But for the ones who've been on the less accepting side -- particularly when it comes to signing non-disclosure agreements -- the WPP media agency network is willing to be a little more flexible. It's now building a less constrictive alternative that it hopes will keep clients from moving their programmatic operations in-house.
The alternative is a system in which clients work with whichever ad-tech vendors or data-management platforms they choose -- GroupM will suggest preferred partners AppNexus and The Trade Desk – while its individual agencies (MEC, Mindshare, MediaCom and Maxus) manage the programmatic execution.
It also invites clients and their individual agencies to buy inventory directly from Xaxis without requiring that Xaxis control the entire programmatic buying process or that clients sign a non-disclosure contract.
Currently, clients who buy digital media through Xaxis' automated buying systems are asked to sign non-disclosure contracts that prevent them from seeing the breakdown in the fee they pay the agency, which bundles the agency's cut, the cost of the media that Xaxis owns, and other affiliated costs such as the technology and data and analytics used to target specific audiences online. It's an arbitrage model, meaning the agency buys and resells the media, using its own technology and data to buy media that targets the client's customers wherever they are online, in real time.
GroupM wants to keep dollars flowing through the agency as large brands continue to place a greater emphasis on controlling their own data and bring programmatic buying in-house -- and as some clients decline to sign non-disclosure contracts.
Temptation to move in-house
"Agencies need to retain their place in the value chain as new channels emerge," said Mr. Norman. "If we don't do that, there's the temptation for clients to take more of those [buys] in-house, as they don't believe the agency is organizing itself with the right people, tools and engagement models."
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GroupM's Chief Digital Investment Officer Ari Bluman will oversee the operation and empower individuals within each agency to oversee the day-to-day operation. Mr. Bluman will also elevate someone from one of the shops to serve in a role dedicated to the trading model at the GroupM level. The agency group declined to disclose the details at this time, but said everyone should be in place within the next few months.
The goal is to have a hybrid of Xaxis clients -- some that buy end-to-end service and some that buy a portion of inventory from Xaxis, said Mr. Norman.
The flexible model is in line with the custom trading desks GroupM has built for a few large clients within its individual agencies. For example, MEC runs client AT&T's trading desk, and Unilever's runs through its media agency Mindshare.
Mr. Norman said the company also hopes that the move to make Xaxis inventory part of the alternative model will help clients benchmark it against inventory from other ad networks, and ultimately build trust and confidence among clients.
"Hopefully there's a chance to reintroduce Xaxis where we don't have penetration with clients," said Mr. Norman. "We'll go back to clients who previously may have said, 'We won't use Xaxis, either because we don't like the disclosure model or whatever,' and say we're creating value here, and here's a mechanism for clients to test Xaxis inventory in the open market against other inventory sources."
WPP has invested a lot in Xaxis over the past few years and more recently has taken steps to eliminate fraud in digital ad buying. Mr. Norman said this would continue despite the focus on an alternative trading model. This June, Xaxis spent $25 million on its own data-management platform. It also invested in a business in the Netherlands that enables it to build apps that help clients use vendors' technology. And it recently said that it would to stop buying on open exchanges to weed out fraudulent buying activity.
Still, as it continues to defend the Xaxis business model, GroupM's programmatic alternative is one more sign that holding companies' divergent philosophies around how they make money from digital trading are slowly linking up.
Omnicom recently indicated that its trading desk, Accuen, is more aggressively tackling arbitrage -- a trading approach typically reserved for Xaxis and criticized by competitors. Omnicom CFO Randall Weisenburger explained it to analysts during the company's second-quarter earnings call: "We are buying specific media and we are re-selling that at a -- hopefully, an increased price, in most circumstances, since the profit that we make our revenue or our return is going to be based upon the difference between that purchase price of the media and the sale price of the media."
It's a shift for the group. Last March, Scott Hagedorn, CEO of Accuen parent group Annalect, told Ad Age that Accuen typically works with third-party digital-ad trading platforms, such as Turn, Google's Invite, mediamind or DataXu, and that it didn't do arbitrage. He didn't eliminate the possibility of embracing arbitrage in the near future, however. "We could get there," he said.