NEW YORK — U.S. online political advertising could quadruple to nearly $1 billion in the 2016 election, creating huge opportunities for digital strategy firms eager to capitalize on a shift from traditional mediums such as television, according to one estimate.
These firms — mostly small, partisan and based in Washington and surrounding suburbs — have grown in sophistication since the last presidential election in 2012. A niche sector in a multibillion-dollar election industry, they are poised to play a much bigger role in 2016 as digital ads assume more importance and change the way political money is spent on advertising.
The companies, typically privately held and staffed by 30 to 100 people with engineering and developer backgrounds, will operate in the background of election campaigns. But their influence will likely be felt in millions of households as they help candidates tailor online adverts for specific groups of voters.
Their analytical wizardry enables them to “slice and dice” the electorate so precisely that they can zero in on voters in a single apartment block. A candidate’s ability to micro-target likely voters with adverts on issues they care about is crucial in a modern American political campaign.
Firms that target voters with digital ads are multiplying, in some cases seeing the number of both clients and employees triple each two-year election cycle, interviews with multiple firms and reviews of Federal Election Commission records show.
Some of the companies said they anticipate hundreds of campaigns, ranging from presidential to school board, to sign contracts with them.
Washington-based DSPolitical expects to double in size to 60 employees in 2016 to cope with the increased business, Jim Walsh, DSPolitical’s co-founder, said in an interview.
When it launched in 2011 it had a hard time convincing candidates that its ability to target voters with a precision unheard of in prior races was anything other than a sideshow to the traditional advertising strategies that focused on television, radio and newspapers, he said.
But by 2014, the firm, which works mainly with Democratic and progressive groups, had done more work in one month than it had in the whole 2012 election cycle.
HOW IT WORKS
Digital targeting works like this: First, partisan data firms, such as i360 and Data Trust on the right and Catalist and TargetSmart on the left, compile detailed voter databases and scrutinize them for demographic and geographical information on 190 million registered voters.
Next, digital targeting firms such as DSPolitical, CampaignGrid and Targeted Victory map the voter datasets against commercially available data like Internet histories and real estate and tax records.
So, a candidate trying to reach environmentalists in Detroit could, for example, send online ads to specific registered voters in the Detroit metro area who had typed “Toyota Prius” into Google.
Predictions for 2016 show online advertising will consume only 8 percent of media budgets, or $955 million. But the growth has been explosive — up from $270 million in 2014 and just $14 million in 2010, according to Borrell Associates, a research firm that tracks advertising.