The art of taking it in-house: Ed Smith on Foxtel’s digital/programmatic journey

Ed SmithTaking digital/programmatic in-house can be a tricky area for many marketers. Foxtel’s Ed Smith talks with Nic Christensen about his programmatic journey and his surprise at finding he didn’t own his own data when he moved media agencies. 

Programmatic is an area that perplexes many Australian marketers but for outgoing Foxtel CMO Ed Smith he has a simple view on why he took his digital buying in-house.

“Clearly, as a client we are not going to invest in printing presses and TV stations but the digital world is very, very different,” Smith explains. 

It’s almost two years since Foxtel made the decision to ramp up its in-house capability in the digital and programmatic space and Smith says the decision was made after he did the maths on the fees being paid to his agencies.

“It’s a couple of years since we started on this,” he says. “It began with some performance advertising, then it went programmatic, then we started to do some digital video and then search.

“Foxtel is one of the largest advertisers in Australia and a lot of what we are doing is programmatic/performance/video space and there is an ability to build that capability and more efficiently achieve the outcomes your brand is after, so why wouldn’t you do that – rather than build someone else’s business to do that?”

One of the first surprises for Smith came back in 2012 when Foxtel moved Zenithoptimedia to Mediacom and found that they didn’t own their own data.

“The first part of the journey came when we moved from Publicis to Mediacom,” says Smith. “Back then the ad-serving account was Publicis’ account, but when we left we lost all our data.

“Therefore when we went to GroupM we make sure to ask them that all the accounts be in ours and said we were happy for the agency to use all accounts but that way you accumulate and start to own your data.”

Smith argues this is a major mistake that many marketers make – by not requiring the media agency to set up their own accounts for programmatic.

“You have to start off by making sure the account your agency in transacting on is yours. That’s the first step,” he explains. “When (marketers) come to do it, they may well be surprised that the don’t (own their data). Anyone can do that.

“Even if your agency acts on your behalf begin by making sure you are not being aggregated with all the other clients, and that you own your own data.

“Now part of the agency’s offering might be to use all the aggregate data to help provide value  and that’s awesome but you want the accounts, with DoubleClick, etc, to be yours. In case you move (down the track) it gives you that freedom.”

Programmatic has a bad reputation, in some quarters, with many clients concerned about the risk of arbitrage and exorbitant ad-serving fees being charged in the space. 

Asked about this Smith responds: “The thing that is important for us is that our media agency is engaged with us to give impartial advice on how to invest our media money best in order to grow our business.

“That is completely the relationship we have with our agency and that’s wonderful,” he says referencing Foxtel’s relationship with its current media agency Mindshare.

On the concern around agencies charging clients a margin Smith notes that it does change the equation with media agencies becoming publishers rather than agents.

But he also accepts that for some clients this will work, provided there is transparency about the shift from agent to seller.

“I think when you look at a lot of the digital products that agencies have they start to cross the threshold of being an impartial adviser to being a publisher,” he says.

“They are acquiring low-cost inventory, they are adding a layer of targeting and there is an inherent layer of margin in that and then selling it back to you. In principal, I don’t have a problem with that because it offers digital products smaller clients that otherwise they might not have access to.

“It’s also quite transparent what they are buying whether it be click-per-view/sale/whatever but the product has to stack up against other products in the market. As long as it’s transparent that’s fine. ”

However, Smith notes that for Foxtel which has a spend estimated as more than $80m a year the economics made sense for building the capacity in-house and getting its agencies to help them do this.

“It was a strategic decision we took a couple of years ago – and it was no discredit to the agency – but it got to the point where we thought: ‘we are spending so much money here and the margin implicit in that would be better used by our brand to buy more media’,” he says.

foxtel logo-234x108“From our perspective as a large investor in media you have to think about what would be best for our brand – there’s really only a small group of us large telcos, banks, Foxtel etc – actually it would be in our interests to have our agency help us build that capability.

“So instead of an agency building that capability and taking a margin as a publisher, they are instead building that capability for their client.”

Smith notes his previous digital experience at News Corp also helped in the process and that there are now six staff in the programmatic team within Foxtel.

“It’s not a huge team – there might be half-dozen people who are working on this but the main thing is we weren’t scared to do it,” Smith said.

The fact that I had run News Digital Media and had access to people who understood ad-serving and data management platforms that gave us a confidence are not super scary. The components of the tech stack are all cloud-based, they are all interoperable with each other.

Asked what advice he would give to other marketers, Smith responds: “I would be building a tech-stack with companies that have people on the ground here and which have a great degree of interoperability. These pieces of software come and go; they have different strengths and weaknesses and there is always a new product.”

Smith, who is departing from the role after more than four years later this year, also has some advice for media agency bosses.

“I think there is a opportunity there,” he says. “If I was running an agency I would be building a consulting arm like the Deloittes, etc.; they could come in and help you do this.

“This is difficult, it’s difficult to get people to help you and there is a real gap in the market. If an agency’s job is to impartially advise you on how to grow your business then there is an awesome business model for them here.”

However, Smith also concedes that for a lot of marketers with smaller budgets building a full scale, in-house capacity might not be the right solution.

“If they are only running one or two big campaigns a year then you are probably better off leveraging your agency,” Smith said. “But if this is core to your business and you are doing this week-in and week-out, what you may find is that the agency has higher staff turnover, younger staff than you do.

“You might find when you take the agency’s margin out and weigh that with the stability of your organisation/culture you might be able to employ for the same or less money older more stable employees and so your corporate learning might be greater.”

Screen Shot 2016-04-12 at 9.03.04 amIn terms of effectiveness for Foxtel, Smith said he is pleased with the results and, in particular, the help of data management platform, Krux, in helping them scale up.

“We decided to go with Krux because they have a good and local team,” he says. “There is a competitive set there, in terms of the product, local staff and service.

“If, in creating your audience, it is a common sense audience you have customers who are obvious – e.g. Foxtel customers who haven’t logged in to Foxtel Go, we find in the order of a 20% uplift in the campaigns when we run them.

“Krux has been really an awesome inter-connector for everything we do. The more complex campaigns we would be extracting data (from their system) and then running quite a lot of analytics and regression models against that and then implementing that and there you can see up to 100% effectiveness lift.”

While in the old days marketers would instigate a campaign and wait weeks and months for the result, today Smith notes audiences and results are more immediate.

“It’s great because you can create an audience in literally 24 hours and then look back 90 days – which is amazing,” Smith said.

Foxtel“If we were looking to build propensity model for buying the drama tier, or upgrading to sport, or buying broadband and then executing against data we have got from Krux, we will typically see 100% uplift.

“We are able to buy all that programmatically. We are able to buy remnant inventory cheaply, we are able to execute those campaigns across exchanges , partner publishers and networks and the whole thing is incredibly cost effective.”

Smith says marketers unsure about the first steps should be open to asking for advice and looking for people with knowledge of the space.

He also urges them to take small steps.

“We were advised along the way,” said the Foxtel CMO. “It’s all about little steps. You don’t have to decide to go in-house, do all this work for months and then launch.

“Start with small steps start with your performance, then programmatic and get experience with display then maybe you extend into digital video. From there, maybe search.

“Not everything will make sense for every client, cutting it down into little bits is best.”

As we wrap-up I ask Smith if it’s about beginning with the end in mind and he argues it’s not.

“Marketers should customise it for your own journey,” he explains. Beginning with the end in mind… that’s an interesting question. I don’t think so. The end now is probably very different to the end in two years.”

Nic Christensen is the media and technology editor of Mumbrella.  


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