Politico.com

Inside the 2016 black market for donor emails

2015-12-15

Scott Walker has begun selling access to his email list to pay off his leftover presidential debt, renting out the email addresses of hundreds of thousands of supporters to former rivals, including Marco Rubio, John Kasich, Ted Cruz and Ben Carson. The solicitations arrive as if Walker’s donors magically landed on the lists of his old foes, as they plead for cash for themselves, linking to their own campaign sites.But there’s a catch.While it never says so in the emails from his old foes, or anywhere, the money that donors give isn’t necessarily all going to whichever smiling candidate is pictured on the site and writing the email. That is because Walker’s committee has struck secret deals with at least some of his old competitors to split the proceeds — unbeknownst to those doing the giving.It’s part of the presidential campaign’s hidden world of digging for donors online, where so-called revenue-sharing agreements — rev-shares, for short — are skyrocketing in popularity.“Is that ethical to the donor? I’m not sure,” Vincent Harris, chief digital strategist for Rand Paul’s campaign, said of such pacts. “I can say, if I was the donor, I would probably be pretty upset.” In the most dramatic and lopsided cases, none of the money that donors give through revenue-sharing email agreements ends up going to the candidate they think they are donating to. Yet campaigns do them anyway. Finding new donors is so valuable, they believe it will pay off over time.“We did a bunch of rev-shares around Rand’s announcement. We do rev-shares around debates,” said Harris, brushing past the ethical questions. “I’m even in favor of rev-shares if all you get back is donor names.”Here’s how it works. The owner of a list of email addresses offers to send that list an email on behalf of another campaign. But instead of selling onetime access for a set price – which can be a risky proposition because if donors don’t give, the renter could actually lose money – they promise to divide the spoils between them.The arrangement sounds almost too good to be true for perennially cash-starved campaigns: a risk-free, no-money-down method to prospect for new donors.“Why wouldn’t you email if you’re guaranteed not to lose money?” asked Patrick Ruffini, a GOP digital strategist.It’s free money for the campaigns. It’s a windfall for the list owners and the brokers who handle their lists. The only losers are the mom-and-pop contributors for whom the deals amount to a secretive diversion of their hard-earned money to places unknown and undisclosed.“Sometimes 60 percent, 70 percent, 100 percent of your donation is going into the pocket of some consultant,” Harris said. “There are political consultants that have become millionaires through the story that you’re writing.”The sums that campaigns plunge into buying and selling emails are enormous.In Rubio’s first quarter as a presidential candidate, his single biggest expenditure, $654,439, was to Campaign Solutions, a digital consulting firm whose services include renting GOP email lists, most notably the remnants from John McCain's 2008 presidential campaign.The purpose listed on the expense form: “Revenue shares.”Rubio’s total outlay to Campaigns Solutions has risen to $891,213 – it’s still the single largest recipient of his campaign cash – though the spending has since been reclassified as “online fundraising services.” Cruz has paid Campaign Solutions more money than any other vendor, too: $2 million and counting.“The email list market is kind of the Wild West,” Stephen Meyers, the owner of Granite Lists, which is managing Walker’s trove of email subscribers. “There’s a lot wheeling and dealing. There’s not established commissions and margins.”A Granite Lists price sheet shows that Walker charges $10,500 to send a single email to his “entire file” of 675,000 subscribers. “Revenue Share available on case-by-case" basis, the price sheet says, "When you need to raise online money fast, this list is the way to go."Meyers declined to discuss any specifics of the Walker account, other than to say that, “There’s been a lot of interest.” Nowhere on the rev-share emails sent by Walker’s ex-rivals does it disclose to would-be donors that are portion of their money is going back to Walker; the closest hint are the words, printed in tiny, light gray typeface at the bottom, “This email was sent by: Scott Walker Inc.”In fact, the details of these money-splitting deals are hidden entirely from the public, even on Federal Election Commission reports. All that shows up are payments to digital firms or list-rental agencies from the candidates using the list, and income from those firms to those renting them out. And because many firms offer additional services, it’s impossible to break down how much is for list renting, let alone whether there are rev-share deals or what the negotiated split is. Campaigns rarely want to discuss such tactical specifics, and none would do so for this story.The starting point for most rev-share contracts is around a 50-50 split, though operatives say that candidates more popular with the grassroots – like Carson and Cruz -- typically negotiate better rates for themselves because list owners know they’re likely to lure more donations than a typical candidate. For now, digital operatives say rev-shares are far more common among Republican campaigns than Democratic ones. Overall, there is such a short supply of email addresses of reliable donors and such high demand that many can linger in the market for years and years. Sharron Angle, the tea party Republican who lost her 2010 challenge to Harry Reid, reported $214,000 in PAC income from renting out her aging supporter list in the 2014 cycle, including a whopping $79,050 payment on Christmas Eve last year.Mark Stephenson, who served as chief data officer on the Walker campaign, said there’s one basic rule in building a campaign’s email file: “The bigger the list you have the better you are off in the end.”“An average donor, over time, will give somewhere in the neighborhood of $70 over the course of the campaign,” Stephenson explained. So forgoing some, or even all, of their first donation makes fiscal sense. “The math long term works. We’ve seen analytics and data that show us that.”Industry defenders say rev-share emails are no different than other kinds of donor prospecting. They compare it to direct-mail letters or phone-banking, in which campaigns typically lose money at first as part of a longer-term investment.“Even if you’re paying a high percentage to get them the first time, the next time it’s free,” Kurt Luidhardt, who runs a list-rental business called Mustard Seed Media, said of revenue-sharing. “That’s why the campaigns are willing to do it. It’s a smart expense.”Luidhardt, whose firm has received more than $250,000 from Cruz and $100,000 from Rubio, said that revenue-sharing is “the most common pricing model” in the marketplace these days. “On the presidential level, I would say it’s probably 75, 80 percent – maybe more,” he said.“Campaigns want to do it because it reduces their risk that they would rent an email list and lose money on it so it’s a safer investment to pay out a percentage knowing there’s guaranteed return,” Luidhardt explained. “That’s important because even the hottest of candidates go through weeks where online fundraising dips because online fundraising is very fickle. They get excited about you one week and the next week it’s slow so every email blast feels speculative when you’re renting.”Candidates get creative to maximize profits. Back in September, Cruz rented numerous conservative lists with the provocative subject line: “dropping out” to goose donations. Carly Fiorina, in the days following her much-praised debate performance that same month, pinged almost as many lists she could, using subject lines like “Debate momentum.”Veteran GOP digital strategist Becki Donatelli, president of Campaign Solutions, is credited with pioneering the revenue-sharing model. So far this cycle, her firm, in addition to Rubio and Cruz, has been paid by the campaigns of Jeb Bush, Lindsey Graham, Rand Paul, and Bush’s super PAC. She declined to discuss any specific clients. Donatelli argued rev-share deals ultimately are good for everyone, weeding out email-scammers who rent out bogus lists that fail to perform and sap candidates of precious resources.“We want to get the most money possible into the hands of the campaign or cause, and fairly compensate the list owner for their good list hygiene and maintenance,” she added. “What is it in direct mail – nobody breaks even in prospecting? That’s the cost of building their list. Frankly, we don’t do that. We can get money into the campaign coffers immediately.”Nearly every GOP campaign is doing rev-shares, digital consultants say. Even Bush, who has focused mostly on raising money from bigger contributors, has paid $111,574 to Targeted Victory, the firm that manages Romney's email list, $288,067 to Campaign Solutions, and $164,930 to Conservative Connector, another of the leading GOP email list brokers.“Email is king,” said Abe Adams, who was deputy digital director for Mitt Romney’s campaign and now handles renting out Romney’s old list as a senior director at Targeted Victory. “We do direct rentals, as well as rev shares for the presidential campaigns,” he said.As for Harris, the Rand Paul strategist, he has a rule for any personal political contributions he and his wife make. They never donate through email solicitations. They always go straight to a candidate’s website.“Because,” Harris said, “we know what happens to that money.”