• by Karlene Lukovitz  @KLmarketdaily, December 21, 2021

The long-expected sale of AT&T's Xandr programmatic advertising marketplace is finally coming about, and the buyer couldn't be more high-profile or high-powered. 

Microsoft, which has worked with Xandr for a decade, has agreed to buy the company for an undisclosed price.

The deal does not include the ad sales business that sells inventory for AT&T's DirecTV. AT&T spun off that business earlier in 2021 in a deal with TPG Capital.

AT&T has been spinning off "non-core" assets to reduce debt and generate cashflow for its mobile/broadband and perhaps streaming businesses.

Further, according to some reports, Xandr has been losing tens of millions of dollars per year. In July, Axios reported that AT&T was in talks to sell it to Indian ad-tech company InMobi.

Microsoft was an early adopter of Xandr’s server-side header bidding solution, Prebid Server Premium, using it to unify access to its inventory and streamline private marketplace buys of video and native through Monetize.

On the buy side, Microsoft has augmented its media spend through Xandr’s Invest DSP as one of its primary DSPs for marketing campaigns. 

In 2020, Xandr joined the Microsoft Audience Network, which serves Microsoft Audience Ads, the only native advertising solution built by its search platform, Microsoft Bing.

Xandr has integrated premium third-party supply in the network, giving buyers the ability to target Microsoft audiences at scale across premium international native supply through Monetize.

In July 2021, as part of a global contract renewal, Microsoft extended its use of Xandr's sell-side Monetize platform, increasing the marketing spend it runs through Xandr’s Invest DSP, and extended the Microsoft Audience Network demand platform to bid in Xandr’s Marketplace.

Microsoft also renewed its use of the company’s “Global Supply Evangelism” team, which sells advertising inventory in more than 100 countries. 

Microsoft uses Xandr technology to enable video and omnichannel programmatic advertising for Microsoft News, MSN, Outlook.com and other properties. 

As video ad budgets have expanded, Microsoft, which launched on Monetize with one video format in a single market, has expanded to three formats (including in-stream pre-roll and outstream in-article) in more than 60 markets.

"With Xandr's talent and technology, Microsoft can accelerate the delivery of its digital advertising and retail media solutions, shaping tomorrow's digital ad marketplace into one that respects consumer privacy preferences, understands publishers' relationships with consumers and helps advertisers meet their goals," said Mikhail Parakhin, president of Web Experiences at Microsoft, said in the acquisition announcement.

"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 Mike Welch, Xandr executive vice president and general manager.

The acquisition highlights Microsoft's goal of building an even deeper moat around its walled garden, in the opinion of Alistair Goodman, CEO and general manager of Ericcson ad-tech division Emodo. “The market is shifting towards full-stack, horizontally-integrated providers. A unified platform ensures smarter campaign optimization, and greater transparency and efficiency via a direct path between supply and demand.”

Microsoft knows that "first-party data will be crucial to successful ad tech plays in the future, and they have a ton of it,” notes Shiv Gupta, Managing Partner, U of Digital. Xandr will help Microsoft "monetize their O&O and search and LI and all of their data way more effectively than they currently can, through more direct access to supply and demand.” It will also give Microsoft "a shot" within CTV advertising, which is currently a weakness, and help them monetize Xbox, he adds. 

Microsoft "is not out of the battle for the living room, 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," agrees Innovid CTO and co-founder Tal Chalozin.

But not everyone is convinced that the deal is a good one for Xandr or the industry.

“Microsoft has struggled in every digital media acquisition they’ve ever tried to make" -- including the Atlas DSP for which they paid $6.2 billion, then sold to Facebook for less than 1% of that original price, says Mike Woosley, COO at ad-tech data solutions company Lotame. "Maybe now that they own LinkedIn, they’ve had to reconsider digital media and are going to try it all over again."