Media Supplier of the Year: Xaxis

At a time when the programmatic media marketplace seems plagued by issues of trust and transparency, WPP’s Xaxis unit has carved out a dominant market position by investing in the best people, technology, data and inventory -- yes, that’s right, inventory -- in the business. Unlike most agency-owned trading desks, buying groups or otherwise-named programmatic platforms, Xaxis makes no bones about it: It’s sole purpose is to acquire the best inventory in the marketplace for one reason -- to resell it and make big profits by doing so. Unlike any other agency-owned programmatic media operation, Xaxis considers itself a medium unto itself.

It’s not a medium in the sense of publishing content, attracting an audience, and then selling advertisers and agencies the right to serve ads to its audience. It is a medium in the sense of aggregating and re-selling the audience exposure that goes unsold by others. 

Yes, Xaxis is what is classically called an “arbitrager” — buying inventory low and reselling it high — but it comes out of a long tradition that pre-dates the programmatic media marketplace. So-called “unwired networks” existed in television, radio and other media long before Madison Avenue ever uttered the word digital, and some of digital’s earliest success stories came from companies that did nothing but make a market out of the unsold audiences of an increasingly expanding supply of digital consumers: ad networks, ad exchanges, DSPs, SSPs, DMPs, and ultimately, the modern day “agency trading desk.”

But unlike its most direct competitors, Xaxis doesn’t consider itself an agency trading desk; it actually considers itself a medium, because its primary constituency is itself. Xaxis makes money not by servicing brands and agencies that want to reach their audience. It makes money by creating value out of under-leveraged audience inventory and creating demand from advertisers and agencies who want to reach them.

It may seem like a subtle distinction vs. how other agencies approach the marketplace, but it is one of the reasons Xaxis has come to dominate the marketplace, and it is also the reason why MediaPost is recognizing it as its Supplier of the Year for 2015. It is also what makes Xaxis one of the most transparent suppliers in what increasingly is perceived as a non-transparent business. Ironically, it does so by being non-transparent. It’s just that it is transparent about being non-transparent. By non-transparent, Xaxis means it does not disclose the spread or margin it makes by selling inventory to its demand-side partners. But it is very transparent about the value, performance and results of the inventory it sells to them. That’s its whole business model and why it has grown to represent $1 out of every $10 traded in the $10 billion-plus programmatic audience-buying marketplace.

It’s also one of the reasons why Xaxis founder Brian Lesser was recently promoted from running the media supplier to being head of the North American operations of the media-buying company that oversees it: WPP’s GroupM unit.

The logic behind Xaxis began when Lesser assembled a team of technology and data experts to begin leveraging WPP’s acquisition of an ad server — 24/7 Real Media — to create a new kind of audience-trading marketplace that ultimately evolved into Xaxis. That team, dubbed the Media Innovation Group, or MIG, was the building block for investing and reinvesting in the best people and technology to effectively hedge the media-buying marketplace. It worked and to send a signal of just how well it was working — as well as differentiating Xaxis from the rest of Madison Avenue’s fledgling programmatic operations — WPP changed its accounting method for Xaxis in 2014 so that it began treating the gross media it acquired as revenue. It was just an accounting change, but it was a bold statement that got the attention of the rest of the industry that WPP no longer considered Xaxis a managed service model like the rest of Madison Avenue, but a supplier of media assets.

The repositioning isn’t the only reason why Xaxis has grown to be the industry’s dominant player, but its accounting and the fact that it treats the technology and people resources it invests in as a capital investment with its own P&L, has enabled it to build one of the most profitable operations in the industry and one capable of continuously reinvesting in its future.

Most importantly, the approach also enables Xaxis’ team to think “neutrally” about technology, media, audiences and data, so that its only biases are things like “yield,” or “return-on-investment.”

“We are oriented in a different way than an agency is,” Lesser told MediaPost earlier this year, before taking his new role at GroupM. “We are a programmatic media company. We are not a trade desk. We are not an agency. And our orientation toward the market is, how do we create media products that can be sold to advertisers that have unique formats, and unique data and unique inventory? So in a sense that we’re not trying to be an agency and we’re not trying to be a trade desk, we can have strong opinions on technology and we can not only take positions in media, but we can take positions in companies.”

At a time when Madison Avenue seems consumed by issues of trust and transparency, Xaxis makes it clear where it stands, what it stands for and who it is standing in for: itself.

1 comment about "Media Supplier of the Year: Xaxis".
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  1. andrew siens from conv, January 22, 2016 at 2:14 p.m.

    Hey, Industry! Xaxis is eating you alive and you seem to like it... I guess they don't want you to wake up :) One day, you'll wake up and find there are no other players but "predatoragencies" stronger than advertisers or publishers. Congratulations.

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