Sprint: In-house buying has 'blown away' expectations

US mobile carrier Sprint has said it has been "blown away" by the results of bringing its digital media buying in-house.

Sprint, which spends $1.3 billion a year on advertising, took all of its paid search, the majority of its programmatic display advertising and some of its social in-house in September 2017.

Chief digital officer Rob Roy said Sprint has improved the effectiveness of its "working media", become nimbler and saved money over the past year since setting up its in-house media agency, The Hive.

Roy told Campaign in an interview: "Quite honestly, moving in-house has blown away our expectations in terms of how much year-over-year improvement we’ve been able to see, both from a top-line and a bottom-line perspective."

He said cost-per-click and cost-per-acquisition are "significantly down year on year", Sprint’s "ability to deliver on quality traffic is up year over year" and KPIs for search and programmatic campaigns have also seen "favourable, double-digit improvements year on year".

"That’s translating into delivering more value for the company in terms of being able to bring in more customers through our digital channels," Roy said.

He declined to discuss financial details, but the company told shareholders at its quarterly results on 31 October that it has saved $150 million, chiefly through "more efficient marketing spend", so far this year.

Optimising media spend in real-time

Roy’s internal team at The Hive works closely with chief marketing officer Roger Solé and Sprint’s in-house creative agency, YellowFan, which launched in 2016.

The two teams work together to "look at our spends and optimise them for the best return on the specific KPIs" that the company has set.

Roy said they optimise adspend on a "daily" basis and have been using machine learning to improve the team’s "auction-based" bidding.

"If we’re seeing an opportunity, we’ll increase spend," Roy explained. "If we’re seeing a degradation, we’ll decrease spend."

He contrasted this fluid approach with what he called "some traditional companies" that take a "rigid" approach by deciding their media spend at the start of the year and sticking to it.

"What Roger and I have done is say: ‘What is the data telling us? And what should we do with that data?’

"As we’ve brought it in-house, we can do it much more nimbly. We don’t have to go and tell somebody else that ‘we are seeing something and please think about what you should do to optimise’. We can do it in near real time."

‘Not primarily about cutting costs’

Roy, who previously worked at Comcast and Time Warner Cable and joined Sprint in 2016, stressed that the mobile operator was not primarily looking to cut costs by bringing digital media buying in-house. Rather, Sprint has made a strategic decision to take a "data-first approach" to the business.

"It all started with us wanting to have greater control over our insights—what we are learning from the marketing spend out there," Roy said. "And if we’re going to be a data-first organisation, then we need all of that data at our fingertips."

That meant Sprint needed to recruit data scientists as well as media buyers and getting them "sitting side by side" with the in-house creatives and giving them "the same goals".

"What’s fantastic has been the way we’ve harnessed our insights," he added, explaining how they have informed the creative executions as Sprint moves to more personalised, one-to-one marketing in the moment.

The Hive has about 125 staff and around 90% of them are based at Sprint’s headquarters in Reston, Virginia, just outside Washington DC.

Sprint continues to work with external agencies for what Roy called "upper funnel" display advertising and social media.

"We can learn from the signals that digital is providing us and make smarter decisions about some of our upper-funnel tactics," he pointed out.

Building the in-house team

Roy said he felt "really confident" when Sprint started implementing its strategy a year ago and building an internal team with the right capabilities and skills.

He has tried to foster an attractive "start-up" culture with The Hive, claiming: "The folks that are coming in are staying. We haven’t lost anybody."

Roy explained: "As we go to market to prospective employees, we really focus on what we’re building: ‘Come be part of a leading-edge, in-house digital marketing team that works on the end-to-end customer journey.’ Not a lot of media agencies are doing that.

"My paid search guys are interacting with my product managers, they’re interacting with my telesales reps, they’re interacting with my data guys, they’re interacting with my brand teams—it’s really a culture of many hats."

He has used MightyHive, an independent programmatic agency, for consulting help.

"Like any good start-up, we went for it and we’ve iterated against everything we’ve done," he said. "We haven’t necessarily stuck to the original model."

Sprint has also built closer, direct relationships with Google and Facebook.

"We’re pushing them to be more progressive in the things that they’re launching and being part of those alpha tests and beta tests [on new products]," Roy said. "Now we’re being leaders in the field."

He is able to use 20% of his budget to experiment on new ideas—sometimes testing a product "within hours" because "we can control everything end to end".

"That really makes in-housing so perfect for us," he said.

Will other brands jump on the in-housing trend?

Sprint became one of the first mobile companies to take digital media buying in-house when it announced it was setting up an in-house unit in September 2017 in what has become a growing trend.

A wave of other wireless carriers, including T-Mobile in the US, UK-based Vodafone and Eir in Ireland, have brought elements of digital media buying in-house this year.

Roy said other chief digital officers and chief marketing officers had to think carefully about whether to bring some of their advertising and marketing functions in-house.

"Each one of them has to look at themselves specifically and understand culturally if their brand or their organisation is ready for it—is it something they want to do?" he said.

"Any organisation is going to have the ability to solve problems much quicker and create a culture of learning if they bring key tasks in-house versus outsourcing them—that’s my belief."

In Sprint’s case, the chief executive, Michel Combes, and chairman, Marcelo Claure, have set the tone by pushing the company to move "faster" and be "more like a start-up", according to Roy.

He has received a lot of inquiries from brands in the retail world that are interested in exploring in-housing but warned: "Don’t do it just to cut costs."

Roy suggested retailers could be well suited to in-housing because they get a lot of data from transactions at the point of sale and web traffic.

He admitted that media agencies were facing questions as "the landscape is changing", but each advertiser has its own needs.

Sprint uses a number of external agencies, including Droga5 and Horizon.

Roy said agencies have valuable knowledge around consulting, in setting up relationships with larger demand-side platforms and managing dynamic creative and data.

"There’s a real need for experience," he said. "We definitely can’t do it alone."

Financial benefits

Sprint spent $1.3 billion on advertising in its last financial year to March 2018—up from $1.1 billion a year earlier.

Taking media in-house has saved money and improved efficiencies in the current year.

"Our in-house digital marketing agency is delivering solid early results compared to our previously outsourced model," Combes said.

Chief financial officer Andrew Davies added the group has made $150 million in savings.

"There's an element which is more digital and less TV [advertising spend], but it's just better placement of our marketing spend. So, just targeting the marketing spend where we can get a much better bang for the buck," Davies said.

There has been huge interest in in-housing across the ad industry in the past 12 months.

Campaign US will host a breakfast event, "When brands take advertising in-house" in association with Wunderman in New York on 4 December—a follow-up to an event in London last month.

Click here for more details about the Campaign US breakfast