By Jon Lafayette

For its new science fiction series “Fringe,” Fox is employing some sci-fi type research that shows advertisers probably will get a bigger bang for their buck from the show’s new, low-commercial format.

The research, including biometric tests that measure viewers’ perspiration, breathing and eyeball movement, also shows that they like the program with fewer commercials.

Fox introduced what it calls “Remote Free TV” during its upfront presentation to advertisers in May, promising that “Fringe,” premiering Tuesday, and “Dollhouse,” due in January, would have half the commercials of its normal programming. The format is designed to keep viewers from changing the channel or using digital video recorders to fast-forward through ads.

Advertisers have long complained that TV shows are too cluttered with advertising, and Fox’s idea won praise from media buyers. During the upfront, some clients were willing to pay significantly higher prices for ads in the new shows because of the Remote Free format.

Jean Rossi, executive VP for sales at Fox and president of multiplatform sales unit Fox One, declined to name the advertisers who signed up for Remote Free TV, but said they include companies in the movie, auto, electronics, video gaming and telecom categories. Those clients are being encouraged to run ads of 30 seconds and longer to create an environment that’s more entertaining.

Media buyers also wanted Fox to do research to show that clients were getting more for their money.

“This all started from client demand for a way to create an opportunity for people to showcase creative and get their message out and break through the clutter,” Ms. Rossi said. “We, from our point of view, were looking for a way to protect our scripted shows and give them a forum that would bring more viewers to the set.”

She said Fox added research beyond the usual Nielsen and IAG Research engagement data to the package “so we could come across with specific research to prove to our clients that it’s working.”

That led Fox to hire Innerscope Research.

“We knew we had to have a big win, clearly. We knew we had to have very nuanced measurement,” said Audrey Steele, senior VP for sales and research marketing at Fox. “We’ve wanted to work with Innerscope for a long time, and we thought this was the perfect opportunity.”

Innerscope’s biometric approach gave Fox the ability to measure engagement in ways that go beyond simply viewer attention.

“We really wanted something that could quantify, without people having to report, their level of enjoyment of both the show and the ads in there,” Ms. Audrey said.

Carl Marci, Innerscope’s co-founder and CEO, said his company uses biometrics to measure emotions, which are the prime determinants of all kinds of complex behaviors. The reactions it picks up are on the subconscious level as the audience receives stimuli—in this case TV programming.

Participants in a research facility were shown the “Fringe” pilot, with one randomly selected group seeing it with the normal commercial load while the others saw half the commercial load. Their reactions were measured in multiple ways.

Fox was hopeful it would see a lift in results in three of the five tests, Ms. Steele said. Surprisingly, it got large, positive results in all five, she said.

In one test, viewers wear a wireless vest that records skin conductivity, heart rate and respiration—all indicators of arousal and stimulation. The vest also employs a motion detector that tracks whether a viewer is leaning toward the TV or rocking back and forth.

“When people lean in, they’re more involved than when they’re not,” Mr. Marci said.
Innerscope, which defines emotional engagement as a combination of attention plus an emotional response, found the show scored 21% higher in the Remote Free TV format.

The research showed 80% of the ads that were shown to both groups of viewers were more engaging to those in the Remote Free group.

Viewers were engaged 91% of the time during the shorter ad breaks, compared to 75% of the time during the normal-length breaks. The 75% figure shows “Fringe” is a pretty engaging program regardless of format. During an average show, viewers are engaged 63% of the time during commercial pods.

Some viewers also were eye-tracked to measure how much time they spent focused on the screen. Viewer attention was 31% higher among those who saw the show with fewer spots.

Other viewers were given remote controls while watching the “Fringe” pilot, and the company found that 70% of those watching the show with a full commercial load did some fast-forwarding in every break, compared with only 30% of those watching the Remote Free format, a 136% difference.

Innerscope found that among Remote Free viewers, there was a 22% decrease in commercial-skipping from the first half of the show to the second half.

“They were learning that it just wasn’t worth hitting the fast-forward button,” Mr. Marci said.
There was a 9% increase in fast-forwarding among those watching the cluttered version of the show, which indicates they were eager to get back to the show, he said.

Innerscope also asked some viewers which commercials they recalled. Unaided recall was 250% higher for Remote Free viewers, who remembered 21% of the ads they were shown, versus 6% among those who saw more ads. Ad likability was 61% higher in the uncluttered environment.

In focus groups, the participants made favorable comments about Remote Free TV. One said it wasn’t worth fast-forwarding when breaks are just a minute and a half long. “I’m not going to lose that much of my life if I just wait,” the viewer said.

More viewers in the Remote Free group also said they were likely to watch future episodes of “Fringe” than in the group that saw more commercials.

The show was engaging also, Mr. Marci said, “and that carried into the ads.”

The tests were conducted in July. The ads used in the test were taken from an episode of Fox’s “House” that was airing at the time.

The results were presented to advertisers last week.

Fox plans to do more testing once “Fringe” goes on the air, Ms. Rossi said, and the network still has some commercial time available in the show.

“We can’t wait to use this research to get out and sell it,” she said.

Labels: advertisement

Paul McCulley

Back in college, most of us took microeconomics before we took macroeconomics. In fact, at Grinnell College where I went, microeconomics was a prerequisite for macroeconomics. The reason was simple: microeconomics begins with the concepts of supply and demand, an essential starting point for the study of macroeconomics. But you only know you’ve mastered both when you intuitively grasp that macroeconomics is not just the summation of microeconomic outcomes, but rather the interaction of microeconomic outcomes.

For me, a simple concept brought this realization: the paradox of thrift. For those of you who might not recall, the paradox of thrift posits that if we all individually cut our spending in an attempt to increase individual savings, then our collective savings will paradoxically fall because one person’s spending is another’s income – the fountain from which savings flow.

This principle is part of a whole range of macroeconomic concepts under the label of the paradox of aggregation: what holds for the individual doesn’t necessarily hold for the community of individuals. Understanding this paradox is absolutely vital to understanding macroeconomics and even more so to understanding what is presently unfolding in global financial markets.

Double Bubbles Bust

Once the double bubbles in housing valuation and housing debt burst a little over a year ago, everybody, and in particular, every levered financial institution – banks and shadow banks alike – decided individually that it was time to delever their balance sheets. At the individual level, that made perfect sense.

At the collective level, however, it has given us the paradox of deleveraging: when we all try to do it at the same time, we actually do less of it, because we collectively create deflation in the assets from which leverage is being removed. Put differently, not all levered lenders can shed assets and the associated debt at the same time without driving down asset prices, which has the paradoxical impact of increasing leverage by driving down lenders’ net worth.

This process is sometimes called, especially by Fed officials, a negative feedback loop. And it is, though I prefer calling it the paradox of deleveraging, because the very term cries out for both a monetary and fiscal policy response, not just a monetary one. Lower short-term interest rates via Fed easing are, to be sure, useful in mitigating deflating asset prices, particularly if they serve to pull down long-term rates, which are the discount rates for valuing assets with long-dated cash flows.

But monetary easing is of limited value in breaking the paradox of deleveraging if levered lenders are collectively destroying their collective net worth. What is needed instead is for somebody to lever up and take on the assets being shed by those deleveraging. It really is that simple.

Time to Lever Up Uncle Sam’s Balance Sheet

As Keynes taught us long ago, that somebody is the same somebody that needs to step up spending to break the paradox of thrift: the federal government, which needs to lever up its balance sheet to absorb assets being shed through private sector delevering, so as to avoid pernicious asset deflation. That’s a fiscal policy operation and, fortunately or unfortunately, fiscal policy is not made by a few learned technocrats above the political fray of the democratic process, but is squarely in the hands of the legislative branch, consisting of 535 politicians, with far more lawyers than economists among them.

Yes, I know that Congress passed a properly Keynesian stimulus package earlier this year, the benefit of which we are feeling now, sending over $100 billion in rebates to the citizenry, borrowing the money to do so and levering up the Treasury’s balance sheet with debt in an equal amount. So, yes, I may be too harsh when I challenge the economic literacy of Congress: they do understand that Uncle Sam should borrow and spend, directly or indirectly through tax rebates to citizen spenders, to truncate the paradox of thrift (even if they don’t know what that is).

But levering up Uncle Sam’s balance sheet, to buy assets to break asset deflation resulting from the paradox of deleveraging still seems to be a foreign, if not a sinful proposition. This need not be, and should not be. Yet we hear endlessly that any levering up of Uncle Sam’s balance sheet to buy assets must be done in a way that “protects tax payers.” By definition, levering Uncle Sam’s balance sheet to buy or guarantee assets to temper asset deflation will put the taxpayer at risk – but will do so for their own collective good!

This was de facto what the Federal Reserve did when it put up $29 billion on nonrecourse terms to buy assets so as to facilitate the merger of Bear Stearns into JPMorgan. As I said at the time, and wrote about two months ago1, this was a fiscal policy operation, conducted by the Fed. Logically, it should have been conducted by the Treasury using appropriated spending power from Congress. But alas, that “right” solution was not legally available to the Treasury, whereas the Fed did have the power to act: Section 13(3) of the Federal Reserve Act of 1932 gave the Fed the power to lend to essentially anybody against any collateral, so long as it declares it is necessary to do so because of “unusual and exigent circumstances.”

But make no mistake, it was a fiscal policy action demonstrated by (1) the fact that the Fed sold a similar amount of Treasuries from its portfolio, increasing the supply of Treasuries in the market by the same amount, and (2) the fact that any losses the Fed experiences on that $29 billion will reduce dollar-for-dollar the amount of seigniorage profits that the Fed remits to the Treasury. At the end of the day, there are $29 billion more Treasuries on the open market than otherwise would be the case, and the Treasury is, one small step removed, on the hook for any losses the Fed experiences on the $29 billion of non-Treasury assets it now de facto owns.

Yes, that $29 billion is actually a loan to a Limited Liability Corporation (LLC) set up to hold the Bear assets, with JP Morgan providing a $1 billion subordinated loan (sometimes called the “first loss” tranche) to the LLC. But that is merely a technical detail – the bottom line is that we the taxpayers bought $29 billion of Bear’s assets.

To their credit, legislators did figure that out – albeit after the fact. And they were none too happy about it, despite accepting the Fed’s and Treasury’s logic that it simply had to be done, for the greater good of the citizenry. Legislators rationally guard their constitutional powers over the federal purse.

And Now to Freddie and Fannie

Which brings us to Mr. Paulson’s request to Congress to give him – and his successor – the power to spend unlimited amounts of taxpayers’ funds to buy the debt or equity of Fannie Mae and Freddie Mac. I confidently predict that he’s not going to get unlimited authority; it will most likely be checked by counting any such deficit-financed injections into Fannie and Freddie against the Treasury’s statutory borrowing limit, which can be lifted only by Congress. But Mr. Paulson is going to get most of what he wants, if only because legislators are too fearful of the consequences if they stiff arm him.

Between now and then, the Federal Reserve stands ready to lend to Fannie and Freddie, again using Section 13(3) as its enabling authority. But unlike the case with the $29 billion spent for Bear’s assets, any Fed lending to Fannie and Freddie is explicitly being billed as a “bridge” to Treasury lending or investing in the agencies. This is the way it should be: bailouts and backstops with taxpayer funds should be legislated by Congress and placed on the Treasury’s, not the Fed’s, balance sheet.

In fact, I envision that legislation will explicitly direct the Treasury to “buy out” any lending that the Fed does to Fannie and Freddie. Indeed, in what might be a bit of wishful thinking, I believe it would be highly appropriate for Congress to authorize the Treasury to buy out the Fed’s $29 billion loan to the LLC holding Bear’s assets, putting it on the Treasury’s balance sheet, where it belongs.

Section 13(3) should be used only when it is absolutely necessary to avoid systemic financial turmoil. That’s not to say that the Fed shouldn’t be cooperative in any necessary bailouts or backstops. The fact of the matter is that the Fed is the only entity in Washington able to spend money without prior Congressional approval. Thus, when the stuff is truly hitting the systemic oscillator, the Fed has to unplug it.

But Section 13(3) should be considered sacred, used only in extremis, so as to ensure the Fed’s operational monetary policy independence in the pursuit of sturdy growth and low inflation. It’s never been a good idea to have the monetary authority and the fiscal authority housed under the same decision-making roof.

That’s not to suggest that there is no room for coordination between the monetary and fiscal authorities. This is particularly the case when the economy is experiencing asset deflation, begetting debt deflation and deleveraging. Indeed, none other than Chairman Bernanke made this case when he was Governor, first in November 2002 in his famous speech titled “Deflation: Making Sure ‘It’ Doesn’t Happen Here”2, and then in May 2003, in a speech titled “Some Thoughts on Monetary Policy in Japan”3.

In the first speech, the economic menace at hand was the risk of goods and services price deflation in the United States; in the second speech, the menace was the reality of goods and services price deflation in Japan. Currently, in the United States, asset price deflation is the menace at hand, not goods and services price deflation.

But make no mistake, asset price deflation can be every bit as nefarious as goods and services deflation. Indeed, asset price deflation in the context of deleveraging is, in my view, much more nefarious than modest goods and services price deflation, since asset price deflation undermines the capital base of levered financial intermediaries, begetting yet more deleveraging and further asset price deflation.

Harkening back to those two speeches from Mr. Bernanke, it is very clear that he sees the role of the central bank as different in deflationary times than inflationary times. Specifically, in the speech on Japan, he said (my emphasis):


The Bank of Japan became fully independent only in 1998, and it has guarded its independence carefully, as is appropriate. Economically, however, it is important to recognize that the role of an independent central bank is different in inflationary and deflationary environments. In the face of inflation, which is often associated with excessive monetization of government debt, the virtue of an independent central bank is its ability to say “no” to the government. With protracted deflation, however, excessive money creation is unlikely to be the problem, and a more cooperative stance on the part of the central bank may be called for. Under the current circumstances, greater cooperation for a time between the Bank of Japan and the fiscal authorities is in no way inconsistent with the independence of the central bank, any more than cooperation between two independent nations in pursuit of a common objective is inconsistent with the principle of national sovereignty.


Again, I’m aware that he was speaking in the context of both goods and services price deflation and asset price deflation in Japan, not just asset price deflation. So the parallel is not complete with current circumstances in America, which involves elevated goods and services inflation in the context of asset price deflation.

In fact, I believe the Fed faces a more daunting challenge now than the Bank of Japan did back then, in that the Fed has to balance the risks of both goods and services inflation and asset price deflation, whereas the Bank of Japan did not have to do so. Put differently, Japan faced both the paradox of thrift and the paradox of deleveraging, screaming for the Bank of Japan to subordinate itself for some time to the fiscal authority. This is not the case now in the United States, which is experiencing only the paradox of deleveraging, not the paradox of thrift, though the latter malady is certainly a fat tail risk if the former malady is not ameliorated, notably in house prices.

Bottom Line

Conventional wisdom holds that when an economy faces a paradox of private thrift, it is appropriate for the sovereign to go the other way, borrowing money to spend directly or to cut taxes, taking up the aggregate demand slack. Indeed, that is precisely what Congress did earlier this year, sending out $100+ billion of rebate checks, funded with increased issuance of Treasury debt. Good ole fashioned Keynesian stuff!

Concurrently, conventional wisdom is struggling mightily with the notion that when the financial system is suffering from a paradox of deleveraging, the sovereign should lever up to buy or backstop deflating assets. But analytically, there is no difference: both the paradox of thrift and the paradox of deleveraging can be broken only by the sovereign going the other way.

Fortunately, Congress is finally grappling with this reality, as it moves towards passage of Mr. Paulson’s plan for backstopping Fannie and Freddie with taxpayer funds. It’s not a fun thing to do, particularly following the use of $29 billion of taxpayer funds to facilitate the merger of Bear Stearns into JPMorgan. But it is the right thing to do. And it is further the right thing that Congress is doing it, not the Fed under Section 13(3), except as a possible bridge to Treasury authority.

Paul McCulley
Managing Director

Labels: Economics

Published on April 30, 2008


By Jelani Harper

Donte Murry is a busy man. The Morehouse College senior, who recently partnered with Michael Cooke to executive produce his first feature-length documentary, Hustle 101, has his hands full. He is simultaneously handling promotions for the film, running a website and writing an upcoming book—on top of juggling a full course load and planning to attend film school after graduation.

Murry's precociousness typifies the entrepreneurial spirit of Hustle 101, which provides an unflinching glimpse into the recent development of professional collegiate party promotions. The film dissects the typical material trappings that attract employees and patrons alike to "the lifestyle," while championing the much needed social work and corporate infrastructure necessary to fuel this lucrative phenomenon sweeping through college campuses nationwide.

Jelani Harper: How did you come up with the idea for the film?

Donte Murry: The idea originally came to me last spring to write a screenplay. That idea came from friends I had who were telling me the inside of party promotions, and some of these stories I would hear would just absolutely blow my mind. There were stories of how other promoters recruit people to their teams, dirty tricks that they pulled against each other, money being stolen. I was like "Wow, this has never been shown before, on any level." Whenever you see the black collegiate experience it's about fraternities or sports, but there are plenty of people who would say a lot of these major Atlanta University Center party promoters are looked at as kings. It's bigger than fraternities, it's bigger than sports and nobody's ever shown that before.

So you wanted to showcase this entrepreneurial spirit?

I like to see young black men starting businesses and making money because some of these young guys really are making a lot of money. And they're getting a good experience on how to handle a business. These promotion teams are real businesses with LLC's and they structure themselves accordingly as they get more mature. Some of the companies that have been around for a longer time are really organized in the way that they operate, the way that they have a title and the way they distribute money and set aside a portion for future investments. I think it's good to see young black men doing that.

How'd you go from the screenplay to a documentary?

In May I ended up trying out for the show College Hill Interns. I made it as a finalist so they flew me out to L.A. When they flew me out to L.A., I was like "Man, this idea would be a good reality show, actually." So I was out there pitching the idea as a reality show and people liked it. But it was something that was so foreign to them they couldn't really grasp it. They were like, "We need something visual." I came back and made a pilot, although I wasn't able to land the pilot, people liked the footage so much they were like "You should make a movie."

How effective was the Internet as a marketing tool for the film?

Initially we had the movie up on our website and let people download it. And it was very successful for us. We had over 1,500 downloads in our first month because the word of mouth on us was crazy. It was January the seventh when we initially put it out there. It was just an experiment. We wanted to see would this really work because we had hyped it up, we had the trailers online, people from across the nation were hitting us up on Facebook and MySpace. So we wanted to see if we actually give them an avenue to watch this movie are people going to pay to watch it, and it worked. It was successful. Now we're selling DVDs and we're working on a distribution deal and all that good stuff.

One of the most poignant moments in the film is when one of the promotion teams sanctions a fashion show to raise funds and awareness for AIDS victims in Africa.

That was Pedro. When I first met him and first met Sky High Entertainment, he told me that when they were first starting he would see all these party promoters, and all it's about is money and women and how good they look. But he was like. "If we could get some pull, I want to use that pull to have an impact and raise awareness of issues." That's what he's doing and that's what he plans to keep doing.

The film goes beyond the typical images of excess associated with the party lifestyle.

There's a deeper meaning to it that I feel maybe only 15 to 20 percent of people see. Really what it was about, to me, was this follower mentality—this follow the leader mentality. I tried to get that across as best I could—how people get wrapped up into following a message and almost the cult-like status of it. To me what was so crazy about it was to see these kids that just wanted to be a part of something so badly. It was just like the same thing going all the way back to Hitler and the Nazis, or gangs or anything like that where people just do something just to be a part of something because they get caught up or wrapped up in the message.

You mean the people who want to join the different promotion teams?

Right. So you notice how we had the girl on there—and the thing is I can't wait to do a sequel because I can't wait to get this message across better—but for instance the girl, Courtnei, who was a part of the promotional team. You realize how excited she was. She was like, "We're not getting paid right now, but I love these guys" and she was going out and doing all kinds of stuff for them. And in the turn of one semester to see her at the very end she was like, "This isn't for me." And, like she said, somebody's going to jump in and fill her place.

How has the public reacted to the film?

Some people see the message that I said—the follower mentality. Some people see that these guys are hustlers; they're really doing their thing. And then some people are like, "Am I missing something?" And that's exactly how I felt before I made the film. I felt like, am I missing something? How are these people so hyped into a party that they'll pay 40 dollars at the door just because people have amped their name out so much?

Throwing the money out, wearing the jewelry... everything is fake. Nothing is real. And that's another thing I tried to get across: it's all an illusion. That's why we had the guy at the end say believe none of what you hear, half of what you see. We interspersed that with the promoter talking about, "We're getting money, we're taxing them." That's something a lot of people see that I want them to get from the film.

Aside from another Hustle 101, what other future projects are you working on?

Another thing I'm working on that I feel really strong about, really passionate about, is a book called Brother to Brother. I see a lot of these books that are done by older black men where they try to reach out to young black men. Like the guy that did Letters To A Young Brother where he pulled in all these celebrities and had them give these messages of hope and whatnot. But the thing that I know from my community service and from being at Morehouse is that young men listen to other young men. Our words have a lot of relevance to each other because we understand a lot of the same things. So I'm working on a book where I'm taking 20 guys from Morehouse and we're all collaborating on this book called Brother To Brother, just to give a message of hope out to other young brothers out there.

Labels: Stuff

The social-networking strategy that took an obscure senator to the doors of the White House.
By David Talbot
Joe Trippi, Howard Dean's 2004 presidential campaign manager and Internet impresario, describes Super Tuesday II--the March 4 primaries in Texas, Ohio, Vermont, and Rhode Island--as the moment Barack Obama used social tech­nology to decisive effect. The day's largest hoard of dele­gates would be contested in Texas, where a strong showing would require exceptional discipline and voter-education efforts. In Texas, Democrats vote first at the polls and then, if they choose, again at caucuses after the polls close. The caucuses award one-third of the Democratic delegates.

Hillary Clinton's camp had about 20,000 volunteers at work in Texas. But in an e-mail, Trippi learned that 104,000 Texans had joined Obama's social-­networking site, www.my.barackobama.com, known as MyBO. MyBO and the main Obama site had already logged their share of achievements, particularly in helping rake in cash. The month before, the freshman senator from Illinois had set a record in American politics by garnering $55 million in donations in a single month. In Texas, MyBO also gave the Obama team the instant capacity to wage fully networked campaign warfare. After seeing the volunteer numbers, Trippi says, "I remember saying, 'Game, match--it's over.'"

The Obama campaign could get marching orders to the Texans registered with MyBO with minimal effort. The MyBO databases could slice and dice lists of volunteers by geographic micro­region and pair people with appropriate tasks, including prepping nearby voters on caucus procedure. "You could go online and download the names, addresses, and phone numbers of 100 people in your neighborhood to get out and vote--or the 40 people on your block who were undecided," Trippi says. "'Here is the leaflet: print it out and get it to them.' It was you, at your computer, in your house, printing and downloading. They did it all very well." Clinton won the Texas primary vote 51 to 47 percent. But Obama's ­people, following their MyBO playbook, so overwhelmed the chaotic, crowded caucuses that he scored an overall victory in the Texas delegate count, 99 to 94. His showing nearly canceled out ­Clinton's win that day in Ohio. Clinton lost her last major opportunity to stop the Obama juggernaut. "In 1992, Carville said, 'It's the economy, stupid,'" Trippi says, recalling the exhortation of Bill Clinton's campaign manager, James Carville. "This year, it was the network, stupid!"

Throughout the political season, the Obama campaign has domi­nated new media, capitalizing on a confluence of trends. Americans are more able to access media-rich content online; 55 percent have broadband Internet connections at home, double the figure for spring 2004. Social-networking technologies have matured, and more Americans are comfortable with them. Although the 2004 Dean campaign broke ground with its online meeting technologies and blogging, "people didn't quite have the facility," says ­Lawrence Lessig, a Stanford law professor who has given the Obama campaign Internet policy advice (Lessig wrote The People Own Ideas! in our May/June 2005 issue). "The world has now caught up with the technology." The Obama campaign, he adds, recognized this early: "The key networking advance in the Obama field operation was really deploying community­-building tools in a smart way from the very beginning."

Of course, many of the 2008 candidates had websites, click-to-donate tools, and social-networking features--even John McCain, who does not personally use e-mail. But the Obama team put such technologies at the center of its campaign--among other things, recruiting 24-year-old Chris Hughes, cofounder of Facebook, to help develop them. And it managed those tools well. Supporters had considerable discretion to use MyBO to organize on their own; the campaign did not micromanage but struck a balance between top-down control and anarchy. In short, Obama, the former Chicago community organizer, created the ultimate online political machine.

The Obama campaign did not provide access or interviews for this story; it only confirmed some details of our reporting and offered written comments. This story is based on interviews with third parties involved in developing Obama's social-networking strategy or who were familiar with it, and on public records.

An Online Nervous System
A row of elegant, renovated 19th-century industrial buildings lines Boston's Congress Street east of Fort Point Channel. On any given day, behind a plain wooden door on the third floor of 374 Congress, 15 to 20 casually clad programmers tap away at computers. On the day I visited, the strains of Creedence Clearwater Revival filled the room; a Ping-Pong table dominated the small kitchen. This is the technology center for Blue State Digital, which means that it is also the nervous system for its two largest clients, the Barack Obama campaign and the Democratic National Committee. Founded by alumni of the Dean campaign, Blue State Digital added interactive elements to Obama's website--including MyBO--and now tends to its daily care and feeding. The site's servers hum away in a Boston suburb and are backed up in the Chicago area.

Jascha Franklin-Hodge, 29, greeted me with a friendly handshake and a gap-toothed grin. He has a deep voice and a hearty laugh; his face is ringed by a narrow beard. Franklin-Hodge dropped out of MIT after his freshman year and spent a few years in online music startups before running the Internet infrastructure for the Dean campaign, which received a then-­unprecedented $27 million in online donations. "When the campaign ended, we thought, 'Howard Dean was not destined to be president, but what we are doing online--this is too big to let go away,'" he says. He and three others cofounded Blue State Digital, where he is chief technology officer. (Another cofounder, Joe Rospars, is now on leave with the Obama campaign as its new-media director.)

The MyBO tools are, in essence, rebuilt and consolidated versions of those created for the Dean campaign. Dean's website allowed supporters to donate money, organize meetings, and distribute media, says Zephyr Teachout, who was Dean's Internet director and is now a visiting law professor at Duke University. "We developed all the tools the Obama campaign is using: SMS [text messaging], phone tools, Web capacity," Teachout recalls. "They [Blue State Digital] did a lot of nice work in taking this crude set of unrelated applications and making a complete suite."

Blue State Digital had nine days to add its tools to Obama's site before the senator announced his candidacy on February 10, 2007, in Springfield, IL. Among other preparations, the team braced for heavy traffic. "We made some projections of traffic levels, contribution amounts, and e-mail levels based on estimates from folks who worked with [John] Kerry and Dean in 2004," recalls Franklin­-Hodge. As Obama's Springfield speech progressed, "we were watching the traffic go up and up, surpassing all our previous records." (He would not provide specific numbers.) It was clear that early assumptions were low. "We blew through all of those [estimates] in February," he says. "So we had to do a lot of work to make sure we kept up with the demand his online success had placed on the system." By July 2008, the campaign had raised more than $200 million from more than a million online donors (Obama had raised $340 million from all sources by the end of June), and MyBO had logged more than a million user accounts and facilitated 75,000 local events, according to Blue State Digital.

MyBO and the main campaign site made it easy to give money--the fuel for any campaign, because it pays for advertising and staff. Visitors could use credit cards to make one-time donations or to sign up for recurring monthly contributions. MyBO also made giving money a social event: supporters could set personal targets, run their own fund-raising efforts, and watch personal fund-­raising thermometers rise. To bring people to the site in the first place, the campaign sought to make Obama a ubiquitous presence on as many new-media platforms as possible.

The viral Internet offered myriad ways to propagate unfiltered Obama messages. The campaign posted the candidate's speeches and linked to multimedia material generated by supporters. A music video set to an Obama speech--"Yes We Can," by the hip-hop artist Will.i.am--has been posted repeatedly on YouTube, but the top two postings alone have been viewed 10 million times. A single YouTube posting of Obama's March 18 speech on race has been viewed more than four million times. Similarly, the campaign regularly sent out text messages (at Obama rallies, speakers frequently asked attendees to text their contact information to his campaign) and made sure that Obama was prominent on other social-networking sites, such as Facebook and MySpace (see "New-Media King" chart above). The campaign even used the micro­blogging service Twitter, garnering about 50,000 Obama "followers" who track his short posts. "The campaign, consciously or unconsciously, became much more of a media operation than simply a presidential campaign, because they recognized that by putting their message out onto these various platforms, their supporters would spread it for them," says Andrew Rasiej, founder of the Personal Democracy Forum, a website covering the intersection of politics and technology (and another Dean alumnus). "We are going from the era of the sound bite to the sound blast."

Money flowed in, augmenting the haul from big-ticket fund-raisers. By the time of the Iowa caucuses on January 3, 2008, the Obama campaign had more than $35 million on hand and was able to use MyBO to organize and instruct caucus-goers. "They have done a great job in being precise in the use of the tools," Teachout says. "In Iowa it was house parties, looking for a highly committed local network. In South Carolina, it was a massive get-out-the-vote effort." MyBO was critical both in the early caucus states, where campaign staff was in place, and in later-­voting states like Texas, Colorado, and Wisconsin, where "we provided the tools, remote training, and opportunity for supporters to build the campaign on their own," the Obama campaign told Technology Review in a written statement. "When the campaign eventually did deploy staff to these states, they supplemented an already-built infrastructure and volunteer network."

Using the Web, the Obama camp turbocharged age-old campaign tools. Take phone banks: through MyBO, the campaign chopped up the task of making calls into thousands of chunks small enough for a supporter to handle in an hour or two. "Millions of phone calls were made to early primary states by people who used the website to reach out and connect with them," Franklin-Hodge says. "On every metric, this campaign has operated on a scale that has exceeded what has been done before. We facilitate actions of every sort: sending e-mails out to millions and millions of people, organizing tens of thousands of events." The key, he says, is tightly integrating online activity with tasks people can perform in the real world. "Yes, there are blogs and Listservs," Franklin-Hodge says. "But the point of the campaign is to get someone to donate money, make calls, write letters, organize a house party. The core of the software is having those links to taking action--to doing something."


Pork Invaders
If the other major candidates had many of the same Web tools, their experiences show that having them isn't enough: you must make them central to the campaign and properly manage the networks of supporters they help organize. Observers say that ­Clinton's campaign deployed good tools but that online social networks and new media weren't as big a part of its strategy; at least in its early months, it relied more on conventional tactics like big fund-raisers. After all, Clinton was at the top of the party establishment. "They [the Obama supporters] are chanting 'Yes we can,' and she's saying 'I don't need you,'" Trippi says. "That is what the top of that campaign said by celebrating Terry McAuliffe [the veteran political operative and former Democratic National Committee chairman] and how many millions he could put together with big, big checks. She doesn't need my $25!" The two campaigns' fund-raising statistics support Trippi's argument: 48 percent of Obama's funds came from donations of less than $200, compared with 33 percent of Clinton's, according to the Center for Responsive Politics.

Clinton's Internet director, Peter Daou, credits the Obama campaign with doing an "amazing job" with its online social network. "If there is a difference in how the two campaigns approached [a Web strategy], a lot of those differences were based on our constituencies," Daou says. "We were reaching a different demographic of supporters and used our tools accordingly." For example, he says, the Clinton campaign established a presence on the baby-boomer social-networking site Eons.com, and Clinton herself often urged listeners to visit www.hillaryclinton.com. But Andrew Rasiej says that the conventional political wisdom questioned the value of the Internet. "As far as major political circles were concerned," he says, "Howard Dean failed, and therefore the Internet didn't work."

While it's hard to tease out how much Clinton's loss was due to her Web strategy--and how much to factors such as her Iraq War vote and the half-generation difference between her and Obama's ages--it seems clear that her campaign deëmphasized Web strategy early on, Trippi says. Even if you "have all the smartest bottom-up, tech-savvy people working for you," he says, "if the candidate and the top of the campaign want to run a top-down campaign, there is nothing you can do. It will sit there and nothing will happen. That's kind of what happened with the Clinton campaign."

Republican Ron Paul had a different problem: Internet anarchy. Where the Obama campaign built one central network and managed it effectively, the Paul campaign decided early on that it would essentially be a hub for whatever networks the organizers were setting up. The results were mixed. On the one hand, volunteers organized successful "money bombs"--one-day online fund-raising frenzies (the one on November 5, 2007, netted Paul $4.3 million). But sometimes the volunteers' energy--and money--was wasted, says Justine Lam, the Paul campaign's Internet director, who is now the online marketing director at Politicker.com. Consider the supporter-driven effort to hire a blimp emblazoned with "Who is Ron Paul? Google Ron Paul" to cruise up and down the East Coast last winter. "We saw all this money funding a blimp, and thought, 'We really need this money for commercials,'" Lam says.

Then there is McCain, who--somewhat ironically--was the big Internet story of 2000. That year, after his New Hampshire primary victory over George W. Bush, he quickly raised $1 million online. And at times last year, he made effective use of the Internet. His staff made videos--such as "Man in the Arena," celebrating his wartime service--that gained popularity on YouTube. But the McCain site is ineffectual for social networking. In late June, when I tried to sign up on McCainSpace--the analogue to MyBO--I got error messages. When I tried again, I was informed that I would soon get a new password in my in-box. It never arrived. "His social-networking site was poorly done, and people found there was nothing to do on it," says Lam. "It was very insular, a walled garden. You don't want to keep people inside your walled garden; you want them to spread the message to new people."

McCain's organization is playing to an older base of supporters. But it seems not to have grasped the breadth of recent shifts in communications technology, says David All, a Republican new-media consultant. "You have an entire generation of folks under age 25 no longer using e-mails, not even using Facebook; a majority are using text messaging," All says. "I get Obama's text messages, and every one is exactly what it should be. It is never pointless, it is always worth reading, and it has an action for you to take. You can have hundreds of recipients on a text message. You have hundreds of people trying to change the world in 160 characters or less. What's the SMS strategy for John McCain? None."


The generational differences between the Obama and McCain campaigns may be best symbolized by the distinctly retro "Pork Invaders," a game on the McCain site (it's also a Facebook application) styled after Space Invaders, the arcade game of the late 1970s. Pork Invaders allows you to fire bullets that say "veto" at slow-moving flying pigs and barrels.

But it's not that the campaign isn't trying to speak to the youth of today, as opposed to the youth of decades ago. Lately McCain has been having his daughter Meghan and two friends write a "bloggette" from the campaign trail. The bloggette site features a silhouette of a fetching woman in red high-heeled shoes. "It gives a hipper, younger perspective on the campaign and makes both of her parents seem hipper and younger," says Julie ­Germany, director of the nonpartisan Institute for Politics, Democracy, and the Internet at George Washington University. The McCain campaign did not reply to several interview requests, but Germany predicts that the campaign will exploit social networking in time to make a difference in November. "What we will see is that the McCain online campaign is using the Internet just as effectively to meet its goals as the Obama campaign," she says. Over the summer, the McCain campaign refreshed its website. But Rasiej, for one, doubts that McCain has enough time to make up lost ground.

A Networked White House?
The obvious next step for MyBO is to serve as a get-out-the-vote engine in November. All campaigns scrutinize public records showing who is registered to vote and whether they have voted in past elections. The Obama campaign will be able to merge this data with MyBO data. All MyBO members' activity will have been chronicled: every house party they attended, each online connection, the date and amount of each donation. Rasiej sees how it might play out: the reliable voters who signed up on MyBO but did little else may be left alone. The most active ones will be deployed to get the unreliable voters--whether MyBO members or not--to the polls. And personalized pitches can be dished up, thanks to the MyBO database. "The more contextual information they can provide the field operation, the better turnout they will have," he says.

If Obama is elected, his Web-oriented campaign strategy could carry over into his presidency. He could encourage his supporters to deluge members of Congress with calls and e-mails, or use the Web to organize collective research on policy questions. The campaign said in one of its prepared statements that "it's certain that the relationships that have been built between Barack Obama and his supporters, and between supporters themselves, will not end on Election Day." But whether or not a President Obama takes MyBO into the West Wing, it's clear that the phenomenon will forever transform campaigning. "We're scratching the surface," Trippi says. "We're all excited because he's got one million people signed up--but we are 300 million people in this country. We are still at the infancy stages of what social-­networking technologies are going to do, not just in our politics but in everything. There won't be any campaign in 2012 that doesn't try to build a social network around it."


Lessig warns that if Obama wins but doesn't govern according to principles of openness and change, as promised, supporters may not be so interested in serving as MyBO foot soldiers in 2012. "The thing they [the Obama camp] don't quite recognize is how much of their enormous support comes from the perception that this is someone different," Lessig says. "If they behave like everyone else, how much will that stanch the passion of his support?"

But for now, it's party time. At the end of June, after ­Clinton suspended her campaign, MyBO put out a call for the faithful to organize house parties under a "Unite for Change" theme. More than 4,000 parties were organized nationwide on June 28; I logged in and picked three parties from about a dozen in the Boston area.


My first stop was a house party in the tony suburb of ­Winchester, where several couples dutifully watched an Obama-supplied campaign video. Host Mary Hart, an art professor in her 50s, said that Obama and his website made her "open my house to strangers and really get something going." She added, "I'm e-mailing people I haven't seen in 20 years. We have this tremendous ability to use this technology to network with people. Why don't we use it?"

Next stop was a lawn party in the Boston neighborhood of Roxbury, whose organizer, Sachielle Samedi, 34, wore a button that said "Hot Chicks Dig Obama." She said that support for the Obama candidacy drew neighbors together. At the party, Wayne Dudley, a retired history professor, met a kindred spirit: Brian Murdoch, a 54-year-old Episcopal priest. The two men buttonholed me for several minutes; Dudley predicted that Obama would bring about "a new world order centered on people of integrity." Murdoch nodded vigorously. It was a fine MyBO moment.

My evening ended at a packed post-collegiate party in a Somerville walk-up apartment. Host Rebecca Herst, a 23-year-old program assistant with the Jewish Organizing Initiative, said that MyBO--unlike Facebook--allowed her to quickly upload her entire Gmail address book, grafting her network onto Obama's. "It will be interesting to see what develops after this party, because now I'm connected to all these people," she shouted over the growing din. Two beery young men, heading for the exits, handed her two checks for $20. Herst tucked the checks into her back pocket.

David Talbot is Technology Review's chief correspondent.

Labels: marketing, politics, Science

Written by Eric Olsen

Marketers, public relations, sales and advertising professionals, and those who study their collective manipulations of consumer heads and hands have long known that a strong, identifiable brand is a powerful tool that in its purest form stands apart from the individual products it informs and casts a positive glow over them.

However, even the strongest branding advocates might be surprised by the results of a new study presented today at the annual meeting of the Radiological Society of North America, which reveals that strong brands flip switches activating areas of the brain involved in positive emotional processing, self-identification, and rewards: I brand buy, therefore I am.

Furthermore, strong brands appear to create a kind of mental "groove," and are processed with less effort than weak brands, which require higher levels of activation in areas of working memory and negative emotional response.

"This is the first functional magnetic resonance imaging (fMRI) test examining the power of brands," said Christine Born, M.D., radiologist at University Hospital, Ludwig-Maximilians University in Munich, Germany, who got up under the consumer hood, so to speak. "We found that strong brands activate certain areas of the brain independent of product categories."

Dr. Born added, "Brain imaging technologies may complement methods normally used in the developing area of neuroeconomics," the ultimate goal of which is to make every purchase a forgone conclusion. I added that last part.

The Born group used functional magnetic resonance imaging (fMRI) to study areas of the brain affected by visual stimuli associated with strong and weak brands in 20 adult men and women. Researchers showed the volunteers — all right-handed, highly educated, and with a mean age of 27 — a series of three-second visual stimuli containing the logos of strong (well-known) and weak (lesser-known) brands of car manufacturers and insurance companies. During the sequence, the fMRI acquired images of the brain, depicting areas that activated in response to the different stimuli.

The guinea pigs', er volunteers', brand perceptions were correlated via questionnaire before and after the fMRI imaging. As an additional control, an abstract colored image was also displayed during each sequence.

It would seem that those with the weakest or least developed critical thinking capabilities — such as children — are most susceptible to the brand balm - or is it "bomb"? But this study shows that we all come under the magical sway of the powerful brand.

Sounding rather defensive, Born said, "The vision of this research is to better understand the needs of people and to create markets which are more oriented towards satisfaction of those needs. Research aimed at finding ways to address individual needs may contribute to a higher quality of life."

Well, it certainly will for those on the selling end of the equation.

Labels: advertisement