WPP digital media buying network Xaxis is looking to tie more of its own compensation to achieving specific client goals such as sales or downloads by forming a performance marketing agency called Light Reaction.
"We see this part of the business growing as rapidly if not more than the business we already built within Xaxis," said Xaxis CEO Brian Lesser. "There's a growing market need for companies that aren't only expert in data, technology and programmatic but also in delivering outcomes on a model that guarantees those outcomes."
Performance marketing currently assumes about 10% of Xaxis' more than $700 million business. But the WPP digital media buying group wants performance marketing, and the pay-for-performance compensation model that comes with it, to assume a much larger portion of its business. The network is looking to double the 20 global markets in which it operates in the coming years, said Mr. Lesser.
It's a shift from Xaxis' core digital buying operation, which sells entirely on a cost-per-thousand-impressions metric across mobile, video display and social inventory. Within Light Reaction, clients pay for consumer outcomes, such as sales, leads or downloads based on pre-set goals the agency thinks it can reach across mostly mobile inventory.
For example, in an engagement with German retailer Walbusch, the agency's performance marketing team -- now part of Light Reaction -- was tasked with driving sales from new customers. The group increased sales from new customers by 17%, while decreasing the amount it cost to convert new customers by 8%, according to Xaxis. Walbusch only paid for directly attributed sales from those customers. This effort was successful, but the nature of the performance business, and of tying client outcomes to revenue, is still risky and can result in missed targets.
Through Xaxis, Light Reaction may own some of the mobile inventory it uses to target customers for a performance marketing campaign, but the group may also look elsewhere, such as private exchanges, if Xaxis's data suggests that's necessary to reach the client's goals.
"It's a similar model to Xaxis in that we'd prefer to avoid exchange-traded inventory and instead buy through private marketplaces or through our own managed tags on publisher sites," said Mr. Lesser. "That's not to say we won't tap into exchange-traded inventory. That'll be a more significant portion of [Light Reaction] inventory than in the Xaxis business."
Light Reaction is the culmination of a Xaxis buying spree over the last couple of years, incorporating technology from recently acquired mobile performance marketing company ActionX and international performance marketing shop Quisma.
Through these acquisition and recent growth, the new performance marketing group comprises 80 people and 300 clients -- about half of them existing Quisma clients -- across 20 markets, including North America, Europe, Asia and the Middle East.
Paul Dolan, who was most recenty was exec VP and general manager of performance marketing at Xaxis, will lead the new group as general manager of Light Reaction.