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Obama's Secret Digital Weapon


Blue State helped create the Web machine that brought in the bucks and built the buzz. Now it's looking to sign up more corporate clients

Since Senator Barack Obama announced that he would forgo public financing for his Presidential bid, even more is being made of his campaign's prowess at raising record sums on the Web. Obama seems to have an almost magical ability to generate a spontaneous upwelling of political and financial support.

In fact, the presumed Democratic nominee has a secret weapon. It's a small, obscure firm called Blue State Digital, a market research-New Media hybrid that has played an instrumental role in fostering Obamamania. The campaign declined to discuss Blue State, but the firm says its handiwork and technology can be seen in the more than $200 million Obama has raised online, the 2 million phone calls made on the candidate's behalf, and in barackobama.com's social network of 850,000 users, who have organized 50,000 campaign events.

Besides Obama, Blue State has attracted more than 100 clients, including such widely known corporate names as AT&T (T) and Stonyfield Farm. There is also talk that the firm could continue playing a role as a contractor in an Obama White House. "Blue State is using technology to give people a chance to become involved, whether it's a voter or a customer," says film marketer Lisa Smithline. While director of creative marketing at independent film company Focus Features in 2006, Smithline hired Blue State to promote the Iraq war documentary The Ground Truth through a vigorous Web campaign that generated 500 screenings in churches and community centers. "They cross over and really reach those who have never been reached before," she says.

Blue State was founded in 2004 by four former members of Howard Dean's Presidential campaign. Other firms were already selling software to help candidates raise money online. But Thomas Gensemer, a former venture capitalist who, at 31, is now Blue State's managing partner, says he and his associates wanted to use such tools to mobilize grassroots support for progressive candidates, causes, or products. "The idea has always been to engage the citizenry, make them feel part of the process," Gensemer says.

In 2005, Blue State began working with AT&T, which was attempting to launch a TV service to compete with cable companies. The telecom declined to comment, but Gensemer says that in one project, Blue State used the Web and other media to organize community groups and citizens to mobilize against Connecticut's rigid cable franchise laws. Some 30,000 letters were sent to state legislators, who eventually enacted a new law making it easier for AT&T to take on the cable guys.

Financier-philanthropist George Soros hired Blue State in the fall of 2006 to work on two projects. The firm created a Web site for a fellowship-like program that sends journalists to New Orleans to document the city's rebirth. Blue State also has made Soros' European Council on Foreign Relations think tank more Web-friendly, and has taught academics how to blog effectively about business and economics.

Obama retained Blue State nine days before launching his candidacy in February 2007. It was a shrewd choice because the firm can do a lot with a little: According to filings, the Obama campaign has paid Blue State not much more than $1.1 million so far.

One of Blue State's greatest contributions to the campaign has been MyBO, the social networking dimension of the candidate's Web site. MyBO allows Obama supporters to communicate directly with each other, organize their own events, and swap ideas. Obama staffers monitor the exchanges as a way to help them make their own communications with supporters as timely and personal as possible. Hughes Rhodes, a 58-year-old garment industry executive and, until now, a lifelong Republican, has hosted salonlike meetings in his New York City apartment to spread the word about Obama and his policies. "It's remarkable how they've used the Internet as an organizing tool," says Rhodes, who checks Obama's site several times a day. "It's voter-to-voter."

Today, Blue State has a staff of 38 and offices in Boston, New York, San Francisco, and Washington. The firm keeps its profile so low that it doesn't even put "powered by Blue State Digital" at the bottom of Obama's Web page. But it is tightly entwined with the campaign. Joe Rospars, a 27-year-old partner, attends all of the Obama campaign's senior staff meetings, says Gensemer. Campaign insiders suggest privately that Blue State has so impressed Obama that, if he wins in November, the company could be in the unique position to play a role inside the White House.

Gensemer won't talk about a possible future with an Obama Administration, but others say it wouldn't be a stretch. "Instead of just having 'check box' polling, just think about what Blue State could do to help you in terms of developing and refining policy," says Clay Shirky, a New York University professor who consults and lectures about New Media. "You could drive the conversation down to the body politic."

The challenge for Blue State (which, as a private company, does not disclose financials) is to ride the Obama wave while diversifying its business—particularly overseas, where it sees opportunities. As the firm pushes deeper into the corporate world, Blue State may also need to rethink its politically loaded name. Gensemer acknowledges this, but adds: "We will always maintain a progressive idealism." Sounds a lot like a certain senator from Illinois.

Lowry is a senior writer for BusinessWeek in New York.

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