The hundreds of millions that mega-donors gave to Super PACs and dark money nonprofits in 2012 largely failed to produce a return on investment, with Barack Obama reelected and Democrats gaining seats in the U.S. Senate. However, a small cadre of media consultants, advertising experts, and strategists still reaped huge profits from the 2012 election, based on an analysis by the Center for Media and Democracy (CMD).
In 2012, the total spending of outside groups -- the Super PACs and dark money nonprofits which spend money to influence elections, but do so separately from campaigns -- amounted to about $1.3 billion. CMD (publishers of PRwatch.org) estimates that more than $482 million in outside spending, about a third overall, ultimately passed through just six media companies: ad production shops Mentzer Media and McCarthy Hennings Media, direct mail giant Arena Communications, online advertising firm Targeted Communications, Karl Rove-affiliated Crossroads Media LLC, and a mysterious Democrat-aligned media group called Waterfront Strategies. Some of these companies used the money to produce ads, others to purchase the slots where the ads ultimately aired, others to send ad mailers. Industry experts tell CMD that media buyers typically take a 10 to 15 percent commission on ad buys, but consultants involved in ad production or mailers may be paid an even greater percentage.
CMD (publishers of PRwatch.org) used the Sunlight Foundation's "Follow the Unlimited Money" database to examine the vendors that outside groups used to produce and air their advertisements. CMD found that the largest outside spenders tended to rely on the same vendors. Many of these media firms often did work for the same candidate campaign accounts that the outside spending groups were supporting, allowing for potential collusion between campaigns and "independent" groups that are required by law to keep their operations separate.
Mentzer Media: Handled $205,136,577 in Ad Buys
Mentzer Media, a political consultancy that specializes in buying and placing TV ads, stands out as perhaps the most prolific of these agencies, having done business with practically every major conservative Super PAC or 501(c)(4) involved in the 2012 election cycle. CMD estimates that outside spending groups moved at least $205 million through Mentzer Media in 2012. If Mentzer took the standard 15 percent cut, it raked in something like $30 million for placing these ads, whether their clients succeeded or failed with their campaigns. Not bad for a group that reportedly only has six employees and a bare-bones website.
Their biggest customer this cycle was the Romney-aligned Super PAC Restore Our Future. Restore Our Future contracted exclusively with Mentzer, which handled over $130 million in ad buys from the SuperPAC in 2012.
Mentzer Media also handled tens of millions of dollars for "dark money" nonprofits, which do not have to disclose all of their spending: because all their expenditures are not reported, the totals could be much higher. The reported totals include at least $31 million in media buys from Americans for Prosperity, $12 million from the American Future Fund, $3 million from the 60 Plus Association, and $1.3 million in ad production expenditures from American Commitment. In each case, this amount constitutes the majority of all ad buys made by the group. In the case of Americans for Prosperity and American Commitment, it constitutes almost all the money the group ultimately spent. Mentzer Media also handled $7.7 million in ad buys on behalf of Crossroads GPS, and $418,000 in media buys for the U.S. Chamber of Commerce, though both groups do the majority of their business elsewhere.
Mentzer Media's resume includes the creation of the infamous "Swift Boat" ad campaign, which may have destroyed John Kerry's 2004 presidential bid. That discredited attack earned Mentzer Media $18.6 million.
McCarthy Hennings Media: Paid $2,086,480 for Ad Production
Mentzer Media works closely with McCarthy Hennings, a media production company that creates the ads for which Mentzer purchases air time. In contrast with media buys, production companies are not paid via commission, instead taking the entire disbursement as profit. CMD estimates that outside spending groups paid McCarthy Hennings over $2 million in the 2012 election cycle, largely for ad production.
Like Mentzer Media, McCarthy Hennings' largest client this cycle was Restore Our Future. Larry McCarthy, the president and founder of McCarthy Hennings, sits on the board of Restore Our Future and was responsible for deciding where its money was spent. This year, Restore Our Future paid McCarthy Hennings over $1 million to produce their ads. McCarthy also has direct ties to Mitt Romney himself: in 2008, he worked as the media director for the Romney campaign.
McCarthy's other 2012 clients include American Crossroads, which paid McCarthy's group $263,000 in ad production fees, and Crossroads GPS, which paid them $324,000. Americans for Job Security, a 501(c)(6) trade organization with close ties to Crossroads GPS and American Crossroads, paid McCarthy Hennings an additional $70,000. The group was also paid $70,000 by the Ending Spending Action Fund, a Super PAC created and funded by TD Ameritrade founder Joe Ricketts.
In previous cycles, McCarthy masterminded such noxious ad campaigns as the race-baiting Willie Horton ad aimed against Michael Dukakis' 1988 presidential campaign, and American Future Fund's 2009 ad campaign linking Democratic Congressmen to the Park 51 Community Center, a proposed Islamic center near Ground Zero in New York.
Crossroads Media LLC: Handled $161,637,315 in Ad Buys
While Crossroads GPS and American Crossroads do some business with Mentzer, most of their money moves through a related ad purchasing company called Crossroads LLC, which shares the "Crossroads" name but pre-dates the formation of Rove's groups by almost a decade.
Crossroads Media was co-founded by former Americans for Job Security president Michael Dubke, who is also a partner at Black Rock Consulting, which he co-founded with Carl Forti, the political director of American Crossroads and Crossroads GPS. Crossroads Media also shares an office with Americans for Job Security.
CMD estimates that Crossroads Media was paid at least $161 million from American Crossroads, Crossroads GPS, and Americans for Job Security. If their cut was the standard 15 percent, Crossroads Media could have made $24 million or more. Like Mentzer Media, their site lists only a handful of employees. Crossroads Media gets little business from other outside spending organizations, and appears to effectively be an in-house ad purchasing agency for Rove's political empire.
The decision by these groups to send their money to a closely affiliated group is potentially a way to increase their own personal take of any election money they manage, according to Bloomberg.
Waterfront Strategies: Handled $92,456,414 (and Millions More from the Obama Campaign) for Ad Placement and Consulting
Several prominent groups on the Democratic side made their ad buys through Waterfront Strategies, a consultancy with no listed address and no known employees, but which still managed to handle most of the ad buys for Super PACs like Majority PAC and the affiliated 501(c)(4) Patriot Majority. The firm also managed ad buys for the League of Conservation Voters and unions like AFSCME and the Service Employees International Union. CMD estimates that Waterfront Strategies handled at least $92 million worth of ad buys in the 2012 election cycle.
An investigation earlier this year by the Huffington Post revealed that Waterfront may not be an independent group at all, but an arm of the massive media conglomerate GMMB, which among other things advertises itself as the "lead media organization" for the Obama campaign and produces and places ads for the campaign. All told, GMMB moved over $314 million in Obama ad buys during the 2012 election cycle, while apparently running Waterfront Strategies out of the same building.
Waterfront is partitioned from GMMB and operating under a different name, likely to avoid accusations of illegal coordination with the Obama campaign. Nevertheless, the Huffington Post describes Waterfront as an "internal branch" of GMMB. It is based out of the same building and uses members of the same staff.
Arena Communications: Handled $13,874,232 for Direct Mail and Email Fundraising
Arena Communications, a direct-mail company with only two known employees, orchestrates mail campaigns for many of the right's largest Super PACs and dark money nonprofits. In most instances, Arena received the majority of funds the top-spending groups spent on direct mail. CMD estimates that outside spending groups had Arena handle at least $13 million in the 2012 election cycle.
More than half of that money came from Restore our Future, which paid Arena Communications $9 million for email ads and to design, print, and send mailers. They were also paid $258,000 by the National Federation of Independent Business (NFIB), a partisan lobby shop that masquerades as the nonpartisan "voice of small business." Arena, though, is hardly nonpartisan; it openly advertises itself as a Republican outfit, boasting on their website that they "play to win...and when it comes to defeating Democratic congressional incumbents, no one can match our record."
Their website does not list any employees, and very little is known about the group. They are based out of Salt Lake City, and controlled in part by Peter Valcarce, a staffer for former U.S. Senator Orrin Hatch. Their site lists a number of high-ranking congressional and presidential candidates including George W. Bush's 2004 campaign, and Paul Ryan's campaigns for Congress in Wisconsin.
Targeted Victory: Handled $9,932,815 for Online Ad Buys (and millions more from the Romney campaign)
Targeted Victory, an online ad agency based in Alexandria, Virginia, handles the purchasing of online ad slots for many of the same conservative groups mentioned above, and also has close ties to the Romney campaign's online strategy department. Targeted Victory has handled the majority of online ad production and purchasing for Crossroads GPS, American Crossroads, and Americans for Job Security, as well as all online ad buys for Club for Growth's Super PAC. Targeted Victory managed the online campaigns of numerous outside spending groups while simultaneously working for the Romney campaign itself, which each of these groups spent vast sums supporting. Targeted Victory received $67 million in business from the Romney campaign itself, most of it for social media consulting and development.
Romney's business with Targeted Victory is not altogether surprising considering his campaign's close ties to the group. Targeted Victory was co-founded by Zach Moffat, who earlier this year left to work for the Romney campaign as their online strategy director. Moffat had a hand in implementing "Project Orca," the Romney campaign's massive digital voter mobilization application which was supposed to compensate for Obama's superior ground game, but ended up crashing on election day, potentially costing the campaign thousands of votes and millions of dollars.
Citizens United Hurts Campaigns, Too
Despite failing to deliver in many cases, each of these agencies have seen enormous profits as a consequence of the obscene volume of money flowing into the 2012 election. Close coordination between campaigns and outside spending groups may have actually hurt the campaigns, by steering wealthy donors toward groups that are as interested in making money as they are winning elections. Groups like these may drive funds toward expenditures that maximize their personal commission, even if those expenditures do not make good strategic sense. This may explain the massive emphasis big-spending SuperPAC's place on radio and television advertising, rather than door to door campaigning and other get-out-the-vote efforts. "No one has figured out how to make a 15 percent commission when they hire a field representative to line up county commissioners and precinct captains and, shockingly, we do too little of it," Republican consultant Andrew Bouchertold the Washington Times.
Additionally, while strict laws govern campaign spending, and require that campaigns pay the "fair market value" of services purchased from friends and family, Super PACs have no such restrictions, allowing millions to move through these groups with little accountability. "My standard sound-bite advice is 'donor beware,' when giving to any political action committee," Paul S. Ryan of the Campaign Legal Center told ProPublica in March. Perhaps more donors should have taken his advice.