The global giant isn’t just transforming the media services industry, it’s also yanking the supply chain
In recent years, these awards have recognized a shift that has been taking place in the way innovation occurs inside Madison Avenue’s major media organizations, moving from decentralized media services operating units, to their bigger, more centralized and better resourced holding companies. The logic seems to be that holding companies are in a better position to leverage both internal budgets, and the relationships with outside suppliers and other industry stakeholders to develop tools, resources, business models and practices that would benefit their operating units and the clients they service.
And that is one of the main reasons we have given so much focus to organizations like Interpublic’s Mediabrands, Publicis’ VivaKi and WPP’s GroupM,
because, when it comes to innovating the media marketplace for advertisers and agencies, that’s where all the action has been. But this year, we’re going a little further up the food chain
and naming an overall holding company — WPP Group — because of the disparate efforts of its operating units within the
holding company, including GroupM,
tenthavenue, and 24/7 Real Media/Xaxis, to transform the media services industry and its supply chain.
What makes WPP’s achievements so remarkable is that it has managed to foster so much industry change, and yes, even collaboration, while exerting such a proprietary approach to the media marketplace. Unlike the other major holding companies who profess to be transparent, “open source” cultures, WPP’s operations are all about exclusivity and proprietary advantage. Still, the people who run it understand the value of collaboration when it helps move the industry, including peers and competitors, in a direction that will benefit its agencies and clients.
One of the best examples of this happened a couple years ago, when WPP’s GroupM unit broke a major impasse in the network TV advertising marketplace, by championing a compromise solution for Nielsen’s move to time-shifted audience viewing, creating the so-called C3 metric that is the established currency of the national TV advertising marketplace. Over the past year, GroupM and sister units tenthavenue and Xaxis exerted similar influence on the media marketplace to move the industry forward in ways it believes will benefit itself and its clients.
Among other things, GroupM has been a key behind-the-scenes player working with Nielsen on the development of its so-called XCR, or cross-platform ratings, which Nielsen executives want to establish as the advertising trading currency for media buys crossing TV, online, social and mobile media.
“If GroupM’s early runs are indicative, I don’t think the others will even hesitate,” Nielsen CEO David Calhoun told investors during the media and marketing research giant’s third-quarter earnings call. Calhoun indicated that the influence of GroupM would be essential to establishing XCR as a Madison Avenue trading currency, noting that while media companies such as ESPN and Hulu have been championing it, the decision to base advertising deals on it was up to media-buying agencies, and GroupM is the biggest and most influential one.
That WPP has such as cozy relationship with Nielsen speaks volumes about how pragmatic it is in its approach to influencing industry change. One of Nielsen’s biggest competitors in the marketing and media research industry is another division of WPP, Kantar, which while a significant player, doesn’t represent the standard bearer of currency that Nielsen does, which is why its agencies work so closely with Nielsen to foster change.
While marketers have been the main focus of another Nielsen push to make its Online Campaign Ratings the currency of the online media-buying business, WPP has also been a big supporter of that push. Nielsen executives assert that thanks to that, the OCR service is now reaching the “tipping point” of becoming a currency.
Xaxis’ Online Domination
Not everyone agrees with those assessments. However,the point is that when it comes to marketplace metrics, Nielsen and WPP both understand that nature abhors a vacuum. Without a common currency, it’s difficult for marketplaces to be organized for buyers and sellers alike.
That same logic has led to similar marketplace innovations by WPP agency trading desk unit, Xaxis. While it has been criticized by peers for its proprietary approach to online audience-buying and programmatic trading, especially its investments in its own technology stack and data analytics systems, there is no question that Xaxis is the biggest and most influential player in the online media industry.
It’s so influential, that when Facebook began developing its own real-time bidding marketplace, the Facebook Exchange, Xaxis was the only agency trading desk invited to participate in both its alpha and beta programs.
“We were the only agency invited to participate, and it’s because we do develop technology,” asserts Brian Lesser, the CEO of WPP’s Xaxis unit. “I’m not going to say that everything we use is our own and built by us, but it is significant that we have our own data management platform, which is the foundation of how we provide value to our clients.” Aside from differentiating Xaxis from its peers, which generally use an “open” sourcing approach that relies on technology developed by third-parties for data, analytics, and exchanges, Lesser says, it gives Xaxis and its clients a competitive advantage in terms of marketplace intelligence.
“If you listen to my boss [WPP CEO] Sir Martin Sorrell talk about new media and new markets, it’s all about the ability to leverage data to produce consumer insights. And certainly, Xaxis is square in the center of that,” Lesser says, noting that while the trading desk is typically recognized for its ability to buy cheaply and at scale, it is really its ability to “perform” based on its superior insights and analytics that sets it apart from other agencies.
As a result, Lesser says that the 300 billion impressions it will serve this year, make it about three times the size of its next closest agency trading desk competitor. And part of that comes from the fact that it is the only truly global trading desk, operating in 25 countries this year, up from 11 last year. Along with that market expansion, Xaxis has also grown its client roster to about 1,000 marketers, up from only 400, making it far and away the biggest player in online audience buying.
Because of its scale, and its ability to take risks, Xaxis differentiates itself in another big way from its competitors: It is the only agency trading desk that publicly acknowledges that it arbitrages online audience buying, meaning it buys audience impressions in bulk based on where it can identify the most marketplace demand, and resells the inventory for a profit.
That approach, while controversial, is completely transparent with Xaxis’ clients, and it affords the agency several advantages over its competitors, including the ability to make higher margins that it uses to fund the technology it develops to create superior online audience-buying systems.
Lesser says those deals don’t come without risk, and it is Xaxis ability to take such risks, and occasionally get left “holding the bag” with some online audience buys that it isn’t able to resell back to clients, that makes it unique in the marketplace.
The approach has enabled Xaxis to innovate in other important ways that are helping to attract more “premium” inventory from publishers who might not otherwise participate in programmatic trading. Specifically, Lesser says Xaxis innovated the marketplace by developing the concept of “reserve programmatic” audience buys, which are basically private exchanges between Xaxis and premium publishers who would otherwise be reluctant to release their inventory into a biddable, auction-based marketplace for fear it would end up discounting the value of their inventory. The trade-off is that publishers who participate in Xaxis private exchanges, agree to sell their inventory to Xaxis for a guaranteed discount, and allow the agency to target ads at specific users as opposed to just placing ads based on the context of the publishers’ pages.
It was with a similar spirit that another WPP unit, massive out-of-home, mobile and experiential marketing division tenthavenue, set out to reorganize the out-of-home media-buying marketplace, utilizing an almost identical approach that it has used for the online industry.
Specifically, tenthavenue unit Spafax began by creating its own “DSP,” or demand-side platform for buying digital out-of-home media early last spring. Then it began using the massive media-buying leverage of tenthavenue units like Kinetic (the largest buyer of out-of-home media in the world) to begin organizing the data necessary to buy audiences in out-of-home media, the way agency trading desks like Xaxis do online.
It started in October by once again working with Nielsen to develop a new index for measuring, planning, buying and posting the value of digital out-of-home network media buys. The new index, which will be built on top of Nielsen’s existing On-Location service, will incorporate sophisticated consumer segmentation data from another consumer media behavior data supplier, GfK MRI, as well as lifestyle and media consumption data from the Media Behavior Institute, which is partly owned by Nielsen and GfK MRI.
The new index, which will enable advertisers and agencies to identify a digital out-of-home media buy “down to the sub-block level, based on longitudinal and latitudinal coordinates,” says Spafax Executive Vice President Patrick Bonomo, is a crucial next step for the industry, as well as Spafax’s development of an exchange-based approach to digital out-of-home media that will replicate what has been evolving in the online display advertising marketplace.
In essence, Spafax’s Bonomo, and veteran of the online media industry, has begun replicating the online industry’s infrastructure for out-of-home, creating the opportunity to buy out-of-home audiences in a biddable, real-time marketplace just like online media.
While out-of-home may not have the kind of audience targeting data that online user cookie profiles represent, Bonomo said it has other valuable data, especially geographic navigation coordinates that can be used to pinpoint a consumer’s lifestyles and behaviors based on physical locations.
“Everything we are focused on is API-driven,” Bonomo explains, referring to the acronym for an applications programming interface that enables third-party developers to access data or write computer programming code to interact with or enable applications tied to another platform’s computers. Because digital out-of-home networks utilize essentially the same infrastructure as online media — a computer serving content and/or advertising to a screen — Bonomo says he believes such APIs will enable Spafax and other agencies to access data directly from digital out-of-home network screens down to the “longitudinal and latitudinal coordinates.”
The implications of that infrastructure go well beyond media-buying, and will ultimately impact creative, as marketers gain the ability to target specific messages and creative formats to consumers in specific locations.
The last key component of out-of-home’s new infrastructure is an online exchange where agencies can access and bid out-of-home inventory the same way they do online. Spafax also helped some online industry vets develop a similar model, incubating Vistar Networks, which is the out-of-home industry’s equivalent of an online audience buying exchange.
True, many of WPP’s disparate moves to reorganize and innovate the media marketplace are based on the self-interests of its agencies and its clients, and play into its own proprietary systems and business models. However, they also have the effect of advancing the industry for all its peers and suppliers, achieving some of the major criteria MEDIA magazine seeks to recognize in these awards: strategic vision, innovation and industry leadership.