Media agencies face backlash from clients over cost and transparency of online media broking deals

Xaxis is the part of WPP’s huge data operation that fuels its programmatic buying business – clients hand over the task of buying media online to the WPP/GroupM company and it adds a bit on top. In other words, it’s a media broking operation (WPP’s Rob Norman disputes this, see Update below).

GroupM’s MEC does this for At&T while its Mindshare handles the giant Unilever media account.

UnknownBut now GroupM’s chief digital officer Rob Norman (left) has admitted to Ad Age that a growing number of clients don’t like this very much, in particular they don’t like the so-called ‘non disclosure agreements’ which prevent them knowing how much Xaxis is actually charging them.

Although Norman claims that “advertisers have been more or less accepting of the business model,” in future GroupM will work with clients’ own choice of ad tech vendors or data management platforms although it will suggest its own favourites.

It’s doing this, according to Norman, because: “agencies need to retain their place in the value chain as new channels emerge. 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.”

Which rather suggest that the original Xaxis business model has broken. So WPP’s GroupM, and indeed other agency trading operations like Omnicom’s Accuen, are going to have to come clean about the fees or commissions they charge and, probably, the exclusive deals they secure with online publishers.

The ostensible justification for these charges (whatever they may be) is the cost of the technology, the technologists (our modern day ‘Math Men’) and, most of all, the data (Xaxis is supposed to be a data operation) that the big agency groups have and others don’t.

The latter may or may not keep the big agency groups in this particular game. But, judging by Norman’s comments, that’s far from a certainty.

Update 12/8/14

Rob Norman disagrees with the first two paragraphs in particular. This is what he says:

I was somewhat surprised by the juxtaposition of the first two paragraphs and by their inaccuracy.

There are two points that I would like to clarify and perhaps you might consider doing the same:

1. Since its inception Xaxis has executed programmatic buying for some but by no means all GroupM clients.
2. Two such clients are AT&T and Unilever which are operated using third DSPs and DMPs by MEC in the first case, Mindshare in the latter. No Xaxis.

GroupM has always given the client a choice:

1. Buy Xaxis as an end to end solution recognizing by explicit contract that the underlying price of media is not disclosed rather it is combined with people, data and technology. We do not consider this broking. Xaxis CAN and IS benchmarked for value provided
2. Use our people, and that’s a fast growing population, to execute programmatic with the best combination of tools available – and not always the same ones
3. Use option 2 and include some Xaxis inventory which will prove value or fail to do so meaning that its allocation will vary

That’s it. We invest a lot of money in the management of change to accommodate new market features and we believe we do so with contractual integrity.

Well that seems clear enough. Maybe someone can explain to us what does constitute media broking these days and who does it? With all these billions of ads whizzing around cyberspace it’s hard to see how it can be avoided.

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