Link, Bundle and Hedge – Campaign Fundraising With No Stone Unturned

 

Question: Will a 2012 candidate be able to only accept small donations?

 

 

The Obama election machinery has been able to raise more than half a billion dollars since his campaign started early this summer, netting $ 150 million in September alone and mobilizing 3.1 million donors so far.

 

Obama has been wildly successful in mobilizing huge sums via the explosive fundraising power of Facebook, MySpace, email and text messaging. Thus, it would seem sufficient for 2012 candidates to only rely on vast numbers of small donations.

 

But would that be prudent? Most likely not. It requires a bit of history to explain why.

 

Back in January 2007, when Obama’s fundraising schemes started to take shape, his advisers came up with a plan that was one part Howard Dean (the first to harness the Internet to raise cash in 2004) and one part John Kerry (the Democratic presidential nominee in 2004 who impressively tapped check-writing supporters up to the limit allowed by election laws). During the primaries, Obama received support from a large number of bundlers who came from Hollywood and Wall Street, or who were moneyed Democrats and prominent citizens from Chicago.

 

Obama’s online fundraising drive set his campaign apart. But by June 2008, members of Obama’s finance committee were worried about a fundraising strategy that relied too much on the Internet, because Internet donors are impulsive and driven by big turns of events.

 

By the end of August, Obama’s campaign finance staff were frankly concerned that the Internet fundraising they had depended upon was turning out to be anemic.  Indeed, it seems that two events–McCain’s selection of Sarah Palin on August 29 and his campaign’s early-October threats to “take the gloves off”– did much to spike Obama’s Internet contributions throughout September and well into the last two weeks prior to Election Day.

 

While the Internet was surely important, a third of Obama’s funds came from the powerful and well-connected, who gave in increments of $2,300 at VIP receptions. That is not insignificant. These donors remain a foundation of any political fundraising campaign. A few of these Obama supporters—such as Warren Buffett, Robert Rubin and Caroline Kennedy—have huge networks of other friends who could write fat checks. And there are single superstar events like the Barbra Streisand concert that brought in $ 9 million in a few hours.

 

Bundlers play an essential role, since they are able to pool large amounts of money from all sources, and not just the Internet.  For example, of Obama’s 562 bundlers, 46 have been able to generate more than $500,000 for the campaign. But they do raise some concerns in terms of the influence they may have later on government decisions.

 

Raising funds through the Internet also raises some issues, such as the anonymity of small donors, possible false identities, unknown foreign contributions, and more generally the specter of “buying the presidency”.

 

In short, the old saying still holds:  as a candidate, don’t put all your eggs in one basket.  It may not be possible nor wise for the 2012 candidates to only rely on small donations through the Internet.

 

It’s fine to link virally and collect voraciously over the Internet, but candidates still need to churn the bundlers and stay well-hedged through friends who sign big checks.

 

  

Sources (in addition to the 4 readings provided in the class site):

“Fear of Failure Helped Fuel Obama’s Record Fundraising”, Washington Post, Tuesday, October 21, 2008, page A-4.

 

“Obama’s September Haul Provides huge Advertising Edge”, Washington Post, Monday, October 20, 2008

 

“Analysis: Obama money dooms current public finance”

http://news.yahoo.com/s/ap/20081019/ap_on_el_pr/campaign_money_analysis