Mike Raffensperger: I hate this artificial delineation between brand marketing and performance marketing. What human being experiences a brand or marketing that way? "Ah, I see their new television campaign is out building their brand attribute and this reason to believe. Interesting, I've formed a more intimate relationship with this company." A little bit later, I'm on Twitter. "Oh, they've got a special offer that is 20 percent off this week. I should click on this and activate." Nobody does that. That's not the way anybody actually has a consumer journey.
Greg Stuart: Welcome to Building Better CMOs, a podcast about how marketers can get smarter and stronger. I am Greg Stuart, CEO of the nonprofit MMA Global. That voice you heard at the top is Mike Raffensperger, who is a chief commercial officer at sports tech and online gambling company, FanDuel. He is also on the board at the MMA, and before he got to FanDuel in 2018, he was the head of marketing at Amazon.
Today on Building Better CMOs, Mike and I are going to talk about the state of sports gambling in the US and how FanDuel became what he calls the most successful second screen experience ever. We're also going to cover why marketing is a fundamental driver of growth, when you should decide to do the opposite of what the numbers are telling you, and why brand marketing is performance marketing, just on a different time scale. This podcast is all about the challenges that marketers face and how do you most effectively drive growth today. Mike Raffensperger from FanDuel is going to tell us right after this.
Mike Raffensperger, so great to see you today. I'm glad you could join me here on Building Better CMOs.
MR: Greg, it's great to see you.
GS: Let's just jump right in here because I think this will be fun. So listen, Mike's with FanDuel, if people didn't sort of read the blurb on the cover or whatever. So in the episode, we'll talk a bit more about FanDuel, but Mike, I think I could go right to the point. This is a show for CMOs. You're actually not titled CMO. You were, but you're not titled currently CMO. What is your current title?
MR: My current title is chief commercial officer. The role I had prior to this at FanDuel was chief marketing officer, and so marketing is under my remit. So marketing is a part of what I oversee. I also see sort of all of our commercial P&Ls, which drive the revenue line of our business. We also kind of have a media entity that runs a number of different channels, including a linear television channel that's under me. So my job essentially is top line revenue and how we get there. Said colloquially, I'm in charge of making sure we make enough money while not spending too much throughout the process, which in my category tends to be a little bit of a death trick.
GS: Okay, well we're going to get into some more of that then, that'll be good. So it's not just that you wanted to set a tone that the head of marketing needs to be commercially oriented, although I know that's a point for you. You've incorporated some new responsibilities that that title supports, I guess, is that right?
MR: That's right, and we'll get into it I'm sure, but yes, I'm a huge philosophical believer that marketing is not a cost center. It is a growth driver and fundamentally, if you're going to believe that, also need to take the accountability of that growth. So it helps you really earn that full seat at the table and understand the true drivers of the P&L, and so yes, I did take on that remit.
GS: I think that's why we got together because I heard that in the conversation you and I initially had, and by the way, just for the audience, Mike does sit on the board of the MMA, but that's the thematic of everything the MMA does. What are we doing to make marketing better? What are we doing to build better CMOs? So the point of the podcast, the point of MMA Global. So let's talk a little bit about the category you're in because not everybody knows your category, so sports betting. Let's talk about sort of what's happened with FanDuel. There's at least one other big-ish competitor out there. Can you give some people an orientation to what the business and what's changed in the world that made FanDuel possible?
MR: Sure. So we are the biggest online real money gaming company in the United States. So we run online sports betting, fantasy sports, casino, things like blackjack, slots. Really the seminal event was about five years ago, the Supreme Court made a decision that allowed states to regulate and tax online wagering, online sports betting of their own accord. Previously that was illegal across the United States except in Nevada. For those who maybe don't live in a sports betting state or don't follow the sports industry quite as closely, it's kind of similar to the repeal of prohibition.
There just are very, very few instances in history where a huge formerly gray or black market went white. Just to give you a sense, our projections are at maturity, the industry will be kind of generating a TAM of about $40 billion, and five years ago that number was essentially zero. So the speed, the intensity of the category growth is really incredible. Again, it stems from the fact that, we can speak plainly, people were betting prior to that Supreme Court decision, and so now that they have legal, safe, regulated, fun, innovative options like FanDuel has really spurred a tremendous amount of market adoption. So I've been busy.
GS: How many states are legal today?
MR: There are currently a little over 30 states that have some form of legal sports betting. The real consumer demand is in online, however, and that is only in 17 states. So we're still in a little, I think it's something about 35 percent of the population of the country lives in an online legal state. There's still more to go than there has been to date.
GS: What are the biggest states? Just give me like top two, three, just to have a sense.
MR: New York's by far the biggest. After that probably Pennsylvania, Michigan, New Jersey, Virginia.
GS: Is this in any way tied to this sort of proliferation of casinos across the country, tied to each other or no, nothing related? Societal change, maybe that's it?
MR: It's related loosely. What I'd say is historically land-based casinos, the MGMs, the Caesars of the world, have been a little reticent about online gambling. I think understandably there was a worry that that might cannibalize their land-based brick-and-mortar business. Really over the past few years that has flipped on its head. I think they've found, perhaps unintuitively, but it's actually good for their brick-and-mortar business, and independently they're also participating in the online marketplace and interested in the revenues associated with that. So it is certainly separate and there are still interests that FanDuel doesn't participate in, but the land-based companies do in opening physical casinos. Generally speaking, though, I think the industry, the gaming industry at large is fairly aligned that there's a desire to continue to legislate, regulate, and open new legal online markets.
GS: So five years ago was kind of the demarcation. When was FanDuel actually started and what was its story of getting going? A couple founders, VC backed, or come out of a bigger company? How did it get going?
MR: No, this was over 10 years ago, I think closer to 15, few founders I think connected at South by Southwest and had an idea of online predictive games. I think it actually started around politics. It evolved pretty quickly towards sports, and I think there was this observation that people really love fantasy sports, but up until that point it had been sort of a season-long game. Football season kicks off and you draft your team alongside some friends and you kind of got to wait for the whole season—at that time 16, now 17 weeks—to end before there was a conclusion to the game. There was a winner and a loser and it was fun, but it was a very long time scale.
I think the insight was with daily fantasy sports, which is what FanDuel pioneered and was the first to create, was that you could have those season contests, that draft experience and that competitive nature, and you can actually do that on individual game days or on a weekly basis, in the NFL's example for every Sunday. So we sort of put a transaction layer on that, help manage those prize pools, and pulled people together into all sorts of new kinds of fantasy contests, and FanDuel was the first to do that.
GS: Got it, got it, got it. So where's the business today? If it's going to get to $40 billion in revenue eventually, where is it today? Is there any good figures for that?
MR: Yeah, I mean to be clear, it's a $40 billion market TAM at maturity. The business is in a really good place. Obviously won't get into specific financials, but suffice it to say FanDuel is the number one player in the market. We operate somewhere between 40 percent and 50 percent market share in sports betting. That's about 2x our next closest competitor. So we're really proud of the leadership position we have here, not just commercially, although obviously that's a part of it, but also how we're trying to do the right thing by partnering with leagues and media companies to evolve this new market that is growing very quickly as I suggested, and do it in the right way.
We also take things like responsible gaming and our part in making sure our platform is well managed and that we're putting the right protections in place for our customers, our players, our communities, that we're investing in these topics and that we're also really proud to be leading in that space. We were the first to do a number of different initiatives on that front and thinking about the long-term health of this business and how it interplays with sports at large.
GS: Listen, sports is kind of an interesting business in the last few years as consumers have migrated from, there's been a fair amount of cord cutting. They moved from sort of linear and then, especially with the pandemic now, streaming just got all lit up. Everybody had a product at what seemed to be just the perfect time to launch a new streaming service. This is my impression. In the world of perfect timing, it was perfect timing it seemed, but sports was always the thing that says, hey, you can't get live sports any place else. Sports media is now in another iteration of change. Can you talk a little bit what's going on in sports as it pertains to TV entertainment now?
MR: I think that media is certainly going through a period of change. As you said, more and more viewers are shifting to streaming. Sports is going through also a period of change somewhat through that streaming transition and also just younger people consuming sports in different ways, some of which being the full game, some of which being more bite-sized, snack-sized highlights, et cetera, the YouTubeification of viewership. So I think at all of it FanDuel's in a really interesting place where fundamentally one of the value ways that any company drives is sort of the attention that it has.
I think that is one thing that FanDuel has found a really interesting trick to. In some ways, one of my favorite descriptions of FanDuel is not the biggest online real money gaming company in the world, it's one of the most successful second screen experiences in the world. What I mean by that is second screen in the media business is really meaning your phone. So you're sitting down, you're watching TV, and you're also on your phone doing something. A lot of companies have tried to figure how to really crack or unlock that dual, two-screen viewing experiences. There's not many that have been successful. I think Twitter is one of those companies. I think FanDuel is one of the others.
GS: Interesting. What's happening, though, to sports generally? I mean the sports leagues still as dominant as they're ever going to be? Live sports still getting a fair amount of viewing to it? Streaming services come in and bought a lot of rights. I don't follow that as closely, I'm sure you do, but it's been a lot of movement there. And then I think there's also some stuff going on with regional sports, isn't there?
MR: There is. So famously, Amazon has gotten involved in the NFL, they're now the exclusive home of Thursday Night Football, and it's the first time the NFL has moved to a streaming platform in that way. Similarly, Google just purchased the Sunday Ticket rights, which is sort of a premium subscription product. Previously had been with DirecTV/AT&T. I think you see more and more of carving of rights, which is something sports leagues have often done across multiple companies, and the streaming players becoming really meaningful at the table with more traditional carriers like the broadcast networks or cable networks like Turner Sports. There's this other overlay, which is national versus regional rights. You think about sports like basketball and the NBA, baseball, the MLB, they have those national packages that air across different cable and broadcast networks, but I think something like 90 percent of the viewership actually happens regionally.
So there's only a handful of national games a week, but they play a lot more, and those are broadcast on these regional sports networks. The challenge has been, along with the whole industry, there's cord cutting going on, meaning less and less people are paying for traditional MVPD, subscription pay television services. Those regional sports networks, which previously were part and parcel of that bundle, are getting really squeezed to the point that Sinclair Broadcasting, which is a major holder of a number of regional sports networks around the country, actually recently filed for bankruptcy.
GS: Oh my.
MR: Part of that driving force is the challenge, real challenge, the regional sports model is undergoing. And so it's an unbelievably dynamic time I think for regional sports right now, and I think the leagues, the NBA and the MLB in particular, are thinking about how do they do right by their fans, right by the viewers, keeping that product in market, but also sort of re-envisioning. As people are moving more and more viewers to digital to streaming, what is the right way they do this, and notably what's hard for them is how do they do this on a market-by-market basis because it's not all the markets all at once. Some markets are in healthier places than others, and so it becomes quite challenging and I think it's a really, really dynamic and interesting time for the sports media business at large.
GS: Is there a point in time you look down the road, you think that FanDuel could pick up some TV rights?
MR: FanDuel getting in the mix with Fox and CBS and Amazon and Apple, I got some coin to spend, but I don't know that I got that kind of coin. And I'm also not sure if FanDuel is really the right exact home for rights in that regard. Now we happen to have a really large digital regionally driven business and with relationships with millions of sports fans around the country, I think we're a great potential partner of leagues, of media companies, a way of helping connect the discovery problem that I talked about with different regions, different markets. So I think there's a role to play, cutting a billion-dollar check for NBA rights probably not. That said, we are an active player in live rights. Fun fact about FanDuel, we air more live sports than any other company in America.
GS: How does that happen?
MR: The overwhelming majority of that is horse racing.
MR: I operate a linear television channel as well as a digital media platform called FanDuel TV, and on that, we have over 24 hours a day of live sports, horse racing from all over the country, the best domestic tracks all over America. We've also gone out and acquired what I will lovingly call under-loved or under-supported sports, so international basketball, Taiwanese mixed martial arts, international soccer, some of the longer tail things, darts, pickleball. We're working through some different deals, but suffice it to say these are places that have some trouble in a traditional broadcast environment.
It's going to be hard for a big broadcast network to get the mass audience around these things it would need for the advertising affiliate model to prove out a business case. For me, where I'm able to introduce great watch and wager opportunities to my audience, I can do that. And I can do that in a way that is really a vested interest between the league and an operator like me. So we've gone out and acquired over 3,000 hours of those live sports, sort of like "other" category, and I think we've seen some really interesting engagement from our audiences where we're trialing new things like that. So anyways, the short answer to your question is I'm not going to compete for NFL rights anytime soon.
MR: But maybe more deeper international football markets, who knows?
GS: Right, you might incrementalize your way into at least some of that as you have already. Very interesting. Hey, last one just kind of occurred to me, interesting. There's a lot of attention being given certainly to college sports and the players actually receiving some of the compensation that the universities were getting. You or FanDuel have a perspective on some of those changes going on in college sports?
MR: You're referring to kind of the name image likeness, NIL deals, with student athletes being able to be compensated? Yeah. Look, I'll put my FanDuel hat on and then I'll give you more of my sports fan personal answer. With the FanDuel hat on, I think that college athletics are a huge part of the adult consumption of sports across America and we have a thriving sports betting business around NCAA, basketball, football on down the list. Actually, Women's March Madness did particularly well this year in many multiples in terms of year-on-year growth from a betting activity. That said, we're very committed to not partnering with athletic departments themselves. FanDuel's not an appropriate company to do name and image likeness deals with college athletes, just given the nature of what we do, and frankly, those athletes aren't 21 years of age, which is what you need to be to gamble.
So we've made the commitment, we don't advertise on college campuses, we don't market to college students. We're not going to do NIL deals with students, and that's just sort of the right way to run our business. Taking the FanDuel hat off, personally, I think college athletics is in an interesting space and the reality is it's a big business. It's a multibillion-dollar industry, and I understand they're students and there are certain aspects of what you want to keep a non-professional environment, but I think it's good the kids get a bite at the pie. So on a personal level, I would be a fan.
GS: Let's jump into the main topic here. Okay, so listen, you get it, you sit on the board of the MMA. MMA is all about unlocking the power of marketing. So I think it would be good to hear from you, just kind of let's dig in. What do you think that marketing and/or CMOs, marketers might not necessarily understand? Part of that might get into your unique perspective on the world and you being successful, as a now formerly CMO but still running marketing. What do you think we don't really fully get?
MR: It's hard to paint with a broad brush. I think every CMO, every company is a little bit different, but generally, it's referencing back what I said earlier. Marketing is not a cost center and it's not just a line in the P&L between revenue and earnings. It is a fundamental driver of growth, and marketing dollars are investments. I think yes, we talk about ROI, and again, every industry is different and there's different levels of fidelity on how easy it is to measure that, but gone are the days of make a really clever creative suite that is executed with a great media agency buy, and it's about pricing and buying certain demographics and penetration and reach and frequency.
Those are technicals, they're not marketing. So to truly have a senior role in shaping the outcome of an enterprise, there needs to be an accountability. And it is, in my humble view, the key commercial driver of an enterprise, and really great marketing is the difference between the number one and number two, three, four-plus player. The CMO's job is not to be the best marketeer at the company. The CMO's job is to be a member of the senior leadership team with accountability for driving growth of the enterprise.
GS: So Mike, this is the issue, I've told this story a lot. There was a number of years ago where I sat with the CMOs of some of the biggest companies in the closed door session. Just to name names, because none of these people are in their jobs right now, so I could do that, but it was the CMO of General Motors and T-Mobile and Duncan Brands was there and Chobani, a few others. It was interesting, we asked them a question, we said, what is the role of marketing? This is probably like five, six years ago. I don't remember any of them really saying growth. What was interesting about that conversation is that everybody had a different answer. Some said it was the voice of the customer, some said it was customer experience, some said it was protecting the brand, but there wasn't a focus. It seems like there is a big new focus in marketing around the orientations of growth. Does that feel right to you? Think it's changed?
MR: I don't think there's any role in the C-suite that has undergone more change in the last 20 years than the CMO. I do fundamentally think 20 years ago, steward of the brand, voice, insight of the customer, more functional. It was a functional definition and I just think it has evolved. Some of it is how much the function has evolved. It's not just creative and insight and media buying. You have to be a technologist to really understand the depth of digital technology, ad tech, MarTech, et cetera. Great marketing that doesn't live up to the product or the customer experience is crap, and so you really need to be able to influence that, understand the full funnel CX of what somebody is.
You need to be a great partner with finance and forecasting, and what is the shape of things? What are our assumptions, risks, and opportunities? There's just a tremendously broad collection of work and knowledge that needs to be brought to the role. Again, fundamentally, the CEO isn't really looking for great marketing. He's looking or she's looking for bigger business, and he needs people on the leadership team to take accountability for where that's going to come from. As I look at a traditional C-suite, there's no better person than the CMO to take that accountability.
GS: Mike, it's funny you say that. There's actually an interesting study out there by—I know Kim Whitler worked on, I'm pretty sure Neil Morgan, Dr. Neil Morgan was also involved in this. So Dr. Kim Whitler, Dr. Neil Morgan, and their analysis was looking at boards of directors that had CMOs on them or marketing people on them versus those who didn't, and they found that those with marketing people versus the usual finance, legal kind of orientation, had 3 percent higher growth than those companies who didn't have a marketer on the board. So it kind of gets at that, right? Marketers are about growth. They're the ones who say I get all the risk assessment, everybody, but what do we do in the growth of business?
MR: I'll paint with an unfair brush because I've worked with plenty of incredibly talented CFOs that are also really growth oriented, but we can speak plainly: often a more risk-sensitive profile. And you can also manage a business, whether it's legal risk mitigation or financial risk mitigation or how does it perfectly fit on an Excel sheet, and that doesn't often create the space for growth conversations. So again, I just think the nature of where marketing sits in the organization—which does, by the way, have huge voice and role and accountability to play in the things that you mentioned—a brand is an asset. By the way, it's a long-term growth asset, and your customers and understanding what they really want, they really need are an incredible engine of growth. So I won't belabor the point other than to say happy to see the results of that study and my fellow marketing professionals driving positive outcomes in their board seats.
GS: Correct me if I'm wrong, but you actually started out, I think you got a business degree, business undergrad degree, if I remember right? Then you wanted to make TV shows and movies, is that right?
MR: I did. My undergrad was in business administration and did a minor in broadcasting communications. I moved to New York over 20 years ago and yeah, I thought I was going to make movies and television. Writing and producing was sort of the loose vision. I immediately sold out because that is a very difficult path, and I pivoted into marketing and advertising pretty quickly after.
GS: I guess you started with an orientation towards—I would say the content creation seems to not capture it—but in an orientation to create film and other experiences for people, but you have such a business orientation to the way you talk about it. I almost would've thought you'd walked in with an MBA in the way you're coming at this or a background in economics. Where did you get your commercial orientation or such a significant commercial orientation?
MR: I did do a residency at Columbia. It was part of the journalism school, but it was specifically a business residency. Looking at the economics of the media business at the time. Again, huge disruption, that newspaper and print business not being what it once was, and a lot of that was around the evolution of that, what are new business models, how can you do it? Some of that I think was, first and foremost, just a really rewarding educational experience. Also help round out some of my thinking. I'd also just say I've got a creative brain. Yes, I like content creation, but even then producing was an interest of mine, and producing is a lot about dollars and cents and making sure the budget pans out, and so I humbly think one of my strengths are that I can pivot pretty well between left and right brain activities.
I'm comfortable talking about creative concepts and storytelling and brand building, and I'm equally, maybe even more comfortable on performance. Some of that also just comes as I moved out of agency world, I went in-house at DirecTV in a very performance marketing and digital strategy oriented role, and it was really about, okay, you've got a sign-up funnel, how many people started today? How many people got part of the way through? How many people got the whole way through? Once they got the whole way through, what is the LTV prediction of that customer? So just a real good grounding in the unit economics of what business looks like and that's sort of grown from there.
GS: Got it, got it, got it. So what's your orientations you work with your team then around producing growth? Talk me through a little bit the strategies you have, the focus you try to put on things, and what you suggest to the teams in terms of where they put their focus to produce this commercial orientation to marketing. I mean you could just talk in general, but if you think also there's some of it that you think is really different from what you hear from other CMOs, that'd be interesting to me, too.
MR: Yeah, it's kind of a huge question, Greg, right?
GS: It is. That was a big one. I should have parsed that down for you. I thought about that. Go ahead.
MR: No, I mean, I don't have a silver bullet, like, follow these five simple steps to reinvigorate your marketing team to drive enterprise growth. It's part culture, it's part orientation. The boring answers are understand key metrics, North Star, orient the team towards those, performance management routines of when are you looking at it? When are we taking actions and how? I think a test and learn, not just culture but rigorous road map of what that looks like. I use this language a lot. We are stewards of the company's resources and the expectation is we are stewarding that in a way that is returning profitably for the company.
So whether that's a media dollar that you can understand the cost per action that it drove or whether that's a creative approach that maybe, hey, we're going to AB test and understand which has the best outcome of this. Whether it's a sign-up flow that, again, you're monitoring and managing and AB testing on a regular basis. It's, I just think, a culture probably of the way that you orient towards the role of the investments that you're making as a company. I'm not sure that's a brilliantly paint by numbers example that your listeners can follow, but it's sort of in the DNA of the culture and the team that we have at FanDuel.
GS: How do you integrate then the building of a brand into all that? How do you and the team sort of conceptualize that? Because FanDuel is a pretty strong brand. I mean it's not like that's been ignored.
MR: Of course not, because I hate, hate and have fought against this artificial delineation between brand marketing and performance marketing, and I know people that even split their budgets up, right? Like, "Oh, here's the pot of money that's brand, and we'll measure that based on YouGov surveys. And then here's all the actual hardworking dollars that we'll measure on performance and digital media and click the rates and dah, dah, dah." What human being experiences a brand or marketing that way. "Ah, I see their new television campaign is out building their brand attribute and this reason to believe. Interesting. I've formed a more intimate relationship with this company." A little bit later on, I'm on Twitter. "Oh, they've got a special offer that is 20 percent off this week, I should click on this and activate." Nobody does that. That's not the way anybody actually has a consumer journey.
So I hate splitting up the budgets, and I'm a big believer that brand marketing—which I don't even like the term—but brand marketing is performance marketing over a longer period of time. So I recognize that there are some campaigns, efforts, initiatives that we expect to have a shorter return profile and there are others that we have a longer return profile. I'm also generally a believer that even the most promotional newsletter, circular, starburst, 25 percent off today only, that has a role to play in building the brand, too. And vice versa, super expensive, star-studded sponsored Super Bowl commercials has a role in driving performance. I like to think of it more of a timeline of return and it's portfolio theory, much like you have an investment portfolio of stocks, bonds, equity, alternative. All of them have different risk and different potential reward, different time frames of return. I think you should be thinking about marketing investments in a very similar way.
GS: Can you share the brand strategy for FanDuel? What is the positioning of the business? I just want to anchor towards that.
MR: Look, I won't get into every aspect of the architecture, but fundamentally a trusting, welcoming, professional place. You think about my category, it has historically been literally bookies, guys on the corner, or gray market operations run out of Antigua that'll only take Bitcoin that you may never get your money back. Trust matters a lot to my category. Professionalism, doing this in a way that I think is building an approachable brand for more people most of the time. I think FanDuel perhaps, humbly, more than others in the category, has built a brand that is welcoming to a more diverse set of people, and I think we're seeing that again in the numbers of what we're commanding with market share and the kinds of people who are trialing our product.
GS: Okay, let's take a quick break. We'll be right back after this with Mike Raffensperger.