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The Evolution of Political Fundraising Online

The political campaign as we know it emerged in the 2004 Democratic primaries.  In 2003, Howard Dean was a long shot, a little known former governor of Vermont with unlikely national aspirations.  Though he didn’t go on to win the nomination, in early 2004 Dean ranked above all his competitors in total dollars raised.  The Dean campaign raised $14.8 million in the third quarter of 2003, shattering the record for money raised in a single quarter by a Democrat (the previous record was held by Bill Clinton: $10.3 million raised in 1995).

Dean’s online dominance was in many ways an accident of fate.  After a successful community event organized through Meetup.com, Dean and his staffers recognized the potential power of the Internet and were able to harness it to grow a widespread community of activists and evangelists.  By relinquishing some control of its messaging, they were able to foster a wide network of bloggers and online evangelists who spread Dean’s message independently of the campaign.

“Skeptics argue that large numbers of small, anonymous donors will never eclipse high-dollar, face-to-face fund-raising. The story of Internet solicitation, they say, is one of isolated successes, and its current popularity will live or die on the fate of Dr. Dean’s candidacy.”
Howard Dean’s Internet Push: Where Will it Lead? The New York Times, 2003

As it turned out, the skeptics were misguided, and the end of Dean’s campaign did little to deter future candidates from resurrecting the online fundraising machine.

Fundraising 2.0

Building upon the precedent set in 2004, another “long shot,” a relatively green Senator from Illinois, created a powerful online network incorporating Web 2.0 elements like Facebook to bolster its reach.

Barack Obama was able to defeat Democratic favorite Hilary Clinton in spite of the fact that the majority of the party’s power players were backing her.  In one month—February 2008—Obama was able to raise $55 million dollars without holding a single fundraiser.  Of that $55 million, $45 million was raised online.

“What’s amazing, is that Hillary built the best campaign that has ever been done in Democratic politics on the old model—she raised more money than anyone before her, she locked down all the party stalwarts, she assembled an all-star team of consultants, and she really mastered this top-down, command-and-control type of outfit. And yet, she’s getting beaten by this political start-up that is essentially a totally different model of the new politics.”
Peter Leyden of the New Politics Institute

According to the Campaign Finance Institute, 30% of Obama’s fundraising in the primaries came from small donations.  This strategy is straight out of the Dean book on fundraising; the average donation to the 2004 Dean campaign was around $80.  Not only do small sums from many donors add up, fundraisers are able to reach back out to small donors for more donations until they reach the individual $2,500 limit.  In 2008, 49% of Obama’s donors initially gave less than $200, but by the end of the campaign 27% of small donors had given between $201 and $999, and 47% had given $1000 or more.

Obama was able to raise a record $745 million, in large part due to these small, recurring donations, many of which were collected online.

Fundraising in the Age of Obama

Both the Obama reelection campaign and the Republican presidential hopefuls have made online fundraising an integral part of their campaigns.

Obama’s reelection team has the advantage of a four year head start and an existing database of supporters, and is working to build on those efforts.  Like in 2008, BarackObama.com is optimized for online donations with clear calls to action, minimal distractions and a simple donation platform soliciting only the information required by law.  The clean and navigable website is only part of the Obama campaign’s impressive cross-channel strategy—their emails contain the same Donate buttons and clear calls to action.

All campaigns are taking advantage of social media channels to encourage donors to evangelize.  If online fundraising was the new thing in 2004, social fundraising is the new, new thing in 2012.

Obama has relied heavily on small donations again in 2012. To date, 41% of Obama’s $139 million in funds came from donations of $200 or less—adding up to a whopping $58.5 million. Only 9% of Mitt Romney’s $56.8 million came from donations of $200 or less.

In 2012, a world where online fundraising is de rigueur, mobile payments could be the new disrupter.  The Obama campaign has just announced that they will be using mobile payments provider Square to allow staff and volunteers to accept donations in the field.  A spokeswoman told the New York Times that they are working on creating an app, which will be available in the App Store.  Supporters will be able to download the app and collect donations on behalf of Obama after receiving a free Square attachment.  All donations will be automatically received by the campaign.

The Romney campaign has also announced plans to use Square for fundraising in the field.

Online fundraising has evolved rapidly in a space that is generally resistant to change.  Social fundraising platform Fundly is tracking what is calls the Fundly Political Index (FPI), which tracks the velocity of social fundraising.  It will be fascinating to see how the FPI grows, how best practices in fundraising continue to evolve, and what role social and mobile will play in fundraising in 2012.