GroupM’s programmatic agency Xaxis has launched Light Reaction, a mobile-first performance group that will operate independently from Xaxis’ main audience-based business.
Unlike Xaxis proper, Light Reaction will charge clients on a pure pay-for-performance model, meaning clients will pay for concrete business outcomes like sales and new customer acquisitions. The new sub-agency, which will have it’s own P&L, has a team made up of 80 former Xaxis employees working in 20 markets, including Canada.
Light Reaction’s general manager Paul Dolan, who’s been leading the group’s development over the past year, said Xaxis saw a big opportunity to lead in the performance marketing space.
“The data that we have around audiences in [Xaxis’ proprietary data management platform] Turbine doesn’t need to be applied to just audience and branding objectives, but is extremely powerful for performance,” he said.
With Turbine’s accumulated data and analysis capabilities, Light Reaction has a powerful engine to understand customer behaviours and use fine-grained targeting to boost sales, he said.
According to Dolan, much of the business will be driven by traditional direct response metrics, such as cost-per-click and cost-per-acquisition. But Xaxis’ well-developed attribution capabilities will allow it to adapt its pricing to custom performance KPIs that are unique to each client. In one pre-launch case study with German retailer Walbusch, Light Reaction developed a performance model based on new customer acquisitions directly attributed to its ads, screening out return customers and assists.
A big focus will be on bridging mobile and desktop performance marketing, by combining the mobile app and cross-screen solutions of ActionX, which Xaxis acquired in March, and the desktop performance technology of Quisma, a European performance agency within WPP.
“Consumers are fragmented in their media consumption across multiple devices, more so than ever before,” Dolan said. “And at the same time [marketers are] trying to squeeze every ounce of performance out of their digital marketing budgets.” To address both those problems, Light Reaction offers performance marketing “across devices, with a focus on mobile-first.”
Xaxis decided to launch Light Reaction as a separate brand, rather than an internal division, in part to shore up the latter’s reputation as an audience-driven programmatic agency. While Xaxis uses performance metrics like engagements and sales to optimize its buys, its core strategy and pricing models are built around audiences that advertisers want to reach. Dolan said the company does more than half of its buying globally in video channels.
Light Reaction will have the opposite balance, Dolan said: its buys will be guaranteed against performance metrics, but optimized based on audience quality, using the same data Xaxis uses.
“Advertisers are using Xaxis, and the ability to reach audiences, to further their brand objectives, their middle and upper funnel activity,” he said. “It left an opportunity for us to create a new set of products that address the lower part of the funnel, in the way that clients want to — which is with more guarantees around performance rather than simply optimizing towards it.”
Even though a lot of programmatic companies have been focused on drawing more brand advertising dollars into programmatic — especially in video, where stealing TV dollars has been priority number one — performance advertising still accounts for two thirds of all the dollars coursing through programmatic channels. As a result, some major players are taking another look at DR (like The Rubicon Project, which acquired Chango in April and is working to develop it as CPA-driven intent marketing group within its buyer technology division).
Dolan’s reasoning for homing in on performance marketing was more down-to-earth. “If everybody’s zigging, it’s worth looking at a zag,” he said. “I think this is the perfect time to evolve traditional direct response channels.”
He said Light Reaction’s Americas division will be announcing further senior hires in the coming weeks.
