October 23, 2008 -- Business Week -- Marketing


Obama's $150 Million Election Spree

His cash bonanza gives Obama lots of leeway in how to place ads on national, local, and cable TV, while McCain has to pick his spots

When college football fans watch the big Penn State vs. Ohio State game on Saturday, Oct. 25, there will be more going on than smash-mouth football. There will be smash-mouth politics, at least during the advertising breaks. It's the best chance before the Nov. 4 election for Presidential candidates John McCain and Barack Obama to reach male voters, especially white male voters in two of the remaining swing states, Pennsylvania and Ohio.

Senator Obama (D-Ill.), who raised $150 million in the month of September and may do nearly as well in October, will dominate the game's broadcast in Pennsylvania, according to Paul Roda, national sales manager of Harrisburg (Pa.) ABC affiliate WHTM. "There will be a lot of Obama, and more politics than any other single category, I believe," says Roda. It's the same story for the ABC affiliates in Cleveland and Columbus, Ohio, where the two candidates are battling for every vote.

Obama has a huge financial and tactical advantage in the final two weeks of the campaign. Senator McCain (R-Ariz.), who is participating in the public financing system for Presidential elections, has been limited to spending a total of $84 million in the two months before the vote. But Obama bypassed the public financing program and has continued to raise private donations.

The huge Obama cash kitty will give his campaign more maneuvering room in the complex dance that determines who can buy TV ads, when, and where.

"Fire Hose" of Funds

Not only can Obama afford to fund a more sweeping ground operation in key states such as Ohio, Pennsylvania, North Carolina, Indiana, and Florida, but he can well afford to pay the premiums that TV stations are charging as politicians compete against retailers, car dealers, and wireless phone companies that traditionally load up their ad buys in the last week of the month to bolster their end-of-the-month sales results.

Additionally, Obama can afford to buy both national and local ad slots, whereas McCain and the Republican National Committee have dropped national broadcast and cable buys to focus their more limited resources on targeted local buys in key swing states and congressional districts. An Obama campaign adviser, who asked not to be named, said: "It feels like we have a fire hose and they have a garden hose."

On Monday, McCain campaign manager Rick Davis predicted that by Election Day the McCain campaign and the RNC will have spent nearly $400 million for the two-month fall campaign, according to the Associated Press. He downplayed the impact of money on the advantage Obama currently enjoys in polls: "The lack of money in Wall Street has had more to do with the outcome of this last month politically than the money in Barack Obama's bank account."

Competing for Ad Slots

The World Series, whose first game was on Wednesday night, is tailor-made for the two campaigns. And the Fox affiliates in both the Tampa Bay area and Philadelphia, nestled in two of the last true battleground states, hope the Series between the Tampa Bay Devil Rays and Philadelphia Phillies goes to seven games. A Fox official would only say that the network and local affiliates were in heavy discussions with both campaigns about ad time. Ad availability for the first two games in St. Petersburg is sold out, with both campaigns having made significant buys.

Stations like Harrisburg's WHTM and Tampa's WTVT charge a 25% to 50% premium for an ad that cannot be preempted by another advertiser paying more for the time. Obama's campaign has stocked up on such buys during the next two weeks. Most of McCain's buys are for a tier below that, which means campaign officials get notified if another advertiser is trying to buy the same time slot, and can spend more to hold the spot.

"Obama has such a huge cash advantage that he is forcing McCain to either buy the top-priced ad inventory that locks in the buy, or pay up because Obama's campaign can challenge every ad buy McCain makes in swing states.... Either way it means McCain can afford fewer ads even if they can get the slots," says Felix Dumbarton, an independent media consultant.

Two-Front Ad War

Both campaigns make their ad buys week by week. That's because they couldn't know back in August which states would be the most hotly contested. Of course, campaign officials assumed Ohio and Pennsylvania would be key states. But the same wasn't true of states such as Florida, which has only become competitive for Obama in the last few weeks. That has allowed the Democratic nominee to pull ad spending his campaign had earmarked for Michigan, Wisconsin, and Colorado, and push it into Florida, Virginia, Indiana, and Missouri. In a recent report covering the week of Sept. 28 to Oct. 4 by the Wisconsin Advertising Project at the University of Wisconsin-Madison, which monitors political ad spending and content, Obama outspent McCain and the RNC by more than 3 to 1 in Florida, and 8 to 1 in North Carolina.

Obama's financial advantage is making it difficult for McCain's campaign even to find ad inventory in premium programming slots in key media markets like Tampa and Jacksonville in Florida, Cleveland and Columbus in Ohio, and Harrisburg and Pittsburgh in Pennsylvania. "So they have to resort in many cases to advertising in programs with lower rating points, and that means you reach fewer people," says Dumbarton.
Obama also has been able to play a two-front media war against McCain, running both positive ads and attack ads. McCain has often chosen his battles week by week. For instance, in the week that preceded the last Presidential debate, 100% of McCain's ads were negative, according to the Wisconsin Advertising Project. Since then, after seeing a dip in the polling, McCain's campaign launched new positive ad messages, but attack ads still represent a majority of the ads running. During the same period, one-third of Obama's ads were negative.

Making it even tougher on McCain and the RNC is that Obama has been able to spend millions on relatively cheap Internet advertising, and even a small amount on video games, to reach the younger voters who are the heart of his base. McCain's biggest group, on the other hand, are seniors, and it costs much more to reach them in more traditional TV buys such as news, game shows, and soap operas.

Down-Ticket Races

Obama's fundraising advantage has also been a boon to the Democratic National Committee, which hasn't had to buttress Obama's ad buys with its own money the way the Republican National Committee has had to with the McCain campaign. That has allowed the DNC to better coordinate with the Democrats' House and Senate election committees and send its money into markets where there are hotly contested House and Senate races, and to help make the difference in races that have drawn closer. That's true in the Fourth District of Connecticut, where Republican Representative Christopher Shays suddenly looks vulnerable to challenger Jim Himes, and in Minnesota's Sixth District, where Republican Representative Michele Bachmann is dropping in the polls and opponent Elwyn Tinklenberg has received more than $1 million in new donations and an infusion of cash from the Democratic Congressional Campaign Committee.

According to ad monitoring firm TNS/CMAG, McCain spent $9.4 million on ads in key battleground states the week of Oct. 12, and is spending more than that this week. McCain has moved his buys into the expensive media market of Washington, D.C., where he can reach suburbs in Northern Virginia as he tries to make up some ground in an attempt to keep Virginia a red state. The RNC is spending about $1 million a day between now and Nov. 4 on pro-Republican/anti-Democrat ads that help McCain in his key areas.
Meantime, Obama has budgeted at least $30 million in TV ads in contested states in the final two weeks. That is, in part, a function of there not being much ad time left to buy during worthwhile programming in those areas. That still leaves tens of millions of dollars available for Obama to spend on get-out-the-vote efforts in the states he needs, as well as closing the gap in states where McCain is ahead but vulnerable, such as West Virginia and Nevada.

Close this window.