Viral Politics Online activists find the fast-moving Net is a great way to rage against the machine. June 01, 2000   Samuel Fromartz In March, a group of Internet-savvy gay activists launched a Website called StopDrLaura.com. Their goal: prevent Paramount Pictures from giving popular talk radio host Laura Schlessinger an hour-long television slot this fall. Highlighting Dr. Laura's comments, which described gays as "biological errors," the Website became the center of a campaign to take her off the air. With a hunger for democracy, Oron Strauss of Netivation thrives on political activism. Generating word-of-mouth support via email lists, the site drew 5.5 million hits in two weeks and produced 12,000 protest emails and untold phone calls to the show producer and local stations scheduled to run the program. One Paramount subsidiary begged John Aravosis, a co-creator of the site who also runs marketing firm Wired Strategies in Washington, D.C., to remove its phone number because its switchboard was swamped. "We didn't even publish that number," Aravosis says. "People looked it up and called on their own."   These activists aren't alone. During the 1998 U.S. presidential impeachment proceedings, MoveOn.org — started on the fly by two Berkeley, Calif., high-tech executives — urged Congress to simply censure President Bill Clinton. The campaign generated 250,000 petition signatures in a month and has since raised $700,000 to battle pro-impeachment incumbents. In 1999, the Libertarian Party set up a Website that spurred 250,000 emails, forcing the FDIC to kill a money-laundering ruling that sought greater disclosure of a customer's private banking records. Welcome to politics in the Internet age.   Although presidential campaign Websites may garner plenty of attention and cash contributions (former candidate John McCain raised $6 million online in support of his failed bid), they are just one facet of a larger movement to spur political organization and raise funding through the Internet. As CEO of voter list company Aristotle Publishing John Aristotle Phillips says, "Democracy is a growth business." In this market, helping build the Al Gore or George W. Bush campaign Websites is one thing. The bigger opportunity, though, is gathering all the small fish, energizing the angry PTA in Texas that's looking to oust a school board member or the antigrazing rights activists in central Oregon. Multiply these examples thousands of times across multiple issues, states, and locales, throw in the 400,000 separate political campaigns waged throughout every four-year election cycle, and it's clear what's at stake.   The future will see micro-organization via the Net on a massive scale — and that's not counting emerging democracies in countries around the world. Grassroots.com, a political portal, estimates the market at $35 billion — with $22 billion spent by advocacy and special interest groups.   Online activists could provide a steady revenue stream for any Microsoft-like maker of tools that enable their work. And if a company could also aggregate these activists at a portal, it could then offer a targeted take-action audience that campaigns and nonprofit organizations will pay money to reach. Even though this nascent market potential remains just that for now — potential. Bob Ingle, president of Knight Ridder Ventures in San Jose, Calif., which joined in a $30 million venture round for Grassroots.com, is optimistic. "I think the timing is dead-perfect," he says. "People are clearly unhappy with politics as usual and they want to make a difference, and the way to do it is to get in there and be a participant." Cash from chaos Oron Strauss, who in 1996 launched Net.Capitol in Washington, D.C., with $400,000 in "angel" backing, has seen this market evolve on his doorstep. "When we started, we saw three opportunities," says Strauss, who now oversees about 60 employees. The first involved selling software tools to nonprofits and associations to help with community building and lobbying; the second centered on bringing campaigns online; and the third involved targeting voters directly. "We set out to focus on selling software because it had the most obvious revenue stream," he says.   Organizations have always been in the business of communicating and marshaling members for one cause or another. Strauss is now building for them the back-end systems — such as intranets, extranets, Websites, and customized email applications — to do that work more effectively. Net.Capitol took off-the-shelf products and tailored them for groups such as the National Association of Realtors and the American Federation of Teachers. He also sold political mobilizing tools to companies such as IBM and Motorola, so they could inform customers and employees about relevant political issues and set up email lobbying campaigns. These products start at $1,250, but prices can stretch into the six figures.   Strauss sold out to Netivation.com in December for about $10 million and came aboard as president of its public policy arm. Netivation was launched by Republican Tony Paquin, a founder of the direct mail and software company, after he withdrew from an electoral bid in Idaho in 1997. Realizing the power of the Web, email, and online fundraising, he began to sell online campaign tools to others and took Netivation public in June 1999. After the Net.Capitol merger, Netivation was organizing nonprofit groups and managing to direct significant aspects of political campaigns online.   Netivation is now looking to target voters directly by creating a portal space through a string of acquisitions. It bought FECInfo — a database that allows people to search for campaign contributors by name or ZIP code — and is reselling that search tool to media organizations and Websites for a subscription fee, which starts at $2,500 a year but that can range far higher. It also secured advertising space at such portals as Microsoft's MSN and Yahoo! to resell to campaigns and organizations.   The jury is still out on Netivation, however. The company lost $8.6 million on revenues of $1 million last year, and the stock has languished at less than its offering price after a brief rise following last year's IPO.   Political spam? Among the plumbing systems for online politics, Capitol Advantage of Fairfax, Va., has a product that appears headed toward critical mass. Started by Robert Hansan 14 years ago, the company began publishing what has become the dominant guide book for Capitol Hill, Congress at Your Fingertips. Hansan decided to port the information to the Web as part of a toolbox for organizations in 1996. Now, when organizations put the suite on their Website, members can look up their lawmakers, send out emails, even find PAC contributions.   Hansan counts 500 Web clients and thinks he can reach 5,000 in a few years. He sells the online software tool called CapitolWiz under a subscription that starts at $2,500 a year. (Hansan, who owns 100 percent of the company and has funded his expansion from cash flow, declined to discuss further financial details other than to say that the company is profitable.)   "Our products defer to the organizations using them," he says. "I let them keep all the advertising revenues and branding." America Online put a version of CapitolWiz on the "My Government" channel in 1998 and users took to it quickly. Following the release of the Starr report, AOL subscribers blasted Capitol Hill with 160,000 emails in two days, crashing the Internet servers of Congress. Yahoo! also uses the tool — through its own interface — as do a number of the recently launched political portals. Last year, 4.5 million emails were sent to Congress via the Capitol Advantage client sites. "When you think about the business model, it's not 'Come to my Website, then we'll sell ads,'" says Pam Fielding, who runs the e-advocates consulting arm for Capitol Advantage. "It's 'Let's provide a product that mobilizes supporters around issues.'" While at the National Educational Association, Fielding fought the telecom industry over Internet subsidies to schools. She now runs cyber-advocacy campaigns for others, charging $25,000 on average. She gets email campaigns up and running, trolls through news groups and chat rooms for potential advocates, and runs online ad campaigns at relevant sites. "If I can hit key legislative districts — that's the ultimate target," she says. Fielding runs a series of ads, including a number on Juno Online, which collects demographic information from users in return for free email services. McCain used a similar tactic in his presidential bid, targeting ads to supporters in relevant ZIP codes, ensuring that his name would be included on the Virginia ballot.   Portal push With this buzz of activity, it is not surprising that there's a sudden rush of portals out there trying to capitalize on political activity. When it comes to business, these sites — Vote.com, voter.com, speakout.com, Grassroots.com, politics.com — want to aggregate voters so that they become a target audience for campaigns and organizations. (See "Bernstein Q&A," p68.) Among those jostling online for a share of hearts and minds, Grassroots.com seems to have sprinted to the front of the pack.   Craig Johnson, chairman of Venture Law Group in Silicon Valley and a co-founder of Grassroots, envisions small groups organizing around local zoning fights, board of supervisor elections, and other microissues. As co-founder of another site, Garage.com, which channels angel financiers to Net startups, Johnson raised $30 million in venture capital in February from Knight Ridder Ventures, AIG Developed Markets Private Equity Fund, Advanced Technology Ventures, Charter Ventures, and Paramount Capital. Grassroots developed Web-based software tools that allow advocates to set up a Website in about five minutes. The five-minute sites include a calendar, member list, bulletin boards, a chat room, and a newsletter.   Attempting to spread out from local epicenters, Grassroots has partnered with the nonpartisan League of Women Voters, whose 100,000 members will act as something of a volunteer sales force for Grassroots. Ideally, the league's foot soldiers would provide entree into local campaigns that Grassroots would host on the site for a fee.   Mobilizing and marketing? These hybrid activist-entrepreneurs draw advertising to the portals by asking users to provide data such as ZIP codes. Some ask for name, address, gender, and age on an optional basis. To understand the potential prize, just look at what Aristotle has done. It has compiled a complete list of 149 million registered voters and sold that information to political campaigns. It can massage the data, too, so that a campaign can reach wealthy Democrats with Greek surnames or Republican homeowners in Manchester, N.H., who voted in the last two elections.   What it can't tell you is what these voters care about. That could potentially change with the portals. Take the issues preferences users willingly impart to a portal, match them with a ZIP code, and bingo — you can target voters in Fairfax, Va., who favor gun control. But matching public voting records and political preferences willingly offered to a site isn't too far from what DoubleClick tried when it bought the Abacus Direct database to match names and addresses to Internet users. (See "FTC: New Privacy Overlord?" April '00, p79.) The firestorm DoubleClick faced will be a brush fire compared with what might happen in the political arena.   "This is a pretty awesome power because you can target voters in swing districts and tip the balance on key congressional votes," says Fielding. "But it also gets into some pretty thick privacy issues — we wouldn't want to be the first to go there," she says of her firm, Capitol Advantage. Marc Rotenberg, president of the Electronic Privacy Information Center in Washington, D.C., notes that the voting booth curtain is symbolic of the anonymity voters have traditionally cherished. Even with "opt-in" policies, that curtain might be drawn back by advertisers looking for Websites to provide customer information. "I think there are significant privacy issues here," he says.   For now, the controversy remains hypothetical because these sites must gain a critical mass of voters and activists before they can draw advertisers and campaigns. "Their hope right now is to become the Yahoo! of politics, and probably one or two will make it," says Jay Stanley, an analyst with Forrester Research who is based in Washington, D.C. "Then again, maybe Yahoo! will become the Yahoo! of politics."   Regardless of who wins the portal wars, Wes Boyd, founder of MoveOn.org, is encouraged by all the activity. Because of his high-tech background, he was able to build an Internet advocacy campaign in a couple of days. Now a novice can do the same in minutes.   "I am very excited about the amount of money being put into this, because it could spur more activism," Boyd says. "Whether it will make investors money is another question."   PLAYERS Aristotle Publishing www.aristotle.org CEO: John Aristotle Phillips Launch date: Founded in 1983, began Web-based services in 1999 Investors: W.R. Hambrecht and Rupert Murdoch's eVentures made undisclosed investments. Insight: The king of online voter lists might be able to leverage the product if combined with a Web portal, but privacy advocates might have a field day with the issue.   Campaign Advantage www.campaignadvantage.com CEO: Phil Tajitsu Nash Launch date: May 1999, as a division of Science Writers. Investors: Self-funded Insight: Nash is one of the small players building campaign Websites and was the first to offer online contributions from a checking account. To grow his business he might have to merge with a bigger developer who wants a cut of the campaign market.   Capitol Advantage www.capitoladvantage.com CEO: Robert Hansan Launch date: Company founded 1986, CapitolWiz launched May 1996 Investors: Self-funded Insight: Hansan has hit a growth curve by porting his traditional congressional directory into a Web service that serves as an all-in-one advocacy tool. His challenge will be to add on services so that he can grow his customer base and make his product even more useful — and profitable.   Grassroots.com www.grassroots.com Acting CEO: Craig Johnson Launch date: February 2000 Investors: Raised $30 million in a second round from Knight Ridder Ventures, AIG Developed Markets Private Equity Fund, Advanced Technology Ventures, Charter Ventures, and Paramount Capital. Insight: Entering a crowded field of political portals, Grassroots distinguishes itself by giving users the tools to mobilize. Whether it will attract enough local activists to create a real business model is anyone's guess.   Netivation www.netivation.com CEO: Tony Paquin Launch date: January 1998 Investors: Raised $16 million in private placement in January 1999. Went public in June 1999 Insight: Netivation's Oron Strauss is point man in turning Washington nonprofits and associations into savvy dot-orgs. But will these age-old institutions take to the Digital Age and pump up Netivation's revenues? The jury is still out.   Voter.com www.voter.com CEO: Justin Dangel Launch Date: November 1999 Investors: Raised $15 million in January 2000 from Charles River Ventures, Bessemer Venture Partners, and Sigma Partners. Insight: Features heavy editorial content, community building and advocacy tools but its challenge will be to distinguish itself from the sources Americans usually get their political news — traditional media sources. Copyright ©, 2000, Imagine Media Inc. All Rights Reserved. First Published in Business 2.0, June 13, 2000