Wednesday, 20 February 2008

Obama Taps The Long Tail

Why is the fundraising effort of Senator Obama going so well, when that of Senator Clinton isn’t? There are a number of reasons why this might be the case, but one that caught my attention was reported in the New York Times (see article). It would appear that Senator Clinton has adopted a strategy of wooing a small number of large donors, whilst Senator Obama has adopted a strategy of wooing a huge number of tiny donors. It is a testament to the success of the Obama campaign that the Clinton campaign is, belatedly, adopting the technology of the internet in fundraising.

As I was reading the article, I couldn’t help but think about Chris Anderson’s book ‘The Long Tail’. The main thesis of the book – long known to economists – is that there is a huge consumer surplus waiting to be tapped from those priced out of the market. What has changed in the economics of business is that the traditional bricks and mortar method of delivery is more exclusive than the new clicks and mouse distribution model.

If we had to point to an exemplar in this field, then Amazon gives a fine example. If we limit ourselves to just the distribution of books, Amazon has a huge inventory when compared to traditional book stores. It has overcome the teething difficulties of distribution that plagued its early days – although Christmas can remain a problem – and now offers a service offering far better than our local book store.

Senator Obama has now moved that paradigm to campaign fundraising. Instead of wooing the great and the good (small numbers of very rich individuals – the Clintonistas), he has developed an internet based following that allows a huge number of individuals who make very modest campaign donations. The article mentions millions of contributors, 90% of whom contribute less than $100 and 40% of whom contribute $25 or less. In total, according to the New York Times, Senator Obama has collected $28 million in total in January.

This has had two important side effects. First, there is a bond with a far greater support base than the Clintionistas can deliver. Second, the automation of the fundraising has allowed Senator Obama greater amounts of time for campaigning, as opposed to fundraising. It is no wonder that he leads the race for the Democratic Nomination.

A more interesting question will be whether, if he does secure the nomination, he can then bring this performance to a Presidential race. If he does become President, then Senator Obama, by using the internet as a key communications tool, will have changed the face of American politics.

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