Cambridge Analytica CEO Promised More Than He Delivered

March 28, 2018 5:30 a.m. ET, By Sam Schechner, Jenny Gross and Rebecca Ballhaus; Original article here

Alexander Nix is now under fire for his use of Facebook data

LONDON — Cambridge Analytica CEO Alexander Nix’s sales pitch was simple and powerful: his firm’s personality-profiling ability would let politicians win votes by tapping into people’s deepest fears and desires. Nix vowed ‘big data’ could hone messages for maximum impact.

Clients of the company, including Donald Trump’s presidential campaign, said Cambridge Analytica struggled to make good on Mr. Nix’s bold claims. Among the data Mr. Nix’s team crunched was information on 50 million Facebook users obtained and allegedly stockpiled in violation of Facebook policies, former Cambridge Analytica worker Christopher Wylie told the New York Times and the U.K.’s Observer earlier this month.

The ensuing scandal has sheared $80 billion off the market value of Facebook and led to calls for Mr. Nix to testify again before U.S. and U.K. lawmakers. Investigators from Britain’s data-privacy watchdog last week searched the Cambridge Analytica’s London offices.

The company has said it followed Facebook rules and didn’t use the data in question during the 2016 U.S. election campaign. It also suspended Mr. Nix, pending an internal investigation, after he was caught on video by a British broadcaster describing tactics that included entrapping clients’ opponents with bribes and sex. Mr. Nix said his comments were taken out of context as he was laying out “a series of ludicrous hypothetical scenarios.”

Acting CEO Alexander Tayler has told employees in recent weeks that he thinks Mr. Nix is unlikely to return, according to a person close to the company. Mr. Nix and a representative for Cambridge Analytica didn’t respond to requests for comment.

Mr. Nix’s sales pitch boiled down to two essential claims. First, he said Cambridge Analytica has developed a way to use publicly available data — on demographics, purchases, voting history — to predict an individual’s personality traits. Second, Mr. Nix has said, Cambridge Analytica can make ads more effective by tweaking them to appeal to specific personality types — delivering an emotional ad, for instance, to someone disposed to resonate with that approach.

“We can use ‘big data’ to understand exactly what messages each specific group within a target audience need to hear,” Mr. Nix said in a talk dubbed “From Mad Men to Math Men” at a marketing conference last year.

There is little public evidence or scholarship to show that attempts to tailor ads that way is effective, according to Daniel Kreiss, an associate professor at the University of North Carolina at Chapel Hill who has studied political campaigns’ use of data. People close to the company said Mr. Nix didn’t understand the data work he talked about, and that his bold claims often overshadowed the company’s actual work, which they said was effective but more traditional.

“The pitch was always about getting rid of the Mad-Men style approach and moving toward understanding people’s personalities,” said a person who worked closely with Mr. Nix in recent years. “That’s a good pitch, but you have to be able to deliver.”

Mr. Nix, 42 years old, turned to political consulting in the early 2000s after working in finance. He told a parliamentary hearing last month that his group has worked on about eight or nine campaigns a year for local and national elections around the world. A former subcontractor said Mr. Nix’s group on multiple occasions sought help in the later stages of a campaign from outside firms that didn’t use personality profiling.

“We would take it back to traditional campaigning as much as humanly possible,” including buying TV and radio ads, the former subcontractor said. “There was no secret sauce there.”

Beginning in 2012, Mr. Nix launched a series of U.K. and U.S. companies, one of which was named Cambridge Analytica LLC, according to corporate filings. He attracted backing from New York’s Mercer family, known for financing conservative causes. Rebekah Mercer, the daughter of hedge-fund billionaire Robert Mercer, is on Cambridge Analytica’s board.

Most of the 20 organizations that reported having hired Cambridge Analytica to the Federal Election Commission also received donations from Mr. Mercer, commission records show. According to former officials of several campaigns, hiring Cambridge Analytica came to be seen as almost a prerequisite for candidates seeking the Mercers’ support. The Mercers didn’t respond to requests for comment.

Mr. Nix’s clout rose significantly during the 2016 U.S. election cycle. Wired magazine named him one of the “25 Geniuses Who are Actually Making the Future Happen Now.” Three Republican presidential campaigns—those of Mr. Trump, Sen. Ted Cruz and neurosurgeon Ben Carson —hired his firm, FEC records show.

It was a lucrative business. In 2015 and 2016, U.S.-based Cambridge Analytica paid a total of £36.6 million ($52 million) to SCL Elections Ltd., a U.K. company controlled by Mr. Nix that owned a 19% stake in the U.S. firm, according to a U.K. corporate filing.

But some clients were becoming disappointed. Cambridge Analytica built a data model for the Cruz campaign that was intended to predict which voters would support Mr. Cruz. The campaign tested the model in Oklahoma and found it was less than 60% accurate, a former member of the Cruz campaign said.

The company also built psychographic models to target voters. The campaign used the models in three nominating contests—Iowa, New Hampshire and South Carolina—but stopped when testing showed they didn’t work, the former campaign official said.

Mr. Nix first met with Trump advisers in May 2016, at the introduction of Steve Bannon, who sat on Cambridge Analytica’s board, and whom Mr. Trump would tap later that summer—at the Mercers’ urging—to head his campaign, according to people familiar with the conversations.

Among Mr. Nix’s first moves when working for the Trump campaign in June 2016 was to reach out via a speaker’s bureau to WikiLeaks founder Julian Assange and offer to help him better organize the Hillary Clinton-related emails the website planned to release, according to Mr. Nix. U.S. intelligence agencies later concluded those emails had been stolen by Russian intelligence operatives. Mr. Assange said he rejected the offer.

The revelation last fall of that outreach prompted U.S. congressional investigators to invite Mr. Nix to testify as part of their investigation into possible collusion between the Trump campaign and Russia, which the president has denied. Mr. Nix testified via videoconference last year before the House Intelligence Committee, which has called for him to interview in person following recent reports about the company.

In the summer of 2016, Cambridge Analytica dispatched a team to work with the Trump campaign’s digital operation in San Antonio. But according to the people within the company and the Trump campaign, the company didn’t perform what it touted as its expertise: building psychographic profiles of likely voters to tailor ads to their personalities. Instead, the company’s work with the Trump campaign focused on placing tens of millions of dollars’ worth of digital ads and on building data models that could predict voter turnout and candidate preference, the people said.

“These are the things that all campaigns end up doing,” said Patrick Ruffini, a conservative political strategist who runs an analytics firm. While Cambridge Analytica was paid nearly $9 million by the Trump campaign, close to $5 million of that sum went to buy TV ads in September 2016, according to a campaign official.

Mr. Nix appears to retain the confidence of Rebekah Mercer. On the same mid-March day that Facebook announced it would suspend Cambridge Analytica from buying ads because of the allegations it had illicitly gathered user data, Ms. Mercer and her sister Jennifer joined the board of a new company, Emerdata Ltd., headquartered at the same address as Cambridge Analytica’s British affiliate, according to a British corporate filing. Another board member: Alexander Nix.