Sir Martin Sorrell backs WPP’s Xaxis to smash the walled garden era of ad tech

WPP chief executive Sir Martin Sorrell has talked up its programmatic platform Xaxis’ potential to thrive at a time when some marketers are worried about whether Facebook and Google’s ad tech products can be trusted to operate objectively.

It spotlights the group’s ambitious plans for a piece of tech expected to attract over $1bn in revenue by the end of the year. Not bad for a service that Sir Martin described as the “poor man’s” equivalent to Facebook’s Atlas and Google’s Doubleclick when it acquired the foundations of the ad platform back in 2007.

The acquisition eventually birthed Xaxis in 2011 and the advertising executive has spent the intervening years manoeuvring it into the ongoing value and verification debates around digital media. Sir Martin, a vocal critic of the closed ecosystems favoured by 'walled garden players' such as Facebook and Google, wants more advertisers to wise up to the inherent conflict of interest in using a company’s technology to purchase their own inventory.

“[Xaxis] is absolutely key to provide the agnostic alternative to Facebook and Atlas and Google and Doublecklick,” he told analysts yesterday (26 August) on the earnings call for WPP's interim results. “The bundling that's going on is anti-competitive and the argument for it has been that it benefits the consumer. The hidden truth; the opacity, the lack of transparency, rests on the fact that in order to get it you need to use the technology platform. We think that its vital for us on behalf of our clients to work with companies like AppNexus, which we have a direct stake in, and use that to expand the Xaxis platform.”

The points expand on fears Sir Martin and other agency executives have voiced about technology companies like Facebook and Google wanting to become media owners. Should these companies successfully transform, then the fear is that they would be free to chase more client-direct deals that could axe traditional media agencies from advertisers’ media plans - a phenomenon commonly referred to as disintermediation.

Despite the growing tensions, Sir Martin understands the need to keep your enemies close, adding that “we recognise the need to build partnerships” with companies such as Microsoft, Google, Apple and Twitter. The situation is emblematic of how marketing is becoming more data driven despite marketers not always having the tools to get the best return on their media investments.

To ram home the point, Sir Martin recounted a recent conversation with one of WPP’s clients who told him that the industry has “gone too far in digital”. “We’ve accepted lower standards for measurement, for viewability and for value and what we have to do is swing the pendulum back,” he added.

“Marketing is becoming more data driven. Clients want simplification. [They want] verification through data analytics of digital and feedback to shape that activity is going to be really important and clients are looking for it in real time. We’ve got real assets; not third party assets but first party assets to do that and the technology partnerships that we have build the foundation for that," he said.

Technology serves as one part of WPP’s triumvate of services alongside data and content it expects will ensure new media accounts for between 40 per cent and 45 per cent of its group revenue by 2020. New media makes up more than a third (37 per cent) of the group’s total revenue.

WPP’s investments in services across these three areas are currently valued at over $1.3bn. And the company is showing no signs of putting its chequebook away as it looks to provide services that can convince marketers to stop being too quantitative. Turbulent macro and micro trends, spanning geo-poetical issues to a spike in mergers and acquisitions, have left marketers unwilling to bet big on advertising for fear of not being able to hit quarterly targets. Sorrell, not for the first time, said this was the group’s biggest concern and that there was little sign of any change in the short-term.

“We get bombarded with questions about [the financial troubles] in China and Brazil but what’s really concerning is the lack of long term focus from businesses,” said Sir Martin. “They’re too short term focused on quarterly results and that’s because of the uncertainties [in the economy]. What’s happening in China is only going to increase that uncertainty but we see no reason why there will be any upside breakout from the current scenario.”

One breakaway trend from these times of uncertainty is the splurge of media reviews. There’s no one reason to explain why heavyweight advertisers like Coca-Cola, Volkswagen and Procter & Gamble have put up their accounts for review, with Sir Martin attributing the $20bn up for grabs to several factors including concerns that traditional media consumption is falling, efficiency drives and the need to come up with better measurement strategies. Sorrell said the reviews had been “good so far” for the group, which scooped Legal & General’s media business in May.

The trends provide the backdrop to a bittersweet first half of the year for WPP. While its results across the board topped analysts’ expectations, nominal GDP predictions forced it to downgrade its growth target for the full year. Pre-tax profit for the world’s biggest advertising group in the period climbed 12.1 per cent, while like-for-like net sales rose 2.3 per cent to just over £5bn in the period, down on the 2.5 per cent growth rate it posted in the first quarter. The emerging markets collectively known as the BRICS – Brazil, Russia, India and China – are struggling to grow fast enough, which slowed the performance.

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