Xaxis CEO Brian Gleason on ad blocking, ad tech 'swim-lanes', and media rebates

Xaxis is the programmatic advertising platform that sits within the world's largest advertising agency holding group, WPP.

The company uses data and technology to help marketers buy ads in an automated fashion across the web, mobile, and connected TV. The division says it reached almost $1 billion in revenue in 2015.

In November last year, Xaxis promoted the CEO of its Americas unit, Brian Gleason, to the global CEO role, replacing Brian Lesser, who was promoted to become the CEO of WPP's media buying arm GroupM in North America.

Now he's over six months into the new role, we chatted with Gleason about a range of topics including Xaxis' 2015 highlights, what sets it apart from rival agency trading desks, ad blocking, how the ad tech market will play out in 2016, and the controversial area of media rebates and the current low level of trust between advertisers and their agencies.

This interview has been lightly edited for clarity and length.

Business Insider: How did Xaxis leave 2015 and what should we be looking out for from you in 2016?

Brian Gleason: In 2015 we crossed a milestone: We reached $1 billion in overall revenue, which is significant for us.

BI: Is that revenue, or billings - ad spend?

BG: The way WPP classifies it is that billings and revenue are one and the same.

As we look at it, it was a turning point year for us. One is from a revenue standpoint. Revenue outside of WPP and GroupM, we generated over $100 million, which is significant. Not because it's over $100 million, but more that 10-12% of revenue came outside of WPP and GroupM, which a lot of people don't know about.

What was also unique about last year was that when Xaxis began coming up five years ago, it was primarily one brand - Xaxis -now we have a portfolio of three distinct brands.

[There is] Xaxis Audience, which focuses on awareness.

You have Plista, which we brought into the portfolio at the end of last year: A GroupM-owned company which started off in Germany, a fantastic business focusing on native and social, with a recommendation engine. Massive in terms of scale in Germany, Austria, it's expanded to Australia, and it recently launched in the US.

Last year, at the beginning of the year, we launched Light Reaction, which is an outcome-based business.

We built out a portfolio and at the same time we continue to make significant business investments into the actual infrastructure and technology. The number that we publicly talk about is the 2016 budget for technology: $54 million we will invest in our proprietary tech.

We promoted a woman by the name of Nicole Pangis to COO, who has done a fantastic job. We have 240-plus engineers around the world working on our tech. And while we have three distinct product portfolios, the underpinning of that is our technology stack.

BI: One of the things [former Xaxis CEO] Brian Lesser said [in an interview with Business Insider last year] that differentiated Xaxis from the advertising agency holding group trading desks is the tech stack. It's not just a desk that advises on where media should go, it's building out the tech that becomes a line item on the media plan. Do you think the other trading desks have now followed?

BG: I haven't seen any significant moves that has put them in that place. That's not to say it hasn't happened, but from my vantage point I haven't seen any large announcements for others to be able to make investments in that category.

If you look at the distinction between us and our service model, there's three points of distinction.

The first is technology, because we actually have engineers and that's difficult traditionally to do in a holding company because most holding companies weren't set up to be able to manage that. But our DNA is built around that, which I think is a unique position.

The second is our revenue streams: We have revenue that comes from outside our operating group. That's unique, I don't think any of the other holding groups are able to do that. It's a product, so when others are buying us outside WPP and GroupM, they are buying an Xaxis product, the same way they would buy Google or Facebook or anybody else.

The third advantage is that I'm able to take significant positions in both inventory and data that benefits our offering. For example, if you look at trying to make data acquisitions to be able to pull into our technology, rather than doing it on a one-off basis, we are able to make significant investments up-front, which gives us advantage.

We used to speak about inventory as an advantage, which it certainly is, but data is the new currency. To be able to acquire data, work out which data makes sense, then verify it, that's also a distinction. We recently had comScore come in and verify our data sets because I think that's important as well.

When you think about issues like ad blocking, all these things tie in together. It starts with the data set to find out who the individual is and what their interests are because, if you understand that, I can build a relationship, which is what most brands are trying to do. When you see issues like ad blocking, it's because there's no relationship being built - we're just bombarding [consumers] with information they are not interested in.

Every study shows that most consumers are interested in relevant information or advertising to them and I think you need to create a balance.

When you see issues like ad blocking, it's because there's no relationship being built - we're just bombarding [consumers] with information they are not interested in.

The way the world has been set up now, we plan in silos: [an advertiser makes] a mobile campaign, search, TV, display, and none of those talk to one another. Those are separate campaigns that may bombard the consumer over and over again, but [the advertisers] don't think [they are] doing it. The campaign isn't interlinked, so [the advertisers] have no way to view what [they are] sending to that individual.

So, much of our technology allows us to take those silos away, plan by one audience and track that individual experience as they go on that journey. Then you can understand where you're interacting with them, how many times you're interacting with them, and in what environments you're interacting with them. The more we can understand that and visualize that relationship, the less likely we are to intrude on their time in a way they're not comfortable with.

BI: One of the main reasons people say they use ad blockers is that ads and trackers slow down web pages and ruin their experience. Part of that is the publishers' fault, but part of that is the ad tech vendors and companies that do the trading as well. What efforts are you making to ensure you're not part of the problem here?

BG: As an industry, just because we can, doesn't mean you should. As a publisher I can put multiple tags on my page and multiple relationships too: but at what expense to the user?

The challenge for publishers is, with the real estate on their page, they have to balance how they monetize that and how they go out and create the content and environment for their consumer. Coming from a publisher background, that's a delicate balance to be able to have. It comes from the publisher having to say what type of experience am I trying to create for the user? As a user: what type of investment am I going to make to this content, for great content or a video am I going to sit through 15 or 30 seconds of an ad?

We have to look at the relationship between content and the consumer and find out the economics of that relationship.

BI: So what specifically are you doing?

BG: We like to have a direct relationship with the publisher and the reason we do that is, when you think about load times on the page, if you have a direct tag with the publisher you're not creating latency in the way that ad is served because you're not jumping through three exchanges to be able to surface that inventory.

By having a direct relationship with the publisher, we make sure the publisher maximizes the value of that experience because if they're not going through multiple middle-men, they are getting a fair price for that.

In terms of what we do for the consumer themselves: anything we serve within our Xaxis system, we make sure it's frequency-capped across multiple media. So what that means is if we're serving up a campaign from Xaxis and we have inventory that is app-based, display, mobile web, or in some cases connected television, if the frequency cap is that we only want to speak to that individual one time in a 24-hour period, we can cap that across all those different media, which is a massive advantage.

We can also see the engagement path and the signals [from consumers]. If someone is looking for something, most consumers will tell you what they want - they will go and interact with an ad or a video. There are certain signals that come up and you have to be able to respect that privilege.

The other thing I think is also important is verification on both sides. Verification in terms of the accuracy of our data, to ensure we are delivering the appropriate message or content to someone - because there's nothing worse when you go to a page and you see something that has no relevance to you. It ruins the experience.

Just because we can have eight ad slots on a page doesn't mean we should. Just because we can block ads, doesn't mean we should if it's not disrupting my experience

The more accurate the data about the characteristics of that person, the more engaging our messaging can be to them.

The beauty of the internet is in a lot of ways it's brought an advantage to all sorts of individuals all over the world, despite where they are located, and if we change the economics of the internet the challenge there is going to be we can considerably disrupt things and we have to figure out how we handle that as an industry.

That goes back to "just because we can, doesn't mean we should." Just because we can have eight ad slots on a page doesn't mean we should. Just because we can block ads, doesn't mean we should if it's not disrupting my experience because there will be a cost for that because quality content takes investment.

BI: I was reading an interview with [IPG CEO] Michael Roth who was calling out Xaxis for the pool of inventory you buy ahead of your clients and saying that's a conflict because you're selling it back to them and they don't know where it comes from. [Xaxis'] position has usually been: we are transparent about not being transparent and our clients sign up to that and are happy with it. Is that still the same stance you'd take?

BG: From our inception, Xaxis has been clear about our position in the marketplace. I feel there's a distinct advantage to be able to invest in inventory and data and technology to be able to provide an advantage back to our clients. The relationship is dependent on providing an advantage and demonstrating that.

For us, our standards have to be higher than the market, our performance has to be better than the market, our technology has to be better than the market, and our ability to drive outcomes has to be better than the market.

If you look at pace of the industry and the things that have happened, the fact that we invested $54 million in our technology provides an advantage and those things put us in a unique position to be able to drive our business.

The other thing is that this year we will end with 1,400-1,500 employees, 260 of those are engineers. Our model is not one which is "OK, let's just buy inventory and mark it up," we are investing significantly into the technology and the talent that goes into that and I feel very good about the offer we have.

The value is demonstrated in a few different ways. The biggest testimony to our model is that we have significant growth outside our holding company. So if I was a client I could look and say: "Wow, their products are that good that they are selling outside their company," should take a lot of that question away.

We have a visualization tool called Spotlight. It took us four years to build it and it's, I think, the most advanced visualization tool which shows viewability across all our different platforms, it shows [ad] fraud across all our different platforms, it shows pricing across our different platforms, which I think in terms of transparency into the performance of campaigns, there is nothing else out there like that.

Because we have shared cost [across technology, data, and media] and I can't break out the technology fee in a way that makes sense. Or if I invest $10 million in a data deal, to be able to break that out is simply not possible and takes away that advantage, so that's why I think our model is so different from others because we invest in these technologies.

One of the most important things in the relationship is that it's built on trust. Since our inception we have over 3,000 clients now. Everyone is fully aware of what Xaxis is and it's an option that they can go to.

At the same time, GroupM has an alternative. If people want to have their own direct relationships and negotiate on their own behalf with other tech providers, it's totally their choice.

BI: Transparency and trust between brands and agencies agencies is at a really low ebb at the moment. Different reports point out different reasons for that. There's a big bombshell ANA report due to come out in the next couple of weeks [on kickbacks and rebates] that could serve to make things a lot better or flip the opposite way and make things a lot worse. Why do you think the relationship is so bad and what do you think is going to happen over the next year or so?

BG: With our clients, I feel very good about the relationship we have. In most cases, our model is driven on performance and there's an inherent trust in performance, which is: can we help you solve a business problem and can we agree on what that problem is prior to launching a campaign?

So we can agree on viewability and we want to deliver on a higher percentage of viewability. And we agree on these metrics, then there's inherent trust. We've agreed a plan, we've delivered it, and it's a clear expectation of what that is.

The same is true of an outcome. If our goal is to be able to deliver a sale, or a click to a website, we agree on those terms, we agree how we measure, and we go into business together.

I think the challenge we have is that we have to look at it more as a "we" rather than an "us and them."

The world is changing, media has completely changed from what it was in consumption patterns, digital is growing but it's still basically a new method, a new media type. The success is that we can have a one-to-one relationship because of the way it's delivered with consumers. I think we have to figure out a way, on all sides, how to deal with that. Consumers have to agree and trust that publishers create great content, the exchange is if they deliver great content, I'm willing to look at their ads because I know that paid for that content.

For agencies and brands, there has to be a trust that both partners have my best interest at heart and we are going to deliver outcomes together. That's the whole goal, which it feels like everyone is saying the same thing: Let's work together to be able to navigate this change.

At the same time, the challenge to digital - you hear people say 50% of the ads weren't seen [ - ad fraud]. There's criminal activity out there that together we all have to focus on now and sometimes that gets lumped in with it. That's not an agency or brand, those are criminals. That's where we have to focus.

Because it's so new, because there's a lot out there, there just has to be a level-set and agreed upon terms of "OK, what are we trying to deliver?" I'm incredibly confident we're going to get there.

BI: Should it just be deliverables though? Isn't the issue at heart that you agree, hypothetically, with Procter & Gamble you are going to reach this many people, and maybe even sales lift, but there's a potential that an agency or vendor could have made the campaign reach more people, or a media credit wasn't passed back to the marketer. Isn't that the issue?

BG: You're talking about rebates and things like that?

BI: Yes. You can agree that the campaign lifted sales by 5% and everyone is happy about it but if a marketer found out it could have been 10%, that's where the issues lie, right.

BG: I would say vice versa. Obviously you need to meet the contractual obligation, that's the number one priority.

For me, maybe it's unique, at GroupM we don't have rebates in the US, you've seen our position. So I feel very strongly about that.

When Xaxis takes forward commitments [when it agrees to spend a set amount of money with a media owner across multiple clients], one of the biggest things about trust is making sure that your clients are aware of what your model is and what you're doing. There has been a lot of explanation around what Xaxis is to our clients and saying: "Hey, here's what it is, and here's what we do and why we make these investments."

That's a far thing from rebates, but each client is aware of what our mission and goal is and sign a piece of paper and says "I'm aware of it."

I can't speak for others in this space, but I think where those lines are blurred is where the challenge comes. I think that's what it comes down to: clarity on both sides on deliverables - deliverables on the contract, deliverables on the execution of the campaigns.

I also think that for the most part there is more good than bad and I think as an industry we are very hard on ourselves. If you look at it, as an industry, we've done a good job of navigating this change into digital. We are fighting together in a lot of ways against fraud, for viewability, that's what we have to do.

Contractual obligation: that's a given. That's a benchmark. And I think sometimes we blur all those things together and they are quite different.

BI: What do you make of [former MediaCom CEO] Jon Mandel's speech at the ANA conference last year [in which he alleged kickbacks and rebates were still rife in the industry]?

BG: I didn't know Jon at all. I wasn't here at GroupM [when he worked within WPP.] For me it was completely shocking because - I've only been on the agency side for three years - I've never seen anything like that. That's my view.

BI: What do you think we're going to see happen in the ad tech market in 2016? It feels like there won't be another IPO, do you think there will be some significant deals or other big changes?

I think it's going to be a time for the bigger [ad tech] players to define their swim-lanes.

BG: I think companies who are in a position to be acquisitive, it's a good time to go to the market. I think companies that can be acquisitive will be because what's available in the market aren't solutions, a lot of the time they are features. Often you see a company offer a unique feature that you want to be able to complete your stack. I think you'll continue to see massive consolidation.

I think you'll see some companies transform to become more digital. If you look at Oracle, and Adobe, and IBM, and SAP, I saw the other day they were looking toward a different solution.

But you can't try to do too much and I think that's also a challenge. I think some companies have to get clear on what their value proposition is.

I agree the IPO market will continue to be slow because the companies that have come out haven't been rewarded for it. I think the smaller companies will struggle a bit because there's not going to be as much VC coming into the market. I think it's going to be a time for the bigger players to define their swim-lanes.

BI: Is there anything else you think is worth mentioning that we haven't covered?

BG: So often right now I think we're talking about a one-way discussion. Transparency, disclosure, ad blocking - you have to say OK, there are multiple parties involved here, what are the benefits consumers get from content? To be a publisher right now is a challenge if people aren't willing to pay for it.

And I think we have to think about it as a society: what are the rules publishers can play by to be able to produce great content? If we don't do that we're going to lose great journalists and we are going to lose great content. That's a two-sided relationship and right now we're only focusing on one side. I'd love to be able to hear from consumers and for them to say: "Here's what I want, here's what I'll engage with, and here's the model I will accept."

In terms of transparency into the brand and agency relationship, I sit on the sideline a little bit. But the interesting thing there is that there has to be a fair playing field because it seems like the expectation of one side versus the other is that if you continue to lower the expectation ...

BI: The fees?

BG: Yeah the fees, right, then what you're getting back from it, you're not going to get it.

If we want people to truly change our business, which I think is what most brands want, we have to figure out the proper economics to make that work. That goes back to if we have an agreed-upon deliverable - that may be different from what it is today, it could be a business outcome or whatever - I think we have to re-shape that arrangement.

The key to that is that the trust you mentioned is agreeing on what that measurement is.

The other stuff with trust I would say is that if you break the contract that's completely different.

This media, digital, can truly change the way we do business, and flatten the world, and allow a lot of people to compete in different ways if we use it for good. We have to figure out as an industry how we are going to use it for good, not for bad. That, at least directionally, is what we're pushing towards and thinking about.

The conversation becomes one-sided a lot of times and we don't focus on the other. I think for the most part, people are doing a lot of good work. We have to figure out how to recognize that.