What Are They Building In There? A Look At Xaxis’ Tech Investments After Its ActionX Acquisition

brian lesser Xaxis bwFor a holding company, WPP is an aggressive buyer of ad tech – most of which winds up within its GroupM unit Xaxis.

Since Xaxis absorbed 24/7 Media in December 2013, the programmatic media company’s investments in tech, most of which are acquisitions, have been methodical. The most recent occurred Monday, when Xaxis revealed it had purchased ActionX, a performance marketing company whose technology is designed to drive sales after an app is downloaded. Terms weren’t disclosed.

Other notable moves include the purchase of semantic ad tech company Crystal Semantics in December 2013, Dutch ad network BannerConnect in February 2014, the $25 million development of the in-house data-management platform Turbine and a $25 million stake in AppNexus – in which AppNexus acquired Xaxis’ publisher ad server, Open AdStream.

And while Xaxis isn’t going to dive into another purchase without looking, more growth is likely.

Following “a very good 2014” in which, according to global CEO Brian Lesser, Xaxis grew 30% and saw $770 million in sales across 40 markets, the company has certain landmarks on its 2015 road map.

“There are five major priorities,” Lesser told AdExchanger. “Mobile, performance marketing, building our video business and also developing a direct sales team and supply-side business.”

Xaxis hopes ActionX – which will initially be its own unit within Xaxis before becoming the foundation for future products – will help with the first three on that list.

The Axis Of Xaxis

Xaxis has taken its lumps from critics. At a time when many marketers want to know the margins their agencies make on media, Xaxis is proudly defiant, saying it won’t be able to drive the performance it does if it revealed the price it pays for media. It also doesn’t consider itself an agency, an agency trading desk or – God forbid – an ad network – though it’s often been characterized as any and sometimes even all of the three.

Seventy-five percent of its business comes through agencies, most but not all from the WPP family. It also works with independent agencies, directly with brands and it sells its own tech-based products.

“When we work with agencies, typically they’re just buying products from Xaxis,” Lesser said. “We’re not having to provide that layer of service, which involves communications planning, media planning, helping to vet options regarding data, technology and inventory. When we work directly with advertisers, there tends to be slightly more service that we have to provide to those advertisers.”

Xaxis’ strategy is to build its own technology that gives its clients a competitive edge, and partner for features that are more commoditized. “Every acquisition we’ve made is consistent with that,” Lesser said. “We wanted Crystal Semantics to better contextualize the massive amount of data we collect from our data partners. BannerConnect helped us improve the way we visualize data and the way we optimize campaigns.”

But there comes a point when a partner’s feature becomes core to the business – which is when it’s necessary to swoop in to ensure a competitor doesn’t. This was one of the drivers behind the decision to buy ActionX, for instance, rather than to continue the yearlong partnership.

“We decided we’d rather own the company than continue to partner just to have that technology be proprietary for us,” Lesser said.

Another advantage of owning the technology is having complete control over it – important for a data business like Xaxis. This was one of the reasons the company spent $25 million building a DMP, which isn’t licensed and is meant only for Xaxis and its clients, rather than using one of the multiple third-party options in the market.

“Some of the data we have is proprietary to WPP, for example some data that exists within Kantar or other places within GroupM,” said Lesser during the Industry Preview conference in January. “We wanted the security that … it wasn’t leaking out of the group.”

Meanwhile, the company’s roughly 15% stake in AppNexus means Xaxis can ensure its tech is integrated with AppNexus’ and, according to Lesser, “we have some influence over what’s built into the platform and when.” He added Xaxis isn’t pumping any client spend through AppNexus as part of the deal.

However, the deal gave AppNexus Xaxis’ sell-side ad server Open AdStream. Xaxis had already benefited from the technology, and Lesser said it would work better at AppNexus, which hopes to build out its ad-serving business.

“Open AdStream let us have close relationships with publishers,” Lesser explained. “Over time, that became less strategic because we can have close relationships without owning the publisher ad server.”

Meanwhile, the resources initially devoted to maintaining the ad serving product can be devoted to other areas of Xaxis’ business, like Turbine.

Xaxis’ growth contrasts with some agency trading desks to which Xaxis is often compared even if it denies the moniker. Publicis Groupe’s trading desk, VivaKi AOD, recently partly dissolved. Meanwhile, Josh Jacobs left his long-held post as CEO of Omnicom trading desk Accuen.

These changes underscore Lesser’s belief that trading desks were always short-lived and that their functions – building and executing programmatic media plans – must inevitably be absorbed by agencies.

“Because we saw that coming, we constituted Xaxis differently,” he said, referring to its ability to build both programmatic media plans and products. “There’s no such thing as a trading desk anymore. We should stop using the term.”

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