It's an all-out commission war

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Digital and TV consultants are fighting a turf battle over online commissions.


In 2012, during Republican George Allen’s Virginia Senate run, Scott Goodstein was approached by a labor group to create ads that would help squash the former Senator’s hope of a political comeback.

The United Food and Commercial Workers wanted Goodstein’s firm, Revolution Messaging, to push Allen’s vulnerabilities on women’s issues and motivate undecided female voters in the D.C. suburbs. Goodstein wasn’t thinking about TV, though. He was thinking online and mobile, which is exactly what he says sets him apart from the traditional media consultant competition.

A traditional media consultant, says Goodstein, “takes a 60-second ad and they chop it down to 15 seconds. We see it all the time around pre-roll video. We creatively make ads that are 15 seconds, so you’re not cutting down, you’re building up. An older, traditional media consultant is not thinking about an eyeball on a mobile phone.”

Maybe not, but since the 2012 cycle many in the old guard have started thinking about the commission that goes with the placement of that ad on a mobile phone or tablet. As campaigns pour more money into digital advertising, the stakes are being raised over online commission payments. Once a small-money afterthought to TV consultants, the fee or commission for placing an ad online is an increasingly lucrative slice of a campaign’s spending. And there’s tension growing over these commissions, according to many digital consultants.

“For many a year, the TV consultants didn’t want to acknowledge digital,” says Wesley Donehue, a GOP digital strategist based in South Carolina. “Now they see the trend shifting, so they’re trying to bring a lot of the digital in-house so they don’t lose any of the buy and can cut the digital folks out.”

If TV consultants succeed at cutting them out, digital media consultants will lose a revenue stream that some say is necessary to keep their offices running Traditional media consultants, who have long received payment for the placement of their creative, view the Internet as an extension of television or radio. Their logic is that they should be paid for the ad they’ve produced, wherever it gets placed.

Challenging their dominance of the message are the digital media consultants, many of whom have been through far fewer campaign cycles. Some of these up-and-comers say they deserve the online commission—even if they don’t produce the ad—because of the time and skill involved in making a digital buy.

Goodstein’s eventual Allen ad, a Cialis-themed spoof showing an Allen-like figure in an outdoor bathtub, blends humor and policy. It was geared toward Virginia commuters trapped on a long bus ride down I-395, which is where the ad appeared through geo-fencing and custom audience targeting. Overall, the ad received 4,000,000 impressions in Virginia and had a clickthrough rate of 0.4 percent. But among women, whose mobile devices were accessing game sites, travel news or shopping apps on designated Northern Virginia bus routes or around metro stops, the clickthrough rate was 5 to 6 percent.

That sophisticated targeting exemplifies the firm’s philosophy of ads designed for the platforms on which they’ll be viewed. In Goodstein’s view, the philosophy—and the results—sells itself.

“It’s evolving into who is the best quality in terms of producing the creative, the video, and who has the best technical ability to do distribution,” says Goodstein. “The expertise is what wins the day.”

BIG MONEY

Traditional media consultants have been able to charge commissions for getting their TV or radio spot placed for a simple reason: The client historically couldn’t go around them and get the same rate from the stations or networks.

The difference between the gross rate and the discount the agency received (as the net rate) became the standard commission.

Online, however, isn’t sold that way. In general, anyone could get the net rate, and consultants selling online mark it up after the fact so they get compensated.

“Digital consultants have existed as their own entity, in part, because the buying structure was so specific to digital,” says Brian Franklin, who owns the digital firm Impact Politics. “And the buying strategies you would use to approach the variant pieces online, which are divvied up between banners and search, video and rich media—are radically different than those you’d use for TV or cable.”

While the expertise is clear, the business model remains murky. “From a time-versus-money standpoint, a lot of us are still trying to figure out what makes sense,” says Donehue, who heads Push Digital. Even how much to charge remains a question.

“Digital is the most time consuming part of politics,” he says. “We have to work with the finance team, we have to work with the communications team, we have to work with the political team, and it takes an extraordinary amount of manpower to make that happen. So when you start cutting us out of the buy, we financially can’t keep our doors open.”

Donehue and other digital media consultants are challenging an established way of doing business, one wherein the commission goes to the TV consultant regardless of where the ad ends up.

“It’s a pretty straightforward rule,” says Tad Devine, a principal at the media firm Devine Mulvey Longabaugh. “If we create content, like a pre-roll ad, for example, and you then pay to put that out, not on television but online, we should be paid a commission for something that we create.”

Devine’s firm works with an outside media buyer to place the spots, and if he’s creating digital ads for a campaign, those spots are placed the same way the firm would place traditional television ads. In that way, the commission is essentially spoken for. Devine says he and other traditional media consultants aren’t trying to step between campaigns and their digital vendors, particularly if a digital firm is doing online ads that are part of a larger digital strategy.

“But at the front end I would say that if we’re going to make ads, and the campaign is going to pay to place them on TV or radio or online, then we should be paid for making the ads. That’s the way it works,” says Devine.

It’s an argument Donehue and other digital strategists have heard time and again. Admittedly, it’s not an easy one to counter. “Logically, it is very difficult for us to argue that point,” Donehue admits. “But unless we get a slice of that buy, our industry doesn’t survive.”

For right now, it may simply be a matter of speed. When it comes to pre-roll advertising, for example, the battle over commissions is increasingly coming down to who gets hired first.

Between the digital consultant and the TV consultants who understand how to buy online, “there’s kind of a race to lock up that part of the buy,” says Franklin, who consulted for Rep. Patrick Murphy (D-Fla.) during his 2012 campaign against Allen West, which turned out to be the most expensive House race in history. “I have been in races where both the TV and digital firms had experience buying pre-roll, and if I hadn’t locked up the deal first, it would have gone to the TV consultant. It’s just that simple.”

It is one area where digital consultants have something of an edge, because they are often hired before traditional media consultants. As campaigns increasingly bring on digital staffers and consultants earlier, making them an integral part of the campaign setup and launch process, they can make an early play for those commissions.

The timing is even more crucial for digital consultants who, for the most part, are earning commission from significantly smaller buys.

“There are very few statewide and congressional campaigns that are spending millions of dollars online,” says Franklin. “We’re often talking about digital budgets in terms of hundreds or possibly even tens of thousands of dollars. So the value of that particular piece of the commission is much more important to us than perhaps it would be to someone who is running a $2 million TV buy.”

One of the reasons digital consultants rely so heavily on commissions, argues Republican digital strategist Patrick Ruffini, is because the online budgets of campaigns are often in flux.

“We’ve had times when people have said digital is going to be 13 percent [of the campaign’s budget] and then it ends up being two,” he says.

Moreover, there’s a paradox digital consultants face when a campaign’s budget drops into that single-percent territory. If a campaign spends $20,000 for digital, “it’s practically all going to go to the consultant because they’re going to have to set up the infrastructure for the campaigns to do basic things,” Ruffini says. “The consultant gets probably a fairly large share of the pie, but nobody’s necessarily really well served by that, because you’re not putting the investment into the actual media spending to make that investment worthwhile.”

It might also encourage the consultant to tack on hidden fees or higher production costs for a pre-roll ad, or to get a kick back from the ad buy in order to break even on the contract. “That’s not as transparent as a commission,” he says.

The problem is more acute on the Republican side given that the growth of digital budgets on GOP campaigns hasn’t matched their Democratic rivals.

“Once campaigns scale up, they can get more out of their consulting firms for less,” Ruffini says. “They can get more of their dollars being spent on actual voter contact activities, on actually putting points on the board, as opposed to overhead and infrastructure and consulting fees.”

MOVING TOWARD ONE MODEL

The tension over commissions isn’t confined to one side of the aisle given that both parties are grappling with the development of a relatively new segment of the industry. In previous decades, sectors like mail, polling and media evolved gradually. Experienced staffers became consultants in established trades and developed relationships with their counterparts over multiple cycles.

The speed at which digital is evolving sets it apart from previous industry innovations.

“I don’t think the digital entry into the consultant space is anything like we’ve seen before,” says Democratic media consultant John Rowley. “I think that’s due to the medium and the kind of people coming in—they’re younger and they haven’t been in the political business as long in most cases. They haven’t done 10 races with other people where there’s some agreed upon points of collaboration. I think because of that it’s going to be uniquely challenging.”

The situation is so touchy that no one was willing to speak on the record about an actual intra-campaign exchange despite consultants readily admitting it’s a frequent point of contention. In fact, some expounded a kind of trickle-down view on the digital-versus-traditional debate. At the top tier of campaigns, these consultants say, there’s little discord between the digital consultants and their TV colleagues, particularly on the Democratic side.

“In my experience, the commission turf war between TV and digital is nonexistent,” Jon-David Schlough, who founded the digital firm Well & Lighthouse, told C&E in an email. “We work on top-tier races, and in those contests the consulting teams are dedicated to working together to develop and deploy strategies to win. Period.

“While there are accepted percentage baselines for digital spending within political persuasion media plans now,” Schlough said, “the state of play in the race and our strategic goals drive the budget discussion. How the digital percentages work out in the budget relative to TV isn’t a consideration for us.”

Other consultants say that any discord between the two trades will be made moot by convergence—the idea that firms will eventually become one-stop shopping for digital and television. The media firm GMMB, for instance, has close to 200 employees, all of whom have some dealings with digital.

“Media is going to be media pretty soon,” says Andrew Bleeker, founder of the digital firm Bully Pulpit Interactive.

“Teams that are more creative and more analytical are going to win. The digital folks have some advantages in terms of culture and instincts and technology as the media converge.”

The advantage of digital over television is something Republican media consultant Casey Phillips has grown tired of hearing about.

“I’m really sick of reading article after article about how everybody in the campaign, except for the data guy, is stupid. That’s just not the case,” says Phillips, who co-founded RedPrint Strategy. “I know some wonderful digital guys, whom I’m friends with, who’ve never run a campaign in their lives.”

Things are changing rapidly, and Phillips admits that it would be stupid to not take advantage of the knowledge a new generation of digital consultants can offer. But a campaign is a whole lot more than data analytics.

“I could go give all a campaign’s money to the digital guy and we’re not going to win,” he says.

For all the buzz about convergence, this isn’t the first time the idea has been floated in the consulting industry. In the 1980s, media consultants tried partnering with pollsters to form one-stop-shop firms. That marriage didn’t work out, but as stockbrokers are fond of saying, past performance isn’t an indicator of future results. Now, consultants say there’s less of a divide between digital and television, and practitioners on both sides are growing weary of the conflict between them.

The union of the two professions could be a result of the mediums—television and the Internet—merging into one. That can be seen already with online content providers gaining prominence in the entertainment industry.

It’s all just content, after all. And consultants, whatever their preferred medium, may soon be just content creators.

Sean J. Miller is a contributing editor to Campaigns & Elections magazine.


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