Microsoft buys Xandr, ending AT&T’s bet on ad technology that never paid off

Microsoft buys Xandr, ending AT&T’s bet on ad technology that never paid off

To say it’s widely understood that AT&T was looking to offload Xandr, the outcome of its purchase of AppNexus 2018, for some time will be an understatement, at least.

And with the news that Microsoft has purchased Xandr for a price Undisclosed fees, this deal marks the end of another chapter for one of the most recognized names in advertising technology. Microsoft’s purchase of Xandr is subject to usual closing terms, including regulatory reviews, with Mike Welch, Xandr evp and GM, who claim that his clothing technology could help accelerate Microsoft’s capabilities for digital advertising and retail media.

Similarly, Mikhail Barakhin, head of web experiences at Microsoft, said in the same statement that he hopes to shape the digital advertising market, “in a market that respects consumer privacy preferences, understands publishers’ relationships with consumers, and helps advertisers achieve their goals.”

Many suitors were running

Microsoft was an early-stage investor in AppNexus and formed several key strategic partnerships with the company before its 2018 sale to AT&T, though it has faced some competition to buy the carrier’s ad technology assets in recent months with InMobi steered heavily in the element.

Xandr, in fact, offers a modular ad technology suite with a suite of tools serving both the buy and sell side of the market with the company focusing the bulk of its efforts on weaning publishers from Google’s lucrative ad suite under the appearance of AppNexus.

Several sources told Digiday, that in the run-up to the latest announcement, a number of suitors, including a competing sell-side ad tech player that was newly awarded with public funds after an initial public offering, kicked Xandr tires.

One source even told Digiday that there were internal discussions at Comcast about a possible approach for Xandr, but that formal negotiations never materialized.

Zander’s Serpentine Riches

The deal concludes the latest wave of industry mergers and acquisitions with high-profile year-end deals including Criteo’s $380 million purchase of IPONWEB, as well as GumGum’s purchase of Playground xyz, many of which have fueled the bountiful ad tech companies that have gone public over the past year. , such as Outbrain’s $55 million purchase of Video Intelligence.

In mid-2021, Axios reported that an ongoing Xandr sale was taking place with “losses mounting”. A source familiar with its 2020 financials for Digiday called it “not pretty,” a major reason AT&T struggled to find a buyer in its early days of exploring selling.

For some, the ramifications of Xandr and AT&T’s premium media assets (a process that would take place as part of the creation of Discovery-WarnerMedia) make it an undifferentiated asset with a “Community Garden” show that’s been widely recognized as a disappointment.

Although sources within Xandr are keen to highlight how its revenue saw something of a pickup in 2021 as the company is reported to be looking to spend $1 billion, across Linear and CTV.

Where did the error occur?

Compare this to what it was three years ago when the vast majority of AppNexus revenue was generated by display ads, although sources tell Digiday that the ad tech company’s margins have dwindled in recent years, especially as advertisers have demanded more robust transparency from online transactions. Platform.

Some interpret AT&T’s divestiture of Xandr as indicative of a broader trend as US carriers — which have spent big on advertising technology when we consider the AppNexus purchase to have arrived soon after Verizon bundled AOL and Yahoo — are turning their back on the space.

Why are telecom companies turning their backs on advertising technology after making these strategic investments? Well, the answer is simple, “internal politics”.

Carriers, after all, are essentially subscription-based businesses where margins dwarf those that profit from the back of media purchases.

The past year saw a change of leadership at the helm of AT&T as Randall Stevenson — the CEO who oversaw the telecoms acquisition of WarnerMedia and Xandr — was replaced by John Stankey with a new CEO who viewed media investments as less than serving the company’s shareholders. Then there are the ever-increasing privacy concerns with Verizon’s early ambitions to head Oath south shortly after Hans Vestberg took over the telco in 2018 with such concerns believed to be at the core of its downfall.

After all, we only need to look at the recent $2 million fine imposed on OpenX after the Federal Trade Commission ruled that it violated elements of the Children’s Online Privacy Protection Act as evidence of the danger many ad tech companies face.

Main departures

Xandr also suffered a number of major major departures with AppNexus CEO Brian O’Kelley leaving just weeks after the sale to AT&T was completed. Moreover, the 2020 exit of Xandr CEO (then) and telco ad technology project architect Brian Lesser led many people to start questioning the sustainability of its ambitions.

Soon after his departure, it was announced that Xandr would be transferred to WarnerMedia, but it was understood that difficulties in merging the two groups soon led to the abandonment of that project.

A project that effectively ends up selling Xandr to Microsoft, and now the industry awaits Microsoft’s renewed fee in advertising technology.

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