“You start to follow the money, and you don't know where the fuck it's gonna take you” – Detective Lester Freamon (the Wire)
So, in yet another effort, to face down the anxiety that death star mountain of Romney advertising cash causes me, I’ve been putting my marketing guy hat on and thinking about why so much of it is spent on :30 spots despite the general trend in marketing of moving away from :30 spots. And, the key might be to follow the money (be great to hear from other marketing folks with more experience in this area).
And, when I follow the money what I come up with is the GOP media consultants (i.e. the firms that are getting as much as 10% of the buy) and the TV stations (that are charging “spot” rates) are getting paid and likely – somehow – driving this weird 30 second spot dance we see going on. Again, I’m not a media buyer (or political advertising guy) and would love to hear from folks with more knowledge.
But, the good news, silver lining, is that because they are paid so much to just run spots, they are going to waste that death star of cash (let’s hope a lot of it).
Political advertising has had, until recently, an unheard of deal in advertising. They get paid up to 10% of the buy. So, if someone spend $100 M on ads, they get paid as much as $10M. This is based on the old pay structure for Madison Avenue that started to go away in the 1960s! You can see it in the recent season of Mad Men where they are grumbling that some clients don’t want to pay them a percent of the buy any more. In my experience, most all non-political clients do not a percent anymore – they pay fees (which amount to well below 10% of the buy).
The fact that so much of the big agencies $ came from TV spots made the whole set-up of agencies structured around the :30 spot (as that is how they got paid). It has been a real sea change in the industry recently with the basic disappearance of media commissions and, more importantly, the decline of broadcast TV (and its audiences). I worked for media companies during the dotcom boom and was perplexed by the reluctance of advertisers to buy online ads to support media dotcoms (no comments about “pets.com” please I prefer to look at Google and Amazon and Netflix and Daily Kos as the evidence that it all ultimately worked). Anyway, they did not want to buy internet ads. They wanted to keep on producing :30 spots (even though the money was going away). It has taken the near death of broadcast TV to finally push the big agencies away (somewhat) from the :30 spot (although all the stars are still people who write, produce and direct:30 spots).
So, here you have these political guys still getting a percent of the buy. And, you have a political culture where getting the top political ad guy (they call them media consultants) is one of the key moves pols make to establish themselves as a serious candidate. And, now you have this total windfall, these mountains of cash, coming their way in the SuperPacs. How can you spend all that money and get paid the most? Why 30 seconds spots of course. So, you are going to produce as many 30 second spots as you possibly can. It is akin to the hedge fund, private equity guys (like Romney) who get paid 2% (of the running net) and 20% (net) (they have an incentive to pump up net in the short term). These political guys have a huge incentive to spend as much on 30 second spots as they can so they can get paid. It is complicated of course – here’s a Roll Call article about how they are doing it. They are basically sub contracting to themselves.
The TV stations are also making out like bandits. TV stations charge more for what they call spot buys. Most big marketers buy TV, media well in advance and negotiate hard. The broadcast TV audience (as you may have heard) is going away and so are those businesses. Imagine if you are a station owner in a dying business and this mountain of cash comes your way via these media consultants. You will want to get paid and make sure they get paid. Here’s a story about all the money the local stations are getting paid by the pols. Note – this is the dirty little secret about campaign finance (you make the TV stations charge lower rates and suddenly you don’t need to raise as much $) And, guess who owns the TV stations – often big newspaper chains (who relegate reporting on this stuff to the “media column” in the back pages).
Finally, you may ask, won’t Romney and Sheldon Adelson stop this as clients? Well, in Romney’s case his ad team are run by political media consultants who need to get paid in the next cycle (and will want to access to that mountain of dark money so they can get paid and buy their homes in Tuscany). Adelson right now is a sucker – these guys don’t know how it all works and – like everyone else – are probably star struck and have a mindset that the 30 second spot is what still matters. This also might account for Soros and Lewis resistance to give money to Dem Superpacs (they know how it all works). I do think, in the long run, the donors will crack down (and I’ve heard that some are forcing the managers to get paid flat fees) but I am very skeptical as these PACs are based around star media consultants just like hedge funds. I wonder if Citizen’s United is really a function of a permanent GOP political class that wants to get paid (a subject for a later diary).
Anyway, curious what marketing, media and political ad people think and know about all this. And, I have no idea how much of that pile of dark money is being wasted – I hope a lot.