How to make Real Madrid your first client as a freshly founded startup? Revolutionizing digital sponsorship metrics in Spain, HorizM has found itself at the top almost immediately, as their service has responded to a long-standing market niche. Founder Pedro Mestriner combines his European sports and American tech market experience with his colleagues to create an algorithm for monitoring the effectiveness of branded content-based sponsorship collaborations, which is still evolving with artificial intelligence and provides an increasingly accurate picture of returns. We met Pedro at the World Football Summit online conference, and in our exclusive interview he shared inspiring ideas and methods with us from the business side of sports, in addition to the unusual history of HorizM.
Let us start with a snapshot! How is the pandemic affecting the daily lives of Spaniards now?
I live next to Barcelona, and unfortunately I have to say that the situation is far from ideal. We are lucky to work in the technology industry, but unfortunately a large part of the population has been hit very hard by this crisis. More than 30% of the Spanish economy’s income depends on tourism, a sector that has been completely shattered by the pandemic. The east and south coasts are in an even worse position, since it means the primary source of income for every second person there. They usually generate their annual salary in the 3-4 months of the summer. Many people lost a complete season and we can only hope that 2021 will be better.
HorizM’s success, on the other hand, has proven that it can still be worth looking for success in the innovation market. How did the idea come about, what gave you the inspiration to get started?
Me and my business partner José David Poveda both come from the world of sport, so we know the industry, and understood what kind of problems the ecosystem is struggling with. A few years ago, when I was responsible for selling FC Barcelona’s digital sponsorship platforms, I failed tremendously. Maybe I should not have taken on the project, as the market itself was not ready for it yet. Even though the idea was great, we could not convince the brands, sponsors at that time to invest resources in digital advertising and marketing solutions. As we were not able to show tangible results, after a while the management’s patience ran out. Target revenues were already achieved with traditional sponsorship solutions. Less work, more revenue. The decision-makers thought that if they generate the same amount of money at the end of the day, it is needless to worry about innovation. We, experts in our field, have of course already seen the potential and trends, we just did not have the right instruments. We couldn’t tell exactly how much value we could create for our partners with our work.
If I am not mistaken, you are thinking primarily of actual facts and pricing.
Yes. We struggled with a lot of dilemmas in this area. How do you set the price of digital content? How do you calculate the return? That was the biggest problem. Moreover, traditional sponsorship is a huge business. If it is relatively easy for a club or an association to make a business for 50 million euros, you will not be interested in a few hundred thousand extras. Because that would require resources: you have to develop it, assign metrics, entrust technology professionals, and then sell it all in the market. Back then, clubs and brands did not want to bother with all of this. That is why I left and moved to the United States, where I continued to work on the scalability of large tech companies and the sale of their services.
What was your first experience when you returned to Europe?
Nothing has changed. I came back to Europe three years ago and worked at the volleyball association as a consultant on the development and monetization of digital assets. Unfortunately, I faced the same problems as I had at Barca: traditional sponsorship dominated the market and we still did not have a winning card in our hands that could have strengthened the positioning of digital platforms. That is why me and my co-founder and friend José David have decided to start solving some problems in the market ourselves.
“Like it or not, specific numbers need to be generated”
What was your approach for starting the work, and where did you find the niche?
Pricing strategy was the key. Somehow we had to find a solution to determine the exact value of digital assets and collaborations. We thought about using technology from the beginning: in a few months, we developed an algorithm that follows digital content-based sponsorship in real time. It is important to note that this is not the same as GumGum, Blickfire or Hookit. Their system focuses on the logo and other visual elements, counts the media appearances thus obtained, and then prepares a long report at the end. Same as what the sales house partners of TV companies do. We, in turn, measure the success of content, much faster, more dynamically. This is because brands now demand instant feedback on their campaigns so they can continually optimize their investments. They are used to the extra-accurate targeting and performance metrics provided by Facebook. If they spend money there, they know exactly the number of clicks, the achievement, the impression. Brands became very data oriented. There is a growing pressure on marketing and sales professionals working for clubs and associations. Like it or not, they have to produce numbers. If they get a million dollars from a brand, a hundred-page report sent in a month will no longer be enough.
At the same time, can this mean that sponsors, who traditionally spend a lot, and usually appear on TV spots and billboards, are increasingly shifting towards digital platforms?
Let’s look at the example of Coca-Cola. Four billion dollars are spent on marketing each year. They no longer need to raise awareness, they are long beyond that. They need to be able to accurately measure how many people their message has reached through those who they sponsor, how many have clicked on their site, or done anything specific as a result of the campaign. In short, they need ACTION. Preferably one that produces measurable results. This is the change that is happening very fast now across the industry.
„We are extremely hardworking at Real”
So the algorithm was ready and the environment was starting to change in a favorable direction as well. When did you push the button to create a company from the idea?
HorizM was founded in late 2019, just a few months after we started developing our algorithm. Our first client was Real Madrid.
Excuse me, did I hear it right, you started with Real right away?
Yes, and it was a completely conscious strategy on our part. The years spent in sports have shown that first we need to convince the big ones about the viability of the technology, because if something works for them, it will work for everyone afterwards. And I hardly need to emphasize how much of an advantage it represented as a sporttech startup in terms of customer acquisition that we already work with Real.
Most sporttech companies start from the bottom up and reach the top of the pyramid once they have matured for this challenge, both organisationally and technologically, over the years.
Yes, and unfortunately only very few manage to walk this path. It would have been very difficult to knock on Real Madrid or FC Barcelona with only small clients before, as we wouldn’t have been able to provide an exact, immediate solution to their problem. However, Real had the opportunity to completely customize our service for their needs and develop our technology with them. Of course, this put an extra burden on us, being extremely hardworking, but at the same time forcing us to develop the best possible service before entering the market. We were able to solve most of Real’s digital sponsorship problems, and our work paid off: with all the other clients, we no longer faced a challenge that would have been greater than what we experienced with our first partner as a start-up.
But it can also be a disadvantage, as smaller clubs may think they can’t afford such a service or aren’t mature enough for using it yet.
Yes, this is a big challenge and we need to overcome this prejudice. We need to prove that what we offer is independent of their maturity and size. Real Madrid has 300 million followers and is a global brand. Girondins de Bordeaux has 1 million followers. The former has a strong fan club in more than 20 countries, while 90% of Bordeaux fans are French and 10% are North African. Yet we work with both, since the machine learning process and the algorithm are the same.
We have already discussed the general impact on the market, but the specifics are also interesting. How much did the pandemic accelerate the decision-making process and sales cycle?
As I mentioned, we started with Real in November 2019. At that time, everything was fine in Europe. They liked the concept, in fact, we agreed relatively quickly regardless of the pandemic and started to work. Then COVID-19 hit in March. The pandemic had two fundamental effects on us. The negative hit us financially. We were close to concluding a larger venture capital investment negotiation, but we were only able to resolve it with a six-month delay, which upset our plans a bit. The positive was clearly in the acceleration of market changes. It empowered us with tremendous credibility that what we had previously predicted for our prospective clients in our pitch for 2022-2023, has become a reality within a few months.
One of the biggest problems for growing startups is the availability of human resources. How do you manage this area, how attractive are you for professionals on the market?
We try to surround ourselves with colleagues who are the best in their field. From the very beginning, we were able to expand our team with great professionals. We were joined, for example, by Luis Viveiros, an experienced strategist who worked for Boston Consulting Group in New York and then headed the sports business at Nielsen. Some have also come over from other digital metrics providers, so I do not think we have a problem with that so far.
By the way, how do you see yourself: as a technology startup, a digital marketing agency, or as a service partner? Which is your path?
We are clearly a technology company, not an agency. We have country managers, we give advice, but we do not go hand in hand with the client. We focus on technology. Then clubs, associations, and other clients have their own partners to take advantage of the potential of our technology. Some companies see us as competitors, while others see us as an opportunity to make their own work easier. There are sports agencies that work for three weeks on a problem that we are able to solve with a few clicks – they now have a problem with how to explain to their client the human resources and time required.
As they are the ones most in contact with sponsors, significant progress is expected in this area.
That’s right, the next step after clubs and associations is to convince brands. They have the capital, and they may be able to invest a lot in digital sponsorship. For many customers, the sponsor is the real “driver” when it comes to innovation. If Coca-Cola gives money to a club, event organizer or association, digital campaigns need to be implemented very transparently. We can track live and verify the results of these collaborations with data. We will tell you if the amount invested per 100 units brings back 100, falls short of expectations, or exceeds. The key word is transparency. Brands and sponsors expect more and more transparency from rights holders.
But not everyone is sponsored by Coca-Cola. What about the smaller ones, what opportunities can this rapid change create for them?
The good news is that most rights holders are fully aware of this. The big ones are already heading in this direction and we are trying to support the medium and small sized ones as well. For example, we have a Brazilian client, a smaller club that handles data very sophistically. They maintain their own team for this purpose, they are professional in this area. They are a great example of how data awareness and the value communication built on it is accessible to anyone.
„Innovation has, and always had enemies”
However, one great example does not bring the tipping point alone.
Indeed, the whole situation is really not that simple. Innovation has, and always had enemies. Many professionals currently in decision-making positions do not have the knowledge needed for this digital transformation. They sell tradition, build everything on relationships, and sell sponsorship with a traditional approach. However, digital assets are completely transparent. They require a fresh approach and their success may be evaluated quite transparently. Brands globally now spend 55% of their advertising through digital channels. The trouble is that only 9% of sponsorship ads are digital, meaning 91% of them still flow on traditional interfaces. This is a gap that will sooner or later disappear, and we are working to make it happen as soon as possible. This is the vision of HorizM. The pandemic has accelerated everything, nevertheless we still have a long way to go.
How technologically complex is this implementation process?
The technology and the process is relatively simple. The systems can be connected in 24 hours. After connecting your social media accounts, we will retrieve data from the last two years to our system – except for Instagram stories, as they are deleted after 30 days in case of most profiles. For larger partners, it takes 48 hours, but clubs such as Real Madrid or Barcelona post 45,000 entries a year, so it’s understandable if the system takes its time processing those. At the same time, a process begins where we analyze the content and the strategy built on it.
What methods are used for measurement?
We can measure hashtags, keywords, or any tag, but we do not deal with the appearance of the logo. So we’re not focusing on the overall brand presence, but rather on the tangible indicators that have long been known in digital marketing. These include CPE [cost per engagement], CPM [cost per mille], and so on. What is even more unique is that we also measure this in a geolocation way, as the CPM indicator is not the same in India, US, Hungary or Brazil. We are looking at a total of 66 markets and we will now be expanding with a client who also wants to monitor Mongolia.
Data is one thing, another is interpretation. What type of professional feedback do you provide after the results are obtained?
We examine a total of 20-25 general content packages. If these have been treated separately so far, it is generally recommended that they should be formed into groups and recommended to sponsors as such. This way, we are not only able to measure the performance so far, but also open new gates. They can create a new revenue channel.
So you increase their ability to monetize, based on data.
Exactly, but for that you also need to know what has been monetized so far. If you could only sell 5% of your assets so far, you’ve missed a lot of opportunities. Of course, 100% can be very difficult to achieve at once, but you have to strive for it. We help with that too. We educate clubs and associations about what content is worth making first and foremost, and then we price it with them, take it to the market, and try to sell it together, or they do it themselves, based on our data.
“Clubs with our help can now present to the sponsor that how much ROI they can expect exactly”
Can you give a specific example of this process?
One great example is Real Madrid: their Instagram and Twitter posts about the outcome of their matches are sponsored by Emirates. This is one of the simplest examples of branded content. Its primarily goal is not direct sales, rather building image and awareness. The brand is connected to a digital content that generates a lot of appearance and to a partner with whom the recipients associate positive feelings. But that alone is not enough for monetization. The question is, how can they sell all this as a value to the sponsor, partner? This requires data, reach, statistics, and the estimated return based on it.
So in the case of HorizM, we can actually talk about a business intelligence service.
Yes. Monetization is first, but it also includes all the beauties of business intelligence. This already leads to the other side of our service: since we can analyze all hashtagged content, clubs will see which materials worked well and which ones worked less. They can go to the sponsor to tell them in advance about how much they can expect from a branded content-based collaboration. The most beautiful part is that this tool will not actually be a cost to clubs, but a revenue. If they invest in making their entire digital sponsorship environment transparent, they can negotiate a much more concrete return with their partners. If they’ve been able to bring in $ 1 million from digital content in a year so far, thanks to our system, ratings, and forecasting, that number could multiply as the content becomes scalable to either new or existing sponsors. But it works regardless of size: a smaller club, who so far only had marginal revenue from this source, can build a whole new revenue channel, thanks to transparent measurements.
As other revenue channels – ticket sales, VIP service, etc. – disappeared, this opportunity can be communicated well to senior management as well.
They had to become more open. These digital interfaces were already available to them, but as my own example showed, leaders did not believe in that. If you generate 100 units of revenue through traditional, already-used surfaces, and you are not under pressure from the sponsor, no one will make efforts for an additional 4-5 units, for which you need to innovate and invest. That is what has changed a lot now. In many places, even revenues from television broadcasts have plummeted. The role of digital assets has increased. It is no longer just about entertaining fans, but all content has value. PWC prepared a very comprehensive report on the global sports market, interviewing nearly a thousand decision makers, which clearly saw the key to growth in the digital field. It became number one on the priority list, while so far it has usually been in the fourth or fifth place.
Previously treated as an extra, unexpected revenue, but now it is a mandatory item. With a little exaggeration, it doesn’t matter if it brings in a dollar plus or a million – as long as the income flows. It’s not just because of the pandemic, all the trends go in this direction. The audience interested in sports is global. Even a small club can build up a fan base of up to a million, if they are clever. In the digital space, much more people can be reached, and much faster than offline. It also pays off sooner in resources if clubs focus on this area. Either it is software development, or marketing, it is a valuable investment, not a waste of money, because the future is headed this way.
Growth is the goal, but not at all costs
What will be the next step in development?
We try to keep these in line and stay focused on the main goal, which is GROWTH. Reaching new markets, appearing in different countries which are interesting for us. We are currently present in 11-12 countries, and we plan to expand further this year. The second is technological development. A couple of new modules will arrive in the next few months. The most exciting of these is benchmarking. We will be able to make comparative reports and analyzes from our own ecosystem, which will also create value for our partners in the idea validation phase. We can check how something that worked for a Brazilian club in the Brazilian market would work for an international brand like Real Madrid with a similar content, how much value it could create for its sponsor and, of course, how they can set the price for it. I would sum it up as a kind of simulation, probing the market with sophisticated metrics.
How does the aforementioned capital raising affect HorizM’s processes?
It helps with scaling, human resources, market opening. Also, we manage the company even more professionally. It brings in a kind of rigor in a good sense. We also shape our own internal processes in a more disciplined way. This will accelerate the pace of growth and give us greater awareness. As a B2B company, however, this pace isn not as dynamic as we have seen in the stock market in some cases: we’re not going to walk that path where we reach billions of dollars very quickly from scratch and then be blown away by the wind. Rather, we strive for a kind of healthy balance, secure growth, and the continuous expansion of our range of partners. We know that current trends are in our favor, and we are working to slowly but surely close that certain gap between digital and traditional spending. If this mission succeeds, we will be satisfied.
This interview is also available in Hungarian via this link.