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DECEMBER 5, 2000

COMPANY CLOSEUP
By Margaret Young

Grassroots Tries Change at the Top
The political activism site hires former Clinton press aide Mike McCurry as CEO as it moves to sell services to trade groups and nonprofits


By Margaret Young
Mike McCurry in his White House days: He's now CEO of Grassroots.com

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Once upon a time, back in the dot-com mania days of September, 1999, Grassroots.com was born as a Web center for political information and activism. The issues would draw viewers, who, in turn, would lure advertisers, the theory went. Unfortunately that show-them-the-eyeballs business model hasn't worked as expected. The eyeballs simply weren't abundant enough to generate substantial revenue. Nielsen/NetRatings says the number of visitors to Grassroots has been too low to measure.

So the San Francisco dot-com is looking to make money another way: by selling campaign- and group-management services to trade associations, lobbyists, and nonprofit groups, in addition to providing an online library for campaign-disclosure forms. Voter.com, another political site, is following the same strategy. "I think they're all realizing that there's not much of a market for political portals," says Jeremy Sharrard, associate analyst at Forrester Research. "It's kind of tough to communicate the traffic into a stream of dollars."

BIPARTISAN SITE. Grassroots has made changes in the executive suite to help push the new strategy. On Nov. 15, it named its CEO: Mike McCurry, the former Clinton White House press secretary. As evidence of the site's bipartisan nature, McCurry was recruited to the Grassroots board in February by John Sununu, who had been President George Bush's chief of staff.

Though McCurry has limited management experience in the private sector, he brings important connections to the Washington political establishment. "It's a good external presence," McCurry says of his appointment. "I have some ability to get into places based on my notoriety -- that's part of the equation."

For lobbyists and their targets, politics means big money. Congressional Quarterly estimated that political lobbying was a $35 billion industry in 1999. But only a tiny percentage of that -- well under 1% -- has been spent on the Web.

"FRACTION OF THE COST." Grassroots thinks it can draw more of that cash by trumpeting the Internet's potential for bringing like-minded citizens together at minimal cost. Among the already converted: the California Teachers Assn. "You can send people a piece of information that's as rich and complex as what you send them in the mail for a fraction of the cost, because you don't have to pay postage or handling," notes Robert Cherry, associate executive director of the CTA in Burlingame, Calif.

The group used Grassroots' Mobilize service to send 40,000 e-mail messages to sympathetic voters and encourage them to fight California's Proposition 38, a well-funded school-voucher initiative. The Action Alerts include links to a Web page with more information that readers can easily forward to others. Grassroots then adds those names to its database for future contacts.

Based on this data, Mobilize customizes future appeals and even generates thank-you notes. And the groups using it save on mailing costs. The $10,000 that Grassroots charges per campaign came out to about 25 cents a person for the CTA -- less than half the expense of direct mail. For the teachers' group, it was worth it: Proposition 38 was defeated.

TAILORING APPEALS. Grassroots, however, is pinning its biggest hopes -- and much of the $30 million it raised in February from the likes of Advanced Technology Ventures, Knight Ridder Ventures, and AIG Horizon Partners -- on what it calls Project Jefferson. This is a membership-management application, reached through a Web page, for large nonprofit groups. When a beta version of Jefferson becomes available early next year, it will help groups tailor appeals to individuals most likely to respond.

For instance, if Grassroots client Amnesty International wants to reach people concerned about human-rights issues in Myanmar, Jefferson would locate those people in the database and provide contact information. "We're trying to manage a membership base instead of a customer base," says Chief Operating Officer Arvind Raja. While many of the management strategies are similar, the final goal is different: "You're trying to get people to do more things on your behalf," he says.

Though Grassroots.com goes a long way to replace shoe leather in political organizing, it still has some sidewalk pounding to do. Not only is it a dot-com in a time of increased skepticism and decreased funding for such entities but it's also seeking customers who are more interested in agendas than profits and who are relatively slow to adopt new technology.

SCANT FOLLOWING. Early predictions that sites like Grassroots and Voter.com would become a political force during the Presidential election year proved too optimistic. While a Forrester survey showed that 46% of likely voters planned to look for political information online, only 11% intended to check out sites like Grassroots. Web sites run by news organizations, as well as more traditional sources such as newspapers and magazines, proved more popular than the online activist sites. Grassroots doesn't release numbers of unique visitors, but Jupiter Media Metrix shows that Voter.com was the only political portal on its radar, drawing 50,000 to 100,000 unique visitors a day.

Executives at Grassroots say business will pick up with time. They predict that Grassroots' potential as a service provider will become clear by the end of 2001 but that the full potential of the online political-influence market is still three to five years down the road. Says Forrester's Sharrard: "With anything that involves government or a nonprofit -- where the bottom line isn't such a concern -- things will move a lot more slowly."

The real driver of online political sites could turn out to be government inaction, McCurry says. With Republicans' razor-thin margin in the House of Representatives and a possible 50-50 split in the Senate, "there will be a sense of perpetual gridlock in Washington," McCurry says. "And something will have to break that gridlock."

If McCurry has his way, that something will be Grassroots.



Margaret Young is a freelance writer in Palo Alto, Calif.
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