How To Build A Disruptive Political Business – Michael Beach (Cross Screen Media)

Michael Beach:

Everybody wants to get to streaming right now, and it's also the future of the business. If you are a TV buyer, the only way that you can hold onto the media budget long term is to own streaming.

Eric Wilson:

I'm Eric Wilson, managing Partner of Startup Caucus, the home of campaign tech Innovation on the right. Welcome to the Business of Politics Show. On this podcast, you are joining in on a conversation with entrepreneurs, operatives, and experts who make professional politics happen. Our guest today is Michael Beach, c e o of Cross-Screen Media, a leading connected TV activation managed service for marketers and agencies before starting cross-screen. He was one of the co-founders of Targeted Victory, and he had an extensive political career in the field prior to that. In our conversation, we dig into the nuts and bolts of building a business on the cutting edge of political technology. Michael, you started cross-screen media back in 2017, which is long before Connected TV CTVs Heyday began. What was the landscape like that you launched into and and what were you seeing there that that gave you the conviction to start a company in this space?

Michael Beach:

Yeah, it's a great question. I mean, the, probably the first way to look at is how large the market was. And so in the 2015 and 16 election cycle, you know, we estimate that there was about 300 million spent on all forms of digital video advertising total in politics. And that's about 12% of the total amount spent on video. Obviously the predominantly, you know, 88% of that being television. So the whole video market was two and a half billion dollars. And we saw, obviously that streaming was growing really rapidly. We estimate there's probably only about 30 million of that 300 spent on streaming video advertising and politics that cycle. So it was so small that no one was really focused on it. And the other thing, you know, kind of coming out target victory was that we started there when kind of digital was nascent. And so we had to offer all these services, you know, building websites and doing your social media and doing your fundraising, an email. And when you do everything, you can't really be the best in class any one thing. And here really even all the way back to 2013, I saw the, the opportunity to be number one at media optimization around video advertising. And then that was the future that, you know, the TV was kind of maxed out in terms of reach and frequency and time spent, and that every day more and more of the time was gonna be spent on streaming, but that it was not gonna be overnight. Like I think a lot of people kind of from the digital side just assumed that there was gonna be this flip and it was all of a sudden gonna be all digital. We looked at it like, well, this is probably a 10 plus year problem. And so we kind of got into space, you know you know, spun cross screen media out of what was targeted at the time and really focused on this one very niche problem. And that I think, surprised a lot of people that we were gonna be in this market. But that was kinda the plan from the start.

Eric Wilson:

So obviously one of the risks of of being first into a space is that you're not around or, or you're overtaken when a market finally matures. Thinking to, you know, Facebook, I was like the seventh social media platform.

Google was not the first search engine. What was your key to success with cross screen to, to being able to stick around, have the longevity to, to beef today, where, where we are, where, where CTV is up there as an important spin for campaigns?

Michael Beach:

Yeah, I mean, that was a tough challenge then. It's, you know, still I think a tough challenge today. You know, we were unique in the fact that I had, you know, we had 140 people at targeted at the time, and out of that were probably 35 people that I would consider kind of product and data science. And in that, you know, there's 20 that were really excellent, right? That we would've loved to brought over. You know, we started the company, we brought 18 people over. And so that's a big payroll to start. The one challenge that I had to come up with was, you know, you now have to capitalize this company.

You know, cuz when we started Target Richards Sack and I, and you know, we didn't hire employee number one until there was revenue coming in the door, starting with the, with engineers and data scientists. You know, you need a little bit of capital. And so the, the, the needle to thread there was how do you, how much do you, what's the lowest amount that you need to get to a point where you're gonna generate revenue and not go out and raise, you know, $20 million in something?

Eric Wilson:

So we, so let me just get this straight. So you, you came over with an 18 person headcount, you didn't have revenue from day one, or did you have some some solid leads on that?

Michael Beach:

Yeah, we definitely had some revenue. But it was an off year. And so we, you know, our best customers that we did video advertising for Target, if you all wanted to come over and be, you know, you know, probably 90% of the people came over were customers of, of cross media. But we then had the kind of the age old election cycle problem where most of that revenue wasn't gonna start to hit until, you know, may of 2018. And so we had to figure out how to make it 17 months without it. And that was a big puzzle piece because we started Target victory, I didn't have to worry about that cause it was just, we had to cover two people's salaries. We were, you know, we take on any project we could find, whereas here we were, we were only gonna do video advertising. We were gonna have a software model you know, everyone was gonna be on a subscription with, you know, with obviously with the, a media component to it sell to go out and get runway basically. Yeah, absolutely. And so, you know, that was you know, but we wanted, we didn't wanna raise too much money. Cause I think that was a, a one area of having the discipline of bootstrapping the first company. I couldn't imagine just running a business that was gonna, you know, gonna continuously burn money and go out and get, you know, find other capital. So. Right.

Eric Wilson:

And, and, and you know, we all know it's not an easy market to raise venture in. And, and especially giving people those returns that they expect. So, so obviously you, you, you push forward, one of the toughest things to, to master is this concept of product market fit. So, which is essentially building something that your customers want to buy. And it's really hard in the political space because you've got budget constraints and new good ideas. Like new technology we need to be using has to take money from somewhere else. There's no like r and d budget <laugh> in, in politics. I'm curious how you navigated that process with, with cross-screen media, because I imagine you had this, what we call the double sales problem, where you have to educate your customer on the problem of measuring across screens you know, connected TV advertising, streaming and then that you are the one to execute on it.

Michael Beach:

Yeah, I think, you know, one of the areas too, you have this, you know, huge market of, you know, politics which kind of looks at this kind of monolithic area. And then inside that was, you know, video advertising, which is the probably 60% of the budget that goes out is, is spent on that area. And one of the kind of insight that I had personally is, you know, for a number of years came out with, you know, really disruptive offerings, but they were either too hard to integrate into a business or they, they had some negative byproduct right. To a business. And so it might be best for the game. Can you dig and give an example of what that negative byproduct might be? Yeah. Taking on a, if you, if you wanna have a very kind of, you know, sass or database model, then the, you're basically dumping a lot of the risk onto the agency or the consulting firm where they've gotta say, all right, I'm gonna take on this $300,000 risk just using kind of run number and I've gotta figure out then how to break it up and charge my 25 customers to make that money back. Yeah. or hope that they spend enough on media at the end of the election cycle. Yeah, I hope. And so I'm asking them to, to do a commitment two years before that happens, right? And so there's, you know, friction there or it's the fact that maybe you make all of your money today doing one thing. And this is drastically going to, to, you know, so for instance, if you're a TV firm and all of a sudden every, like all the data points to moving money to the digital firm, that's a, that's a zero sum loss for the TV firm, right? Right. And that's why you get this, you know, fighting on these campaigns. So first we had to figure out how to, to, to build a superior product, which I think we had before, but we were kind of disruptive, obviously. The second is world class customer service because this is totally new to everybody because we're either making the TV buyer understand digital video and, and streaming or equally big challenge. We're making the digital firm understand television and media markets and gross rating points and all those things <laugh>. So either one is a totally foreign concept. So we, our team is really important there. And then we've gotta have po positive economics, like it's gotta be something that it's easy for them to adopt and they can make, it's gonna grow their business. Right? Like, cuz a lot of firms will do stuff that's neutral, you know, because they want it, they, they wanna have a superior offering and grow their business. If it's negative, that's really hard for them to, to justify over a long period of time.

Eric Wilson:

Right. Well, I think one of the hard things that, you know, entrepreneurs come into this space and they basically, oh, this software is a service business model where there's just this recurring monthly subscription, which is what we all wanna see as investors is recurring revenue. That's just not how our, our customers operate. It is a, you know, the, the money comes in at the end of the campaign when donors are engaged. And so a lot of people look at this, so it's a multi-billion dollar industry, but actually it's like a multi-billion dollar industry for three or four months. And we've gotta figure out how to, to capture that value essentially 24 months out of the cycle. And that's a, that's a real challenge for the, the, the business model. I wanna dig in an insight you had during a conversation that we participated in was this idea that, you know, if you are going to be disruptive, you need to have a, essentially a broad enough customer basis seems really obvious. But the way you said it was just like, oh yeah, that, that makes sense. You can't just disrupt and have no customers out there.

Michael Beach:

Yeah. I, you gotta find the balance of how can you push the ball forward and as far as possible. Cause there's, you know, tremendous opportunity, obviously in politics there's a, an outcome you're going after and, and if you are pushing solutions and your clients are still losing, then you're, doesn't really matter. You're gonna, like, your business is gonna go away. Or if you are, I mean there's so many ways that can negatively impact your business, but so you gotta figure out what's the way to push the, the business forward as much as possible while also building a sustainable business. I think that's the area that is lacked in politics is that people don't take on any kind of capital risk because it's so risky. And so then everyone ends up where we have bad products, right? And like there's, there's things that, like you and I have probably been looking for for 10, 15 plus years. Crms, things like this that are like recurring conversations every two years and people are like, why does it exist? You're like, cause there's no business model for it, right? Like, it, it, no one in the right mind would take on the, the risk there you, we've gotta change the incentives and then these things will appear. And that is not unique to politics, but there's, it's a probably a double challenge.

Eric Wilson:

So what ideas do you have for, for shifting those incentives where, where something like that might work?

Michael Beach:

Well, I think overall people, some of it you know, is competitive dynamics where everybody, you know, you see a big number of f c report and you assume that everyone's getting rich and that they're, you know, if they, they show 10 million f c report, you assume it's 10 million of like consulting, right? Like, you know, for instance tarry in, in 2000, I think we roughly 135 million from, you know, from the RO campaign, 99% of that was a me was media, right? And so, but people are like, oh, they paid, you know, 135 million to do digital for this campaign. You're like, that's not how it works. Like that's how you look at a TV firms revenue. And so a lot of those competitive dynamics are just people, you know, dumping intel on other firms. But then that kills everyone's idea. Cuz in order to have great products, we have to have great sustainable businesses because we've been working on media optimization. I, that's basically all I've been thinking about since 2013 <laugh>, right? And we're very fortunate of that and the fact that like there aren't many other companies have been able to have that kind of discipline. That's only cuz we've been able to build a good business, right? If we didn't have a good business, that would be a neat thing to do for two years and not to go do something else. Or I'd have to, you know, pay the bills being a general consultant or, or doing another area. And we don't have many of those businesses out there and we need more.

Eric Wilson:

So let let me ask you a little bit of a crystal ball question here. You know, when, when do you think we'll see an election cycle where broadcast TV advertising isn't the number one expense for, for a campaign?

Michael Beach:

Obviously we're talking about campaigns on the, the, the top of the ticket, right? Yeah, that's a great question and I think first it kind of depends on how you classify what's number one, right? So if you're, if you're talking about all digital video and you put streaming in there, this'll happen a lot sooner than if we're just talking about streaming. And so what's really happened is that streaming is, you've got three big buckets on, on the TV screen. You've got broadcast television, you've got cable television, you've got streaming and then you've got on the, what would be the more digital bucket, you know, mobile and desktop video and social video, which are, are huge markets kinda by themselves. But just looking at the TV screen streaming has overtaken cable in terms of reach. And so the easy way to think about that is that the number of households that have, you know, cable's reach is basically capped by the number of people that pay a hundred plus dollars a month for cable tv. And that today is about 70 million households in the US and streaming is kind of blown by that number. Streaming is also passed cable in terms of time spent watching. And so those are two big, big markers that happened last year. In terms of politics, we projected that streaming would overtake cable last cycle. It came in just under, but it was still, you know, monster growth. And really the reason it probably didn't overtake it,

Eric Wilson:

That surprises me by the way. Did it, did I mean, I guess good on us for, for being adaptive or, or was that one side over another <laugh>?

Michael Beach:

Yeah, I, I think it's, I mean everybody wants to get to streaming right now. That's that. And it's also the future of the business. If you are a TV buyer, the, the only way that you can hold onto the media budget long term is to own streaming. Mm-Hmm. And if you're a digital buyer, the only way that you can ever be in charge of the media budget is if you own streaming. And so it is like ground zero now, you know, and we've got this chart that kind of walks through, you know, who wins the streaming budget or who should and I think the TV buyers in politics have probably armed up a lot faster than that because they saw the opportunity cuz they were in the catbird seat, they had the revenue coming in, now we're seeing a rush of digital buyers are like, why are we losing the streaming budget? Because if you have the streaming budget, you're always gonna have more than 50% of the video budget forever. Right? and so if you go look back to the market, so broadcast then is still has mo the a largest amount of reach, though it's declining rapidly. It has the most money and it has the most frequency. So why it has a probably a greater share of the frequency because the ad loads are so much higher. So have you watched an hour of, of broadcast? Mm-Hmm. <affirmative>. Okay. You get 16 minutes of, of ads or you watch an hour of streaming, you get about two minutes of ads because so much of it's still ad free. And so it'll take a while for streaming to overtake broadcast in terms of ad impressions. It'll pass the reach probably as earliest in our most bullish case next year depending on the audience.

Eric Wilson:

So what's the, what's the bucket right now? Just so we have some, some numbers. Is it like 50% broadcast and 25% streaming?

Michael Beach:

25% cable. So 2022 we think it was 51% broadcast, 15% cable 34% digital video. And then if you take out just streaming out of the digital video bucket, it was right around 16% of the total was on streaming. So 30 plus percent of our time is on streaming, but only 16% of the dollars. Again, there's an imbalance of a lot more of it's ad ad supported or ad free. And, and the stuff that does is ad supported is just has fewer minutes of ads. And so, you know, the other kind big picture thing that's happening is every 10% shift in time from linear TV to streaming is an 8% reduction in ad impressions. And this is like a monster trend because every Wall Street projection has the TV market including streaming, growing, you know, 4% a year into the future. But our number of impressions are gonna dramatically decline, which means CPMs have gotta go through the roof and like nobody's prepared for that.

Eric Wilson:

Got it. So we're, we're in this sort of, I don't know that it's an extinction level event, but it's certainly a do or die moment for, for political advertisers it sounds like.

Michael Beach:

Hey, it's a big deal. And so if you look at the, the G O P primary right now, so if you look at the first four states streaming digital video can reach consistently reach 42% of that audience, which is really high. Cause that is the oldest audience you will ever deal with are Republicans in rural areas, the vote in in primaries, and yet that's gotten up to 42%. You know, you're probably in the seventies for a broadcast and you're in the, you know, probably fifties for, for cable roughly. But that's a big jump from a couple years ago. So then the question becomes what share of the frequency should go to each of these? What is the only way to reach one person? Cause that's where a lot of these metrics, you know, you can watch one minute of one N F L game and you're reachable by broadcast or you can watch one minute of TV on Hulu and you're reachable by streaming. It's, the mix is really imp important and hard and that's kinda a core problem that we, we tackle.

Eric Wilson:

You're listening to the Business of Politics Show. I'm speaking with Michael Beach, c e o of cross-screen media about all things CTV and building a successful business in that space. I wanna shift gears now that you were a campaign Cowboy <laugh>, you were the national field director at the R N C, which is like Chief Cowboy of campaign cowboys before you made the transition to entrepreneur first at Target Victory and then at cross screen media. So what would you say to the Michael Beaches of 15 years ago who are thinking about starting something new? You know, I talk to, to folks all the time who, who recognize a problem on, on campaigns and they're, you know, they sort of say, I wish someone would do something about this. Or, you know, kinda like what we were talking about where these problems just keep happening over and over again. What advice do you have for them who are trying to maybe take that leap?

Michael Beach:

I think I was looking at kinda where I was looking at the world in 2008. A small thing I would say is to think bigger about the opportunity. And we were probably thinking really big, but you know, in the end it was probably way too small. But the, the big trend would've been to completely shift faster your mentality on people, right? And so in, in politics, you're two years max, you're working with people as the election approaches, you're like working 20 hours a day and and burning through. A lot of people just don't make it right. And you're you know, you're replacing people, you're layering people. It's just, it's, you gotta get to election day. The biggest impact in my career in the, our companies have been the people that have been there for 10 plus years. You know, and, and the investment and the, that you make in those people and, and really shifting into, you're now in a marathon, not a sprint. And it's hard cuz it's, it's all year round. It's all year round and, and you're gonna work with these same people for hopefully 20 plus years, right? Like I'm, I'm at, I think we've got a couple that were at 12 years now straight. And that is like those people are worth a thousand x. What someone that came in for two years is worth right? And, and cuz it, it compounds and, and their the value they bring and, and the, the trust and all those things. So I think if you look at the really successful companies in politics, in business, I mean they keep a core team that's able to grow into, to new positions around it. I think investing in that earlier would've been smart. Cuz you know, probably could have had people, more people that are around that long. But you know, that length of time,

Eric Wilson:

That's a big mindset shift from the yeah, just sort of churn and burn. And, and with something that we're seeing across the industry, right? Is this, you know, as more money comes into politics, it becomes more of a career. We demand more professionalization. And your, your background is in political, but you've, you've made the shift to corporate and issue advocacy work. What advice would you share for other entrepreneurs who, who are in the political business, but obviously see that that two cycle revenue kind of slump and want to get into something more steady. How do you how do you bridge that gap and, and translate your political experience to new customers?

Michael Beach:

Well I think when you're there, you know, when you're in political and you've got a budget and you've got vendors reporting to you, you know, really learning their economics and understanding the, the companies have been able to sustain a business and grow over time. Obviously they have superior economics and not necessarily falling into the trap of a lot of, again, we talked this earlier, a lot of people like attacking that is a bad thing, right? When you get an opportunity to work with a really strong firm that makes investments in better products and, and, and has people that have been around for a long time and clearly they're doing something right. You learn what they're doing and what, what it would take to do that with one person, two people, three people. Because when you start, let's, no matter what you had on a campaign, you're gonna have to run a real business. Like there is no, the first day you go over and be a consultant and, and I talk to people all the time about this, they all have the exact same problem set. Like the, there's, it's like gravity. And so the people that really paid attention to the business side and were like, wow, I wanna be more like this group. I mean it can be, you know, some, it could be a polling firm or a telemarketing firm or a direct mail firm. It could be something that's like to you, I'd be really boring if you're coming the digital side, but they've figured something out. Because that's not, there's a lot of companies that pop up and go away. There are not a lot of companies that stay and consistently grow over time. And then always evolve their business model cause our space is changing, you know, so quickly. But I think that would be an area that I think I did a pretty good job of when I was on the campaign side. But I, I could have done even better.

Eric Wilson:

So like a number of successful companies in this space and, and something I emphasize to new founders all the time, you, you place an important emphasis on, on creating content both personally and at Cross screen media. I read your newsletter every week. You've got a podcast where you're getting some big names joining. How does this fit into your overall strategy? And and what ways does it contribute to your success? Because I'm, I'm assuming it's successful cuz you keep doing it.

Michael Beach:

Yeah, so we're at this be our 312th week in a row of doing the newsletter. We launched it in early 2017 and the goals have definitely changed back then. I think coming out of the 2016 cycle coming out of, you know target victory, I think we were very aggressive in innovation and marketing where the world was going. Back to the kind of earlier conversation about probably we were very disruptive to a lot of people's business models and had a ton of like, hate right? All the time. So we had trade groups coming after us. We had every, like, we were competing with basically every firm out there and some product we offered. You know, our friend set was, was shrinking and so basically zero sum to attack us. And I think a lot of what we believed and what I believed was completely twist in the market about the, you know, TV advertising or, you know, video or whatever. And so I tried to think, well, what is the best way? Why is this view permeating? Because it's, you know, we like allowed it to and probably, you know, throwing fuel on the fire. And so a newsletter was the easiest way to get, you know, my thoughts out clearly to people. And also I think the second thing was just to think, yeah, I always like to write at Target victory, but we were just very inconsistent putting content out because you always had so many things to do that you would trade off, you know, an hour all I'll get to it tonight, and then you'd go, go. Whereas if I said, I'm gonna put newsletter out every week and I'm no matter what, it's gonna go out and if force forced me to sit down and write it. And so the thing happens and it's really cleared my, the then the next goal was like, it clarified my thinking in the thinking of our company around the market. Cuz we were basically getting tons of feedback every week on what people understood what they're sharing, what their, you know, then you get your list gets big enough and you start to, those analytics actually have an impact. Then you start to get invited to speak and, and do other things around certain topics. And so then it, it's now evolved into a big part of our brand because there's nobody that doesn't understand what we think, right? And it's really hard to attack how we think with falsehoods, right? Like you could say, I disagree with this and there are, there's plenty of room to disagree, but it's really hard to sling mud because we're, we're out in public with what we think and we show our homework. And I think that's really important and, and then it's just clarified our organization's thinking. And so I think it just value, like I, you know, I I read your newsletter, listen to the podcast, like the research that you put out or other people that are our peers put out. It's a lot of work and I think that it's, but it's a tremendous value and then you can build, build upon that. Yeah. I wish more people did that.

Eric Wilson:

Well I, and I, you, you've hit on something that that does not come up a lot when we're talking about this, but it's the organizing your thinking and, and people who listen to this podcast know, I have things that I go back to all the time. Same thing folks in my training, they're probably tired of me saying it over and over again. But those sort of maxims or those principles have to sort of like mining, right? Where you have to keep digging and, and until you really find that, and then it's just so helpful to, to organize your thoughts and it does serve as a forcing function when you're in these kind of chaotic environments.

Michael Beach:

Oh, absolutely. And I, I think it's just yeah, putting your homework out in public, you just, that you have a discipline that you wouldn't have if, if you weren't doing that. And, and that's why most people don't do it. Or they do it a couple times and then they give up. Cause it it's really hard.

Eric Wilson:

It's hard. Yeah. And consistency really is the only secret sauce there. Well, okay, so, so obviously cross screen media's approach to TV video advertising has been disruptive. You disrupted a number of, of incumbents in the industry who are now having to adapt, take a look in your rear view mirror. Where do you see potential disruptions to cross screen coming from? Because my thesis is that that cycle of disruption is just gonna happen faster and faster. You know, this was a, a sea change to probably about 30, 40 years of media buying. I don't think it's gonna be 30 or 40 years before we see a, a disruption. So where, where are you watching your flank?

Michael Beach:

Oh, definitely and I think, you know, there's a kinda a business theory, I think it was initially put out by, you know, Jim Clark, the founder of Sun of Microsystems, but has been shared I think a lot by the folks of Andrew Nortz, you know, bundling and unbundling. And so you ideas that you always have these two trends happy at the same time. And so we cross screen, were an unbundling, right? We're basically taking a item that was part of a big agency, it was one of many services and running a whole business off of that. And that you and I, you know, we had this kind of conversation about other areas that, you know, technologies that could, could unbundle and then, but this bundling, right? So there's an opportunity to offer a superior service by bundling more items together. And that, that is a, I think a competitive threat to us, but also an opportunity for us of, of which, you know, which do we do or do we do? You kinda can't do both at the same time or you get to be mediocre at both. So is it,

Eric Wilson:

It's like shampoo and conditioner can't do both.

Michael Beach:

Absolutely. You know, is, is our, you know, even just a simple thing of is our value proposition, we, you know, you solve the TV thing, which I don't think is gonna be solved for a long time. And then people want other and they want podcasting, the video game, advertising other things in it. Or is it, you go more in the weeds on this one thing. Cause then you've got, you know, you now got planning, buying, and measurement are three things. So we've now bundled those three things together. Is our large enough market to offer any of those three things at the local space today? There's not but 2, 3, 4 years from now, they definitely could. So I think you'll see both those trends continue and you'll see firms that are are successful. I think I always tell people to know what your strategy is and execute that. If you wanna be a bundler, be a bundler. If you wanna be non bundler, be un-bundled, but the death zone is doing both at the same time.

Eric Wilson:

Mm-Hmm. <affirmative>. Well, I want to thank Michael Beach for a great conversation. You can learn more about him in the links in our show notes. Definitely sign up for his newsletter, state of the screens. It's definitely on my weekly must-reads list. If this episode made you a little bit smarter or gave you something to think about, all we ask is that you share it with a friend or colleague, the benefit of horses, that you look smarter in the process. So it's win-win. Please remember to subscribe to The Business of Politics Show wherever you get your podcast. That way you'll never miss an episode. You can also go see previous episodes, sign up for email updates at business of politics podcast.com. With that, we'll say thanks for listening. See you next time.

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