Financially troubled startup modelled after Cambridge Analytica helped power Trump campaign

President Donald Trump’s 2020 re-election marketing campaign was powered by a cellphone app that allowed employees to watch the actions of his hundreds of thousands of supporters, and supplied intimate entry to their social networks.

While the marketing campaign could also be winding down, the information technique may be very a lot alive, and the digital particulars the app collected will be put to a number of different makes use of — to fundraise for the president’s future political ventures, stoke Trump’s base, and even construct an viewers for a brand new media empire.

The app lets Trump’s crew talk straight with the two.eight million individuals who downloaded it — greater than another app in a US presidential marketing campaign — and in the event that they gave permission, with their whole contact checklist as properly.

Once put in, it might monitor their habits on the app and within the bodily world, push out headlines, sync with mass texting operations, promote MAGA merchandise, fundraise and log attendance on the president’s rallies, in keeping with the app’s privateness coverage and person interface.

Yet the enterprise software program firm that constructed a instrument to propel Trump’s mass motion is in monetary misery and has been sustained at key factors by the administration and the president’s marketing campaign, in keeping with interviews with former workers, monetary filings and court docket paperwork.

Austin-based Phunware Inc., whose inventory is buying and selling for pennies, just lately agreed to pay Uber $4.5 million as a part of a settlement over claims of fraudulent promoting and earlier this yr risked being delisted from the Nasdaq. In April, the corporate received a $2.9 million mortgage below the Coronavirus Aid, Relief and Economic Security Act because it was constructing the Trump marketing campaign app.

Campaign watchdogs and former workers alike marvel at how a struggling startup recognized extra for constructing apps for hospitals and a Manhattan-based astrologer turned a juggernaut in Trump’s re-election bid, facilitating an ongoing information and fundraising effort that threw the corporate a monetary lifeline.

Even after main media retailers referred to as the election for his Democratic opponent Joe Biden, the app stored pushing out content material supporting Trump’s bid.

“We all know why Joe Biden is rushing to falsely pose as the winner, and why his media allies are trying so hard to help him: they don’t want the truth to be exposed,” learn a press release attributed to Trump posted earlier this month. “I will not rest until the American People have the honest vote count they deserve.”

On Tuesday, the app pushed out recent content material defending the marketing campaign’s vote-counting litigation in Georgia.

Last week, the app posted a fundraising attraction asking for donations to Trump’s newly fashioned Election Defense Fund, which can ship a lot of the cash raised to a brand new Political Action Committee(PAC) Trump fashioned referred to as Save America. That PAC has few spending restrictions and will pay for lavish private bills or give cash to different candidates.

While exercise on the app has slowed just lately, the enriched information it gathered on the president’s supporters — which may embrace every little thing from their contacts to their IP deal with to their location information — can serve many functions going ahead, stated Adav Noti, a former Federal Election Commission(FEC) lawyer who works for the nonpartisan Campaign Legal Center.

Congress and the FEC haven’t set guidelines governing how campaigns can use folks’s private information and or limits on the variety of entities to whom the marketing campaign can promote its checklist, he added.

“I’m assuming that what he is going to do is transfer the assets of the campaign,” Noti stated. “You can definitely buy the data and the campaign can sell it to you, the trickier question is how much do you have to pay for it.”

Phunware declined to reply to questions concerning the app, the corporate’s monetary standing, its inner tradition and its relationship to the marketing campaign.

“Phunware has absolutely no role in the constitutional processes tied to US elections at any level … and also has no role in the content created or used by our customers specific to our mobile software or enterprise cloud platform for mobile,” CEO Alan Knitowski stated in an e mail.

A senior Trump marketing campaign official declined to reply questions on doable future makes use of for the wealthy supporter information the marketing campaign collected by way of digital platforms, together with the Phunware app.

“The data is owned by the campaign and limited whatever hit their servers,” stated the official who spoke on situation of anonymity to debate marketing campaign specifics.

As Phunware has hit difficult monetary occasions in recent times, it has shed workers, purchasers and buyers, 10 of whom agreed to talk with The Associated Press(AP), some on situation of anonymity as a result of they signed non-disclosure agreements or feared retaliation.

Phunware sued its consumer Uber in 2017, accusing the ride-sharing firm of failing to pay its invoices, in keeping with court docket data.

But after Uber filed swimsuit towards Phunware, alleging the software program firm dedicated fraud by amongst different issues, permitting advertisements for the ride-sharing app to indicate up on porn websites, former workers stated the startup regarded for brand new methods to diversify its income stream.

Into the image stepped Karl Rove, former advisor and Republican strategist for President George W. Bush.

Long earlier than reaching the White House, Rove made his title in Texas politics as a specialist in junk mail, a type of political promoting he as soon as stated was efficient as a result of it was largely “immune from press coverage,” or close to invisible to the general public.

In an interview with the AP, Rove stated a lobbyist who was pleasant along with his spouse launched him to Phunware executives, who instructed him the corporate had constructed apps for sports activities groups and Fortune 100 corporations that built-in geofencing expertise, which may monitor folks’s actions by way of their cellphones.

Ex-Phunware workers and the lobbyist’s employees gave Rove a presentation, exhibiting off how the corporate may use cellphone information to ship out custom-made political advertisements that additionally had been exhausting to hint.

“His mind was blown. He was like ‘this is extremely powerful data,’” a former worker recalled.

Rove stated he brokered a relationship for Phunware with Trump’s 2016 marketing campaign digital director Brad Parscale.

“I thought it had lots of implications for politics so in a subsequent conversation I mentioned it to Brad Parscale,” Rove stated. “He said ‘interesting’ and that was it, he never told me he had hired them.”

Knitowski stated in an e mail that he constructed the connection with the Trump marketing campaign.

“Phunware met the Trump Campaign through me directly after a 1:1 introduction from a Silicon Valley CEO who requested our consideration and participation in an RFP that also had Salesforce as a finalist,” Knitowski stated.

Stung by the Cambridge Analytica controversy — the corporate was accused of utilizing information improperly obtained from Facebook to foretell voter habits within the 2016 election — and perceived bias from social media platforms, Parscale needed to bypass Big Tech and reorient the re-election marketing campaign to attach straight with supporters.

After Trump’s 2016 victory, Parscale labored with consultants and an ex-Cambridge Analytica information scientist to construct out a knowledge storehouse that might higher microtarget audiences with specialised advertisements, former collaborators stated.

Phunware, in the meantime, began advertising its instruments to campaigns, saying it may attain possible voters by way of geofencing, by drawing digital boundaries round areas of curiosity “such as event appearances, polling centers, sporting events – even an opponent’s campaign rally,” a weblog publish stated.

Two former workers stated Knitowski instructed engineers to embed invisible monitoring software program to comply with customers’ habits inside every app they constructed to spice up Phunware’s choices to campaigns.

“We were told they needed to be in every app to collect information for whatever we did, and the political vertical was one of those reasons,” an ex-employee stated. “It would still go in even if the customer said they didn’t want it.”

Knitowski declined to touch upon the allegation. A former supervisor stated he labored to maintain the software program out of apps whose purchasers didn’t need it.

At month-to-month conferences, Knitowski would transient employees on the startup’s prospects for getting purchased by one other firm or attracting angel buyers, one other former supervisor recalled.

The Republican National Committee(RNC), in flip, had employed a personal firm to construct a centralized hub for voter information for right-leaning campaigns referred to as Data Trust, and Parscale joined its board. All the whereas, his crew stored amassing cell phone numbers, and providing Trump supporters MAGA swag in alternate for his or her digits.

“This is how Donald Trump stays president for four more years,” Parscale stated, holding up his iPhone on stage at a 2018 rally supporting Texas Sen. Ted Cruz’s reelection. “Now this phone is how we connect with you. It’s how we turn you into the army of Trump.”

By early 2019, after Phunware had gone public, former colleagues stated Knitowski began speaking about his efforts to court docket the Trump marketing campaign. In April, 15 % of the employees was laid off because of “organizational restructuring and cost reductions,” in keeping with a Securities and Exchange Commission submitting.

In July of that yr, Knitowski rang the bell on the Nasdaq. But by then income was dropping and main purchasers had been threatening to go away.

New York-based astrologer Susan Miller, whose glittery horoscope app had been considered one of Phunware’s most profitable, stated she would ask for options to be up to date, and nobody would name again.

“Have you ever talked to someone at a party who is always looking at the door and not at you because they want to talk to someone else more? It felt like that,” Miller stated. “They just treated me like an old shoe.”

An investor stated Knitowski stopped returning his calls, too.

“The guy seems very shady. He is all your best friend when he’s looking to raise money and once you have questions he is nowhere to be seen,” stated Scott Walker, who stated he misplaced greater than $200,000 after Phunware’s inventory tanked.

In August, there was one thing new to announce: work with American Made Media Consultants, “otherwise known as the ‘Trump-Pence 2020’ and ‘Keep America Great’ Campaign,” Knitowski stated in an earnings name.

According to a doc filed with Federal Communications Commission(FCC) two months later, the corporate’s administrators included marketing campaign operations director Sean Dollman and marketing campaign counsel Alex Cannon.

Phunware would later reveal extra particulars about its work on the Trump app, which would come with location-based instruments and different options to assist the marketing campaign crowdsource new customers. Plus, there can be a gamified loyalty system, the place supporters may accumulate factors to spend on signed MAGA hats or pose for an image with Trump.

By September 2019, 18 % of the remaining employees was laid off after consumer Fox Networks Group left, taking a big proportion of Phunware’s gross sales with them, in keeping with filings.

Managers requested engineers in Phunware’s Newport Beach workplace in the event that they needed to work on the Trump app, and a few engineers who had been opposed resigned, a former worker stated.

Then in April, as coronavirus instances surged and stay-at-home orders shut down enterprise, Phunware obtained a $2.9 million mortgage from the US Small Business Administration’s Paycheck Protection Program, a reduction fund that Congress created to assist small companies preserve staff employed by way of the pandemic.

Phunware COO Randall Crowder denied political favoritism helped Phunware get the mortgage.

“We got no help from the Trump campaign — boy I wish we could have, what a great way to have friends in high places — but that didn’t have any implication on what we did,” Crowder stated in a recorded interview.

Phunware declined to return the cash after the administration demanded that public corporations that obtained greater than $2 million give it again.

The subsequent month, Nasdaq notified the corporate it might be delisted over its funds. To keep listed, corporations should meet a set of requirements to reassure buyers that for the reason that preliminary public providing, they continue to be a reputable firm.

SEC data revealed that by July, American Made Media Consultants accounted for one-third of Phunware’s gross sales, paying Phunware greater than $1.6 million within the first half of the yr. The Campaign Legal Center filed an FEC criticism alleging that the Trump marketing campaign and a serious PAC supporting it had shielded their spending on Phunware and different subcontractors by way of American Made Media Consultants.

As the pandemic stored many supporters at dwelling, Trump’s marketing campaign used the app to accumulate new customers remotely, and Parscale touted how the app was retooled to assist digital occasions. According to on-line information supplier Apptopia, almost 860,000 folks downloaded the Trump app in July, the identical month Biden’s marketing campaign deserted its first app, Team Joe, and requested followers to obtain a completely new app, Vote Joe (solely 11,075 did).

By mid-November, 2.eight million folks had downloaded the Trump app, which Apptopia CEO Eliran Sapir estimated may give the marketing campaign a whole bunch of hundreds of thousands of telephone numbers, enabling it to achieve folks whose numbers had been saved of their buddies’ contact lists however by no means consented to being contacted. A Carnegie Mellon University researcher, nonetheless, estimated the whole can be nearer to 27 million because of duplicate telephone numbers.

By then, the app had already laid the groundwork for a coordinated remaining months, permitting marketing campaign officers to mannequin supporters’ behaviour below quarantine and incentivize them to look at rallies.

“Why is that app so valuable? Because people like sharing messages with their friends from the campaign and getting news and updates,” stated Republican guide Eric Wilson.“But it’s not just an extractive resource. It’s also generating contacts and mindshare on behalf of the campaign.”

Phunware’s monetary troubles hadn’t abated, nonetheless.

In a Thursday SEC submitting, Phunware abruptly stopped disclosing its prime clients by title. But by matching the accounting figures to previous filings, AP derived that American Made Media Consultants is Phunware’s single greatest buyer, and paid Phunware $2.Four million over the primary 9 months of this yr, accounting for almost one-third of Phunware’s income. Two former workers concurred. The app developer additionally disclosed sizable debt and expressed “substantial doubt about its ability to continue as a going concern.”

On an earnings name with analysts final week, the corporate by no means talked about its work for the Trump marketing campaign, as an alternative specializing in its future development potential. Despite the corporate’s uncertainties, some analysts say it has a positive long-term outlook as a result of development in cellular utilization.

Last month, its inventory rose barely after the corporate introduced it had completed two contracts for Honeywell. Honeywell fired again on Twitter, saying it had requested Phunware to retract its launch, and that the commercial conglomerate “does not have an ongoing relationship with Phunware and does not plan to work with Phunware in the future.”

A second firm, Hewlett Packard Enterprise, instructed AP Phunware had publicized a partnership between the businesses the place none existed. Knitowski declined to touch upon both occasion.

“We never had a relationship with Phunware, we don’t have any formalized partnership with them,” stated spokesman Adam Bauer. “We didn’t authorize them to issue that press release and we asked them to take it down.”