AT&T has offloaded its ad tech unit Xandr to Microsoft after searching for a buyer for more than a year.
Terms of the deal were not disclosed, and the transaction is subject to regulatory review.
The deal, which does not include Xandr’s addressable TV sales business supporting DirecTV (AT&T spun that business off to TPG Capital in August), marks the end of an era for AT&T’s bold yet brief bet on being an advertising and content powerhouse, following its sale of WarnerMedia to Discovery in May.
"Microsoft's shared vision of empowering a free and open web and championing an open industry alternative via a global advertising marketplace makes it a great fit for Xandr. We look forward to using our innovative platform to help accelerate Microsoft's digital advertising and retail media capabilities," said Xandr's EVP and GM Mike Welch in a statement.
AT&T launched Xandr in 2018 with an ambitious vision to transform the TV marketplace by using telco data and automation. Led by ad tech exec Brian Lesser, the company was framed as the third pillar of AT&T’s strategy to monetise the WarnerMedia assets it acquired for $85 billion earlier that year.
Under Lesser’s leadership, Xandr acquired the demand-side platform AppNexus for $1.6 billion, which it later rebranded to Xandr Invest (ad buying platform) and Xandr Monetise (ad sales platform). It also launched a video marketplace called Community and got smaller cable operators, including Altice and Frontier, to join its video marketplace.
But Xandr’s bold vision to become the foundational marketplace of advanced TV buying didn’t sit well with WarnerMedia’s competitors, and the company failed to gain enough scale to execute on that vision.
There were other challenges: Xandr struggled to turn AppNexus, a legacy programmatic display platform, into a TV-focused exchange. And it had difficulty working cohesively with the sales team at WarnerMedia, which was hesitant to hand over its premium video inventory to the ad tech unit.
In 2019, with a load of debt on its balance sheet, AT&T began receiving pressure from activist investors at Elliott Management about its strategy with Xandr and WarnerMedia. By March 2020, Lesser resigned from his post as CEO of Xandr, and the unit was folded into WarnerMedia that April.
According to Axios, Xandr was “grossly mismanaged” by AT&T and WarnerMedia and lost tens of millions of dollars annually. The ad tech firm brings in roughly $300 to $380 million per year.
What’s in it for Microsoft?
For Microsoft, Xandr adds another weapon to the tech giant’s advertising arsenal, which includes LinkedIn and search ads on Bing.
According to a press release, “Xandr's technology strategically complements Microsoft's current advertising offerings and will help accelerate delivery of digital advertising and retail media solutions for the open web by combining Microsoft's audience intelligence, technology and global advertising customer-base with Xandr's scaled, data-driven platform.”
Ad tech execs see the move as a play by Microsoft to more effectively monetise its owned and operated properties and make it easier for buyers to do so at scale.
“Microsoft is looking to build out the moat around its walled garden of O&O,” said Alistair Goodman, CEO and GM at Ericsson’s Emodo, in an email. “The market is shifting towards full-stack, horizontally-integrated providers. A unified platform ensures smarter campaign optimisation, and greater transparency and efficiency via a direct path between supply and demand.”
Microsoft has its own advertising ID and “sees an opportunity to distribute it more widely via a massive exchange in Xandr,” said Shiv Gupta, Managing Partner at U of Digital, in an email.
“They have an ad tech like product already focused on their data and inventory (and some third-party inventory), but they are weak on self-serve, on publisher monetisation and DSP-like capabilities for advertisers, which precludes them from accessing a lot of direct advertiser and publisher budgets,” Gupta added. “Xandr fixes a lot of that immediately.”
Finally, like any Big Tech giant, Microsoft has its eye on the living room screen, said Tal Chalozin, chief technology officer at Innovid.
“Microsoft is not out of the battle for the living room,” he said. “And to have a chance with Xbox, which has a good install base, they must have a play or at least a solution with ads."