The Money Trail: Presidential Candidates Dole Out Their Ad Dollars

NEW YORK Alex Castellanos doesn’t have any pretensions about his role in the business of politics. “My job is to get candidates and bottle them,” says Castellanos, president of Alexandria, Va.- based advertising consultancy National Media Inc. Among his past bottling efforts are President George W. Bush and Vice President Dick Cheney. This time around, he’s strategizing the advertising of Massachusetts Gov. Mitt Romney in his bid for the presidency.

“The world has changed tremendously in the last few years, and it’s turned my business upside down. Jesus, this is turning into a lot of work,” he says, with tongue firmly in cheek.

Work, indeed. Castellanos and his team are among the political consultants that are finessing a kind of climate change on the current election season, flowing a tsunami of advertising cash into media much sooner—and with different buying strategies—than ever before.

Just after Labor Day, Evan Tracey, COO of TNS Media Intelligence/Campaign Media Analysis in Arlington, Va., estimated that the TV sector had written up $10 million in business from presidential candidates year to date. As of last week, that figure had risen to $16.87 million.

Romney has outspent all the Democratic contenders combined. So far, he’s plunked down $8.5 million for TV ads alone. Nielsen Monitor-Plus data allows for an even clearer picture of how things are changing: National cable networks sold 301 ad units between January and Sept. 2, 2007. That compares with a mere 19 units sold over a 15-month period during the last presidential cycle, January 2003 to March 2004. Similarly, radio rang up sales for 1,258 units as of Sept. 2, 2007, versus just 882 for the same 15-month 2003-04 cycle.

Clearly, the heat wave has just begun. Tracey expects before the current year has ended, the media world will have digested some $700 million in political advertising sales. All told, at least $2.7 billion in political ad spending is expected to flood in the doors of media companies before Election Day in November 2008, according to Tracey, who says that figure is on the conservative end of the spectrum. That would represent a $1 billion bump above spending during the 2004 presidential election cycle.

And the fun won’t stop in 2008. Even though 2009 is an off year for elections, Tracey expects that issue advocates—immigration, healthcare, energy, taxes and education—will add a spending afterglow.

The 2009 spillover is just one of many reasons why the 2008 election cycle will be like none before it. First, the crush of primaries in January and February will instigate an early rush of advertising, likely hitting a high point in December and January. There is also the recent Supreme Court ruling that allows issue advocates, 527s and labor unions to spend earlier and with fewer restrictions.

On top of that, almost every single presidential contender is opting to go off the federal fundraising system, enabling them to raise and spend as much money as possible.

Cable vs. Broadcast

Clearly, TV stations will be the primary recipients of the ad spend, particularly in early morning and evening news, along with primetime. Chris Rohrs, president of the Television Bureau of Advertising, says he expects cost-per-rating point and cost-per-thousand to rise about 10 percent in battleground states. And just about everyone notes that because TV stations can’t absorb all the candidates’ cash, the influx of dollars will benefit all media sectors.

Yet campaigns are rethinking their media strategies. “There are so many new tools available to us, everything from cable to search to social networking sites,” says Simon Rosenberg, president and founder of the Washington-based New Democratic Network, which recommends ad strategies to Democratic candidates and is creating a series of party-building spots. “People need to experiment with all these new tools.” In particular, Rosenberg feels the “ratio between broadcast and cable spending is way out of whack.”

That opinion is shared by Fred Davis, CEO of Strategic Perception Inc., a Republican-leaning political consultancy based in Hollywood, Calif. Davis has been known to chastise cable operators for being laissez-faire, because in the past they haven’t made it easy for politicians to take advantage of cable’s ability to geo-target voters right down to the neighborhood.

“In broadcast, in any market, if I wake up in the morning and get a call that the competition is running a negative ad against my candidate, I can get an ad that refutes it on broadcast TV the same day. Typically, in the cable world, that can take about a week,” explains Davis, who until recently was working on Sen. John McCain’s strategy. He says cable should comprise about 80 percent of all political dollars spent, if the systems would just get their act together.

Cable operators are doing just that, said the National Cable Communications, the spot cable cooperative owned by Comcast Communications, Time Warner Cable and Cox Communications that represents every single MSO in the country.

“Ten or 12 years ago, we were just in the formative stages of spot cable, and we represented a modest portion of political spending,” says Andrew Capone, svp of marketing and business development for NCC. “But we are now fully armed to take a much larger share of political dollars.” Capone says NCC doubles its political billings every two years, and he expects to hold that pace during the current cycle at the bare minimum.

Last month, NCC held a presentation in Washington for political advertisers, and rolled out a 10-point pledge to make advertising on systems dramatically more efficient than in the past. It gets a mixed review from Kyle Roberts, president of the Alexandria, Va., political media buying shop SmartMedia Group. One of the pledges is to deliver make goods in 24 hours.

“That’s a big deal,” says Roberts, who is strategizing buys for some senators and governors he declined to name.

Another point promises order confirmation in 24 hours, which is an improvement. But other pledges are not as impressive to Roberts, such as the ability to run long-form ads on video-on-demand platforms. In Roberts’ view, there are still too few people accessing VOD to make it worthwhile.

In addition to the added effort on the cable systems front, the current election cycle is also noteworthy because a couple of candidates used national cable to spread early messages. Romney placed ads in nearly 300 cable network time slots between January and the middle of June, according to Nielsen Monitor-Plus. Observers say that’s extremely unusual.

“The early problem that Romney had was he couldn’t get the press to talk about him,” says Tracey. “What Romney did was put together a buy targeting Iowa, New Hampshire, a little bit of South Carolina, Florida and Michigan. And a significant portion was on cable—Fox News, CNN, CNBC—the real political-junkie audience. He had to do it to get some form of name recognition and translate that into a lead.”

Castellanos, who masterminded that strategy for Romney, points to data from Scarborough Research showing that networks like Fox News, and even CNN in certain time blocks, are magnets for Republicans. “We spend about three-quarters of our dollars on broadcast, and the other quarter on cable and radio,” he says of the overall ad plan. Although Internet’s portion of the mix is negligible from an ad-spend perspective, it was a significant part of the strategy, including a Mitt TV section of Romney’s Web site (www.mittromney.com) that contains more than 100 different videos.

“[Consumers] with above-average Internet use are more likely to be Republican or swing voters,” Castellanos says, referring to other Scarborough research. However, “Democrats are watching a lot more TV than Republicans, about 15 percent more.” It’s the Web that’s filling the GOP TV gap, he says. Local station sites as well as Washingtonpost.com and MSNBC.com “are a good market for us.”

Internet Angling

The average presidential candidate will only devote about 1 percent of his or her ad budget to the Web, and lead candidates are likely to dedicate about 5 percent, according to TNS. “There’s no candidate who’s really put historic dollars into the Internet. Most of what’s going on has been free—the YouTubes, the blogs, the MySpaces,” says Tracey.

But some candidates are reaping the rewards. “For every dollar we spend on search, we’re getting $3 to $4 in donations,” says Eric Frenchman, chief Internet strategist for Connell Donatelli, a Cleveland and D.C.-based agency working on the McCain campaign. “We focus on search to drive awareness of John McCain’s position on certain issues, and to generate effective conversation, whether it results in donations or joining the team.”

Frenchman buys thousands of key words on portals like Yahoo and Google on behalf of McCain. “We’re adding hundreds every couple of days. I’ll swap some in and swap some out. We buy thousands. We’re constantly [changing the mix] to optimize the campaign,” says Frenchman, adding that it wouldn’t “shock” him if the number of key words McCain’s campaign buys hits 10,000.

Peter Greenberger, manager of Google’s elections and issue advocacy sales team, says that while candidates used key words in the 2004 election cycle, it was in a much more limited capacity than this go-round. “We’re seeing a large amount of activity,” he says. “Candidates are being more savvy and strategic about words they buy, and they’re also starting to buy issue terms, like the war in Iraq and healthcare.”

“Internet usage is going to be huge in 2008,” predicts SmartMedia’s Roberts. “The research is so much better for media buyers and planners to utilize. We can see with great accuracy where people are getting their information on the Internet by party I.D. or persuasion. We can go right down to the ZIP code, if necessary.”

Although Internet spending is often separated into a different budget than ad spend, Roberts says, depending on the candidate, those he represents could spend 5 percent to 10 percent of their ad budgets on the Internet.

Radio and Newspapers

Although radio and newspapers don’t have the sex appeal of the Internet, observers say they fall into the category of “what’s old is new again” when it comes to this election cycle.

Ironically, it’s the usage of print by an organization powered by the Internet that is being used by the Newspaper Association of America as a selling point. Moveon.org’s ad in The New York Times denouncing Gen. David Petraeus’s testimony before Congress last month—and the anger it evoked among conservative Republicans and presidential hopeful Rudolph Giuliani—received a great deal of public attention. And that speaks to the power of the medium, says Jack Brady, director of marketing and advertising for the NAA. Brady says the NAA is also making a more concerted effort to sell the power of newspapers to politicos. “In the past, we kind of sat back. They would come in, the local guys running for mayor or sheriff. They’d bring in their checkbook [and a sale would be made],” he says. No longer. The NAA is educating its membership to be savvier about pursuing political business.

Tracey predicts newspapers stand to gain more than just excess dollars spilling over from TV. “Certain print outlets can be effective in promoting candidates’ online videos. Some candidates will be creative and resourceful and find that full-page ads will build traffic to what they want people to see on the Web,” he says.

Although the Nielsen Monitor-Plus numbers for presidential candidate spending on radio stations in the first eight months of this year—1,258 units—shows a vast improvement over sales in 2003 and 2004, there’s a bigger picture to consider.

Jeff Haley, president and CEO of the Radio Advertising Bureau, points to Nielsen Monitor-Plus data indicating that political advertisers of every stripe—national, state and local—bought well over 26,000 radio units in the first half of this year, representing a 17 percent increase over such spending in 2003, when the 2004 races kicked into gear.

Haley anticipates about a 20 percent lift when comparing the 2004 and 2008 presidential cycles. “We’ve seen a lot of activity earlier than we have in the past,” he says.

What the media world is experiencing now with political sales is likely to pale in comparison with the activity that takes place in December and January, as the concentration of primaries in early 2008 approaches. And there may be new ways of using media that have yet to unfold.

“No one’s an expert in running a campaign in this environment,” says Rosenberg. “Our general advice to candidates is, study the new tools and really experiment.”