Posts by Michael Bassik

Rules and Tools: The FEC and the Internet

February 17, 2005

Michael Bassik

An article appearing earlier this week in Roll Call has sparked debate on the Federal Election Commission’s announcement that it may soon rewrite current rules that regulate online political communication.

Under the current rules – crafted after the passage of the Bipartisan Campaign Finance Reform Act (BCRA) in 2002 – certain Internet communications are exempt from the strict regulations that apply to other forms of communication, such as television, radio, and print.

For example, television ads streamed over the Web are exempt from the “stand-by-your-ad” requirement.

However, this exception is not at the heart of the potential controversy. Rather, there are two other FEC rules that have independently been coined “The Internet Loophole” (or “The Internet Advantage,” depending upon your perspective) that look likely to close after a U.S. District Court said that the FEC’s:

“exclusion of Internet communications from the coordinated communications regulation severely undermines” the purposes of election law. The court continued: “To allow [online] expenditures to be made unregulated would permit rampant circumvention of the campaign finance laws and foster corruption or the appearance of corruption.”

Here is an explanation of the two Internet-related rules that the court was specifically criticizing and my opinion of what this all means.

1. Public Communications & State Parties

The first rule in question really only applies to state and local parties. As you probably know, BCRA was crafted primarily to remove unregulated soft money contributions from federal elections. As such, the law dictates that while state parties can continue to raise and spend soft money for local campaigns, they cannot spend soft money on (pay careful attention here) “public communications” that reference federal elections.

Seems pretty simple, right? No soft money for “public communications.” Got it. But wait! When the FEC looked up Congress' definition of “public communications,” they noticed it didn’t mention the Internet. See here for yourself:

BCRA Language

A public communication is “any communication by means of television (including cable and satellite), radio, newspaper, magazine, billboard, mass mailing, telephone bank or any other form of general public political advertising.

See what I mean? There’s not a single mention of online, electronic, web, computer or Internet communications anywhere. To hammer in their point that the Internet isn't covered by BCRA's definition, the FEC went as far as to include this specific language at the end of their public communication rule:

FEC-Added Language

Communications over the Internet are not included in the definition of public communication.

Everyone still with me?

OK, I know what you’re saying. Shouldn’t we interpret the Internet as falling under BCRA's inclusion of “any other form of general public political advertising?”

Well, the drafters and sponsors of BCRA sure thought it did, but since they did not specifically mention the web in the actual piece of legislation, the FEC opted to keep it out of its rule.

2. Coordinated Communications

The “advantage” with respect to coordinated communication on the Internet is directly related to the “advantage” with respect to the state and local party soft-money exception described above. Here goes.

Not happy with the current definition, BCRA asked that the FEC create a new, broader definition for the phrase “coordinated communication.” Much to the surprise of Congress, the FEC wound up doing the exact opposite and wrote rules that seem to have carved the Internet (among other media) out of its definition of coordination. As a result, coordination between individuals, candidates, 527s, political parties, and just about anyone else is completely legal with respect to online communication.

Once again, the “advantage” is linked to the FEC’s interpretations of terms like “public communication” and “electioneering communication” which both specifically and clearly exempt the web from regulation.

What does all this mean?

Not a whole lot. While it means that a big donor could have written the Democratic Party of Ohio a check for $1MM to spend toward online communication (i.e. web video, e-mail, banner advertising, etc.), state parties failed to take advantage of their, well…“advantage.”

Same goes for the coordination exception. While 527s could have coordinated their online communications with federal campaigns they wished to support, it appears that no one did.

Could these be the first major loopholes in the history of election law that were not taken advantage of?

Now, some might say that this was intentional. After all, it doesn’t take a genius to realize that just because something’s legal doesn’t mean that it’s a good idea. Especially in politics, candidates must weigh potential public relations nightmares with the benefit they receive from taking full advantage of the law.

But, at the end of the day, if the FEC winds up changing their rules to please the court, it’s unlikely we’ll even realize the difference.

What should the rules be?

I have two perspectives on this matter. And, to be honest, I haven’t quite worked them out in my head yet.

First, if Congress wants to regulate the Internet, they should say so in their legislation and not complain to the FEC after the fact. I don’t blame the FEC for sticking close to the text of the statute which fails to mention the Internet or anything related to it. While easier said than done, Congress would be better off passing another piece of legislation than begging a federal judge to squeeze out what the drafters of BCRA “meant” even though it’s not what they “wrote.”

I’m also a very biased individual. As an online political consultant, I’m in favor of letting the Internet grow as a political communications medium without unnecessary interference from the government. BCRA was meant to curb abuses by limiting the amount of money individuals, corporations, and organizations could throw into the political process. While the Internet was an important part of the 2000, 2002, and 2004 election cycles, it certainly wasn’t being abused. Therefore, a part of me says “don’t fix what ain’t broke.” Let the web live on as an unfettered medium.

But on the other hand, I’m not naïve, and realize that Congress will likely regulate the actions of the online community. It would be very safe to say that the web really is the “Wild West” of all available communication media. It’s also where there’s room for the greatest amount of abuse.

If left to our devices, it’s just a matter of time before we start seeing video ads without disclaimers, blogs and websites claiming to be independent but really coordinated hand-in-hand with candidates, e-mail and banners ads funded with unregulated soft money…the list goes on. If you think it won’t happen, just look at the “independent” bloggers who were paid handsomely by Thune’s Senate campaign in South Dakota to attack Daschle.

Although I really haven’t made up my mind, Congress might be right in wanting to monitor coordination and regulate the funding of online communication.

Getting the nod from Congress that the Internet is no different than any other medium might actually work to our advantage. It could go a long way in legitimizing our space and showing the political establishment that they can’t keep on thinking that the web is just a crazy medium filled with potential donors and nutty bloggers.

After all, wouldn’t you agree that the Internet is worthy of being defined as medium of “public communication?” I know I would.

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Long Live the BlogAd

December 6, 2004

Michael Bassik

At the March 2004 Politics Online conference at George Washington’s Institute of Politics, Democracy, and the Internet, Henry Copeland from Blogads posed a question to the panel on Internet advertising: “Have you considered placing ads on blogs?” I was on that panel, along with Cliff Sloan from The Washington Post, Nick Nyhan from DynamicLogic, and Charles Buchwalter from Nielsen//NetRatings.

All of us on the panel had heard of blogs, perhaps even visited one or two before. But who would actually pay money to place a tiny tile banner alongside of someone’s random thoughts? We all thought Henry was crazy, along with everyone who agreed with him.

As it turns out, we were all wrong. This past year, these inexpensive, static ads provided many candidates and organizations with an effective way to reach activists and thought-leaders on both sides of the aisle.

But after enjoying a remarkable ride from relative obscurity to trusted media vehicle, are paid Blogads a thing of the past?

According to Copeland, Blogad’s CEO, over 200 political campaigns placed ads on blogs in 2004, accounting for 40% of his company’s revenue. However, Site Meter reports that traffic to top sites like DailyKos and Instapundit has dropped by half since October, and revenue from Blogads has likely dropped by as much. While the most popular blogs still attract hundreds of thousands of pageviews everyday, can the average blogger – who keeps 80% of the revenue generated from Blogad buys – adjust to the possibility that the cool stream of welcome cash is likely to dry up, at least until the 2006 cycle begins?

Here are some suggestions for Henry and the Blogads folks to keep the money coming in while waiting the next cycle to arrive:

1. Branch out

If you visited a blog in October, you couldn’t have missed TBS’s ads promoting reruns of “Sex and the City.” And rumor has it that TBS is planning another large Blogad campaign around their new reality show “Gilligan.” In addition to TBS, Blogads were also purchased by Sharp Electronics and a handful of other non-political advertisers. Blogads should proactively market themselves to online ad agencies as a way to reach influential and engaged consumers. Just don’t let the non-political advertis
ers buy up all the ad space!

2. Team up with Google

Blogads should approach the folks at Google AdSense to discuss a multi-year partnership to place contextual links within blog content. While you run the risk of having untargeted and seemingly arbitrary ads appear within alongside articles, Google will do all the work while you make money in your sleep. It’s a no brainer.

3. Move to a bidding model

If eBay and Google have taught us anything, it’s that demand-driven pricing models work. Rather than set your own prices arbitrarily, let the marketplace set them for you. Allow advertisers to bid on placement and/or the amount they’re willing to pay per click. Although it requires more work on the advertiser side to manage an ever-changing campaign, the ability to control where your ad falls on a page was a feature that was sorely missed this year.

4. Label blogs based on their ideological slant and physical geographic location

Here’s how you go after incremental dollars. Help those purchasing ads on one blog know about other blogs that also match its particular ideological or geographical slant. When someone checks out, take a cue from Amazon.com’s playbook: “People who purchased ads on DailyKos also purchased ads on TalkLeft. Click here to add TalkLeft to your basket.” While local campaigns are prone to buy placements on well-known blogs, they might consider others if they can easily discern their ideological or geographical slants.

5. Create a “Run of the Blogosphere” ad opportunity

Rather than sifting through definitions of hundreds of blogs when trying to select those you want in your campaign, create some catch-all options to make Blogad purchases easier for political and non-political advertisers. Some obvious ideas include: “Run of Liberal Blogs” and “Run of Conservative Blogs.” Do this, and you’d be my hero. This might take the fun out of Blogad buying, but purchasing a “Run of the Blogosphere” sounds too cool to be a bad idea.

6. Allow for multiple creative executions

Blogads only allow an advertiser to run one banner creative at a time. While this might not directly impact revenue, it sure would make it easier to test and optimize various creative options. If an advertiser was able to know which ad would drive the most site traffic or revenue earlier in the campaign, they might be more likely to renew when the week is over.

7. Publish more metrics

While 2004 was a break-through year for Blogads, still only 200 campaigns across the country invested in messaging on blogs. If we are going to convince more campaigns to spend money on this new medium, we need more hard data on the impact of Blogad buys. We have all read about incredible fundraising returns from Blogads, but what’s the bigger picture? We need the data not only in terms of dollars raised, but also in terms of generating buzz and signing up activists.

8. Set up an affiliate network partnership

Affiliate marketing is a simple concept that, for some reason, is difficult to explain. Basically, affiliate networks enable a website owner to receive a commission for driving traffic to – and purchases on – a specific merchant’s website. Say, for example, I sell used political books. A blogger could agree to promote my site and collect a percentage of the profits for each book I sold that was directly attributed to the link he or she promoted. Bloggers would have total control over the types of offers they’d promote. Rather than leave it to individual blogs to set up and manage the affiliate process, Blogads should take the lead in formalizing relationships with leading affiliate networks, such as Commission Junction, and charge a small percentage for each item purchased.

Kudos to Henry and the Blogads team for helping the political community efficiently and effectively reach activists and thought-leaders in 2004.

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