Has there ever been so much enthusiasm for an unproven political fundraising tool?
Yet another firm threw its hat into the text-to-donate ring this week by submitting a new proposal to the Federal Election Commission. Revolution Messaging has asked the FEC to consider:
- Allowing campaigns to share short codes in order to cut down on costs and setup times for text-to-donate campaigns.
- Lower the amount wireless carriers can charge campaigns per donation.
- Allow any federal campaign to utilize text-to-donate.
The FEC is set to clarify their stance on text-to-donate later this month.
The elephant in the room is that all these promoters of text-to-donate are treating the wireless carriers like they are providing public services. The reality is that wireless companies are private companies with a fiduciary responsibility to their shareholders to return profits. This means that besides getting the FEC's approval of the text-to-donate process, proponents’ challenge is to build a solid business case to the carriers for them to want to open their networks to political donations.
If I was a wireless carrier, I would have three primary concerns:
- Market size of text-to-donate political donors
- Corporate benefits of text-to-donate—both financial and good corporate citizenship
- Costs and risks involved with providing text-to-donate services.
Basically, the business plan has to be written and pitched to carriers before they will even touch text-to-donate.
The total amount of funds raised by political campaigns may sound like a lot, but compared to other markets the political fundraising world is about the same size as the alpine ski lift ticket industry—very small potatoes.
In addition, is there a proven demand by prospective political donors for a new way to make small donations?
The average online political donation is about $80. The Obama team has stated that their average is closer to $55, and the Romney team says they are closer to $100. According to the Obama FEC reports, less than 0.5 percent of all their donations for this cycle were for $10 or less. It does not sound like $10 donations are currently moving the over-all fundraising needle.
Making donations online is very easy. Will the ease of contributing via text bring in that much more new money or turn cell phone subscribers into new donors? The answer isn’t known just yet. The market will need to be tested and validated.
Rumors have it that the carriers, should they choose to pursue text-to-donate, will not be charging for their service. As such, the only benefits of providing the service will be that carriers are being good corporate citizens. This is good for the PR department.
The challenge is that the carriers are going to be less inclined to invest in making changes to their business practices in order to support political donations processed through their network.
Costs & Risks
What are the costs and risks of the carriers providing their network as a donation processing platform? This is where the devil is in the details. Potential costs include:
- Bandwidth for the donations and donation confirmations
- Tracking, reporting and accounting for each subscriber’s donation
- Invoicing the donor for the donations
- Collections for the donations (10 percent of cell phone bills go unpaid.)
- Customer service calls regarding donations
- Charge-back processing for canceled donations
- Reporting, accounting and reconciliation for funds to be forwarded to the aggregator
Regarding the risks, these were listed in wireless association CTIA's last letter to the FEC. The carriers are concerned about who is responsible for validating prospective donors, tracking the donations and validating prospective campaigns. On top of this, the aggregators want all the changes in place before Election Day in November.
The takeaway is that carriers have invested billions of dollars of their investors' money in their networks. Their fiduciary responsibility is to avoid risk and make their networks profitable.
Does fast-tracking text-to-donate for the 2012 political cycle make financial sense if you are Verizon, AT&T, Sprint or T-Mobile? I still need to be sold.
Erik currently runs sales and marketing for CMDI, the largest Republican fundraising technology platform. Prior to joining CMDI, Erik founded numerous fundraising technology companies whose products have raised over $300 million for hundreds of political and cause-based organizations.