Record Political Ad Spending Powered by Special Interests

Ads for Republican presidential hopefuls are just starting to hit the airwaves in battleground states, kicking off what will be the most expensive election in history. Kantar Media's Campaign Media Analysis Group projects as much as $3.3 billion will be spent this season, with north of $1 billion going to the presidential race. Back in the 2007-2008 season, just $1 billion was spent across all races, according to Ad Age.

Residents turn out to vote in mid-term elections at a polling place inside a luxury car dealer in Beverly Hills, California.
Mark Ralston | AFP | Getty Images
Residents turn out to vote in mid-term elections at a polling place inside a luxury car dealer in Beverly Hills, California.

So what's driving the big jump? It's the first presidential campaign in decades without limits on corporate and union contributions. Thanks to the Supreme Court ruling on the landmark Citizens United case, special interest groups can raise unlimited money, spending it through non-profits that aren't required to disclose their donors. And these groups have big-name backers with fat wallets. Republican strategist Mark McKinnon says that the special interest groups are raising as much as 20 times the money as previous campaign cycles.

The Karl Rove-backed 'Crossroads' group hopes to spend $240 million. 'Americans for Prosperity' is backed by the Koch brothers and reportedly wants to spend north of $200 million. There are as many as 150 of these groups, and they're working together to strategize and coordinate campaigns in battlefield states.

Of the candidates, Rick Perry and Mitt Romney are expected to spend the most. How much they spend depends on how long the race drags out. The fact that Florida moved its primary up to January 31, which sparked moves in other early primary states, makes primary season even longer than years past. Another factor expanding the advertising season out longer: many states voters have extended the time voters can file absentee or early ballots.

So where's all this money going? Local TV stations will continue to take the lions share of the cash. In 2010 75% of ad budgets went to broadcast stations, with only 8% to cable and 4% to the web. When it comes to reaching undecided voters, nothing's better than television. Affiliates in battleground states will reap the benefit and investors can play the trend with some smaller cap stocks.

Sinclair Broadcast Group, has 24 stations in battleground states. Entravision Communications Corp, with 12 and Gray Television with 14 stations in the battleground states should also benefit. And CBS and Meredith, which both own a number of local affiliates, usually also see a boost from political campaigns.

Social media and Internet ads are better suited to shoring up the support—and gathering donations—from existing supporters. But they'll also draw more dollars this year. President Obama spent more than $26 million on Internet ads in his presidential campaign, according to the Center for Responsive Politics, and he's already spent about $1 million so far this year. So far the Republican candidates have spent more than $5 million on the Internet. Of course much of the Internet marketing we'll see this year—Twitter, Facebook and tumblr—costs next to nothing other than a person to man the accounts. What costs money is convincing voters—with TV ads—that they want to sign on to follow the candidates on any of these platforms.