In recent quarters, Acxiom’s financial narrative has focused on its struggle to redefine itself. Whereas Acxiom was once – and still is – known as a provider of data for marketers, it’s seeking to become a neutral provider of data infrastructure via its Audience Operating System (AOS) platform and LiveRamp, the data onboarder it acquired in July.
This transformation, CEO Scott Howe has often said, requires patience. And in its Q1 in August (the company’s fiscal year ends in March), CFO Warren Jenson warned of “transition and heavy lifting” in the coming year.
The transition and heavy lifting clearly continues, with total fiscal Q2 revenue down 3% YoY to $260 million. This is mostly due to a 17% YoY decrease in Acxiom’s IT infrastructure management services division, which bagged only $56 million in Q2 revenue.
Its marketing and data services unit eked out $204 million, a 2% YoY increase.
During the earnings call, Howe insisted the plodding growth rate for this sector, much of it “governed by long-term contracts” with opportunities to upsell additional products, should be expected: “Count on low single-digit growth. Not remarkable, but inherently predictable.”
While Howe acknowledged the company’s topline growth is still far from where he’d like it to be, he characterized Q2 as Acxiom’s “strongest upsell quarter in a number of quarters.”
But he also conceded that in order to stabilize its core marketing and data services business, Acxiom will need “a few more of these booking quarters sequentially.”
The problem is that once AOS and LiveRamp are extracted from that core category, growth disappoints.
Here’s the good news for Acxiom: AOS revenue increased 36% from $5.5 million in Q1 2015 to $7.5 million in Q2. LiveRamp added an additional $7.5 million in revenue, bringing AOS, with LiveRamp included, up to $15 million. And the platform managed $37 million in gross media spend, up 32% from Q1 2014.
Client growth in AOS is encouraging. It got seven new clients in Q1 and 15 new clients in Q2 including AT&T and Toyota Motor Company.
It gained three agency partnerships: Starcom MediaVest Group in Europe, DMG Solutions, and Japan’s second largest advertising agency Hakuhodo Inc. It also signed a strategic partnership with Chinese social network Weibo.
While Acxiom has roughly 81 clients from the Starcom partnership it struck last December, “the number of clients who have been activated won’t go up much since we’ve activated a large percentage of [Starcom’s] client base,” Howe said, adding that AOS is helping run roughly a dozen live campaigns with Starcom. “Our focus is ensuring clients who’ve been activated are running campaigns and have successes.”
AOS also got 115 new clients via the LiveRamp acquisition, and Acxiom has accelerated its joint sales efforts by introducing LiveRamp sales execs into Acxiom client engagements. Howe said this accounted for eight new LiveRamp clients in Q2.
But what of LiveRamp clients that might be iffy about working with Acxiom? Howe said there were four or five “historical competitors” to Acxiom on LiveRamp’s client list hesitant to remain LiveRamp customers.
“We’ve met with them and given them reassurances,” Howe said. “I know at least one case renewed. But this isn’t a question that will be answered in a quarter. It’s a question that will be answered a year from now. They’re watching us and making sure we deliver against our promises before they make a longterm decision.”
Acxiom has been on a tear assuaging potential partners and clients that it doesn’t hold competitive interests. Case in point: when it first rolled out AOS, it highlighted free apps built to prove the platform’s power.
It seemed like a good idea at the time, but Howe regrets that decision and wishes he had showcased partner apps instead.
“By giving away these free apps out of the gate, we alienated some potential partners,” he said. Demand-side platforms (DSPs), for instance, weren’t sure if Acxiom was trying to become a DSP. Ad networks thought Acxiom was trying to become an ad network. And data-management platforms (DMPs) thought Acxiom was trying to become “the most robust DMP ever created.”
“We wanted to be the pipes that catalyze the applications that others have built,” Howe said. As such, Acxiom will soon discontinue the free app program associated with AOS.
Finally, Acxiom gained “several” new database contracts with companies like Duke Energy and TD Bank Group, as well as renewals with credit card issuers and insurance agencies.
The company is working to build out its product features in this area as well. Jenson said most database deployments are highly customized and Acxiom is looking for commonalities so it can eventually roll out standardized database products.
AOS – LiveRamp Integration Update
In case there was any doubt, LiveRamp is poised to become a completely integrated part of AOS. While Acxiom splits LiveRamp and AOS revenues and client growth, it will combine them going forward. And over the next 18 months, Acxiom will migrate clients onto a new product that includes “the best features of LiveRamp and AOS.”
The benefits of this combined product, Howe said, include faster service-level agreements (SLAs) around data ingestion and distribution, greater process automation, more self-serve functionality, improved digital reach, and more use cases as tech partners built apps for the platform.
So far, a team of AOS and LiveRamp employees have identified the features they want to combine into a cohesive product, and have outlined an integration plan through the end of Acxiom’s next fiscal year.
This integration is still a work in progress, though it’s given AOS some enhanced capabilities. For instance, AOS can now recognize 120 million individuals across 350 million devices, Howe said. Still, he wanted to keep expectations around AOS and LiveRamp “appropriately bounded.”
For instance, because it’s still early days for an integrated AOS-LiveRamp product impressive client growth rates are predicated off of a small base. And Acxiom is still figuring out how to scale the product as it signs on new businesses. If all goes well, a joint AOS-LiveRamp product should drive clients to use Acxiom’s third-party data.
