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The Money Myth

BY Patrick Ruffini | Thursday, January 31 2008

If he wins, John McCain will have spent roughly $40 million to secure the nomination against two vastly better funded opponents. That is a far cry from the conventional wisdom that it would take $100 million to compete.

How much you raise may not matter that much, but I'm about to argue that how you raise it makes a big difference. Two data points.

One:

Boosters, including state Chairman Wayne Semprini, spent much of last year urging the national campaign staff to have Giuliani spend more time in New Hampshire. "We couldn't get Rudy for a lot of prime-time evening things and breakfasts because the New York people were telling us he had to fundraise for what they called a 'national' campaign," the volunteer recalls. "He'd do a fundraising breakfast out of state, come in here for an event, then fly out and do a dinner fundraiser somewhere."

Two:

Officials familiar with Romney's plans cautioned they could yet changes. They said that paradoxically, the Florida defeat had been followed with a particularly strong day of online fundraising. But they added that in discussions so far, the former Massachusetts governor had selected the least costly of a variety of options prepared for his review.

The first quote comes from the Leahy & Shear postmortem on Rudy. It recounts how the focus on fundraising -- and specifically high-dollar event fundraising -- helped squander the very thing they were fundraising for: a vigorous on-the-ground campaign in places like New Hampshire.

In the second, the Romney camp seems caught by surprise that the online community has finally discovered them, even in defeat. But that's not very surprising. I came to Romney in the last 24 hours, as the race clarified to two men. A few people in the comments even mentioned they had kicked in a few bucks to stop McCain. (Whether it's too late, we'll see.)

The common thread is that neither Rudy or Romney had a huge, organically driven online community behind them. Though each had strong supporters online, and though the Romney blogs were very organized, they didn't match the boisterousness and money-raising ability of Huck's Army, the FredHeads, and of course, the Paulbots. In fact, the lack of a clever moniker for Giuliani or Romney's people is telling in and of itself.

In Rudy's case, it was because the candidate didn't openly do very much to inspire them. He eschewed retail politics and never threw out much red meat on the stump. As told by a staffer,

"It was a constant battle to dial him up," one aide said of the lack of energy or the old winning combativeness in his appearances. "Every day: a constant battle."

In Romney's case, all the money he pumped in probably dried up low-dollar fundraising. Why part with $50 or $100 or your hard earned money when the candidate is doing it all for you? In the first half of 2007, when it was unclear whether Romney would self-fund to the extent he finally did, the campaign reported more low-dollar donors than any Republican. The campaign hasn't claimed similar success since Romney began writing seven figure checks.

While this has been a good problem for Romney to have, it leaves him in the position he is now: with no grassroots base of financial support as he grapples with an uphill February 5th battle. A similar predicament left Rudy even more grievously wounded.

The irony is that Romney could easily have turned his self-funding into an asset. All they had to was launch an e-mail campaign with the tried-and-true donor match technique: "I'm laying it all on the line. I am not afraid to be the biggest investor in this campaign because I believe deeply in the future of this country. But I can't do it alone. That's why I'd like to issue this challenge: for every dollar you contribute, I will personally match it with two of my own. That's right -- you can triple your impact. Your $50 will become $150. Your $300 will become $900." That would have vested people in the campaign, and let them know that despite Romney's massive personal contributions, their support still mattered. The snowball effect this would have started could have kept them going at full steam into Super Tuesday.

Romney has made some inspired moves online (the ad contest, peer-to-peer voicemail), and done some very creative things relieved of the pressure to raise money, but failing to mitigate the effect of Romney's self-funding counts as a missed opportunity.

Because Rudy was unusually dependent on finger-in-the-wind high-dollar fundraising, his collapse was quick and stunning. It was this lack of resources that backed them into the Florida strategy.

Fred Thompson offers an interesting counterpoint. Between Iowa and South Carolina, Thompson raised $1.2 million on the Internet through the red truck on his homepage. John Edwards raised $3 million online in the month of January. This was at a point when these candidates were walking dead. A candidate who relies on traditional fundraising will see it all dry up under similar circumstances. In past years, we saw candidates drop out when a turnaround was still possible because they couldn't afford to meet payroll. Today, with the ability to ask instantaneously of an engaged and motivated base, e-mail lists can be the decisive factor in keeping candidates going. (I'll bet that e-mail was a big source of John McCain's fundraising during those lean summer months.)

How did Fred do it? Remember when I made a big deal about his announcing online? I knew it would pay dividends down the road, expanding their ability to reach diehards who would give no matter what. The announcement video attracted tens of thousands of new online supporters. At $10 an address, they'd be worth hundreds of thousands of dollars -- and that's a conservative estimate. But beyond simply attracting more eyeballs, Thompson 1.0 fundamentally got the idea of building an online community around the candidate. As Thompson's new media guy Michael Turk writes:

The blog was a hit almost instantly and led me to believe the path we had chosen was right. Fred's commentaries were getting a lot of comments and I saw the beginning of an online community I've never seen around a GOP candidate's online operation. What's more, nobody wrote a single word about what supporters were saying online. Nobody accused us of endorsing the random beliefs espoused by the occasional nut, and nobody on the campaign had to answer a single press call (that I am aware of) about the blog or anything said on it.

Despite this manifest success, it was still an uphill battle to convince the traditional types:

Unfortunately, the staff turnover that began in the late summer had an almost immediate effect on the Internet operation.

As the Communications team focused on traditional media tactics, their attention increasingly turned away from the Internet. The commentaries became less frequent, online initiatives were no longer part of the equation.

It's worth noting that Rudy never had comments on his blog. They didn't have Facebook page or a public MySpace profile until September. Lacking a fiery candidate who energized the grassroots, I doubt opening these avenues sooner would have made much difference. But at a minimum, it was certainly symptomatic of a rigid approach that devalued retail politics online and off.

Overall, this has also been the year that low-dollar, primarily online fundraising officially eclipsed high-dollar fundraising. Obama beat Hillary in the money chase because of online. Ron Paul beat everyone in Q4 because of online. Online enables lower-tier candidates like Huckabee to be competitive and was the only reason Fred Thompson had any ads up in Iowa and South Carolina at all. Leveraging this opportunity demands a certain type of candidate and a certain type of campaign. One that patiently works to nurture an active online community without initially asking for money. One that dials up candidate energy to get online energy, and is, to borrow a phrase, "fired up and ready to go."

I hope that future candidates and political operatives learn the right lessons from this. Knowing that McCain was able to (probably) win the nomination on half the money they said it would take, let's keep those 2011 Q1 (or 2010 Q4?) numbers in perspective, won't we? And let's truly understand online not as another layer on top of the traditional campaign, but as an opportunity to change the equation, protecting candidates from unreliable, time-consuming, and costly fundraising practices from the past.