about it and come back later”. We seldom do that, don’t we?
If you decide to request a fixed amount and using PayPal to collect your donations, you should consider how much of your donation money will actually get to you after PayPal takes all its commissions.
I’ve prepared this graph (ranging from donations of 1.00 to 100.00 USD), which illustrates the amount of money in percents PayPal will take for each donation amount. Naturally, when you ask for more money you will get to keep a higher percentage of each donation, however it will become harder to raise them in the first place!
This graph is based on data from PayPal for a premiere account (where transactions from people using PayPal and credit cards have the same commission rates). You pay PayPal a fixed 0.30 USD for each donation, plus an additional 3.4% (for a monthly transaction volume smaller than 3,000 USD).
You can observe a rapid drop in the fraction eaten by PayPal for each additional dollar up until around 5.00 USD (this is our 10% commission mark), after that we get a nice curve up until about 20.00 USD where the commission rate is reduced in half to about 5%, and from there it’s a linear decline with a very small slope (which means that from this point, asking for more money will have almost no effect on the commission).
I have concluded that our preferred work area should be the curve, with donation requests ranging from 5.00 to 20.00 USD.