ICYM The Political Digital Bubble

There’s something fun about bubbles; bad decisions become really easy to spot. The same reasons that dancers were flipping homes in Las Vegas in 2006 and Jordan Belfort could make a fortune twenty years earlier lead to our own little bubble in political digital media buying over the last decade. The nice thing about moving into 2020 is that the bubble survivors are tougher and smarter. What’s left are big players who can explain our unique 24-month cycle investors and the smarter players to deal with stockholder scrutiny.

How do we know political digital was in a bubble?

Just like the real estate bubble, people who had no business getting into political digital did just that.

Offline voter data shops, a mainstay of our industry for decades, jumped into this business and either fizzled for failed spectacularly. Rocket Fuel entered the market in 2015 with a stock price approaching $60 and a political team of fifteen, and exited with a stock price in single digits, before being acquired by Sizmek. Their parting shot after one campaign cycle, compliments of AdExchanger was this gem: “There is a 0% chance that many resources are dedicated to political again.”

One good company specializing in indexing the spoken word, thought it would be a good idea to enter this space. As did dozens of other established political and public affairs players. If your company was Acme Consulting in 2005 you changed it to Acme Consulting Interactive in 2015 and assumed it was a ticket to success. Somewhere in Las Vegas, there’s a dancer turned real estate agent who lost her shirt in 2008 sipping rose and laughing. This stuff is hard, and maintaining a serious tech stack is not cheap.

Price discovery was a wreck.

I don’t mean that in the sense that clients were being ripped off; rather, it took a decade for people to learn that you get what you pay for. The problem wasn’t unique to politics; high-quality platforms charge a healthy media fee for quality inventory and targeting. Lower quality platforms charge less, and with inexperienced customers, business flows to the lower quality junk.

Marketing was writing checks that the ops team couldn’t cash.

Ten years ago, there were precisely zero voter targeted digital buyers with any real experience. Yet, we as an industry marketed the heck out of this product. The result: absurd over-promising delivered via PowerPoint and painful backtracking delivered via awkward phone call.

The fact is that nothing has 100% reach and 100% viewability because we all consume media differently. For a decade, the entire political professional community lost its mind. It is what I imagine buying a home in 2006 looked like if you were offering all cash, 25% over asking price.

Meanwhile, some direct mail and television shops literally cut and paste from other decks and promised “platform agnostic cookie targeting,” along with quality lawn signs. Another vendor just told clients they used our voter targeted digital platform. Except they weren’t, and their clients were ripped off.

Sponsorship consumers found themselves awash in cash. 

If you’re a nonprofit political professional association accustomed to $10,000 sponsorship packages, and a relatively new digital platform offers to sponsor a $50,000 riverboat, that’s called a bubble.

The social media giants never scrutinized ad funding sources.

The craven greed from large platforms, accounting for well over half of political digital dollars, made political ad buying too easy. Their next decade will be one of regulation, slowed political spend growth on social, and malaise. The more they self-regulate, the more they kill political market share in exchange for the expectation of improved brand trust and commercial revenue. I question whether the social media giants will ever recover the political market share they lost from 2016 to 2018, and I doubt they care. Facebook generated $55B in 2018, and about $400M in domestic political spending. Less than 1% of their revenue accounted for most of their headaches.

Meanwhile, a decade of under-regulation lead to hastily written well-intentioned and bad rules that each platform interprets differently.

Rather a sensible national solution, we are following poorly written laws in a handful of states. This is no way to keep tabs on an industry that helps elect people. The only winners are lawyers, and companies who can afford those lawyers.

The bubble didn’t end with a spending collapse.

In fact, politics is one of the most recession-proof businesses in the US, growing faster than our GDP since 1980, and never dipping with economic downturns. What did happen was that political digital spending got smarter and the vertical cleaned itself up, and in the process ending some bad businesses.

Where do we go from here?

The market has weeded out the worst players, the crooks, and the cheats. Who is still standing? Shops who play by the rules, understand the state and federal regulatory landscape, and players who are unafraid to tell their investors how this market functions. These are the kind of people who could have sold Tulips in 1640’s Amsterdam (post-collapse) for a profit.

Show me a platform that’s been through the bubble and survived, and I’ll show you a group of people who knows what they are doing. One is a4 Media, which is staffed with a political digital operations team that has been through the battles and emerged stronger for it.

Jordan Lieberman

a4 Media