Microsoft has signed a deal with AT&T Inc. to acquire the Xandr Inc. advertising unit of the company. The deal was inked on the 21st of December 2021 and with this AT&T Inc. has officially sold its global programmatic advertising marketplace (Xandr Inc.) to Microsoft. The agreement solidifies the decade-long relationship between Xandr, including its predecessor companies, and Microsoft in the quest of delivering global digital media solutions for advertisers.
In an independent report by Axios on the same day, it was disclosed that Microsoft is partnering up with the esteemed content recommendation platform Toolba Inc. This partnership will be for a new advertising service that is being aimed at enabling brands to purchase ad space across a large number of websites.
Microsoft by far has been best known as a provider of cloud and software services; however, the company also competes in the digital advertising landscape and the acquisition move Xandr has revealed the ambitious plans of Microsoft to expand their advertising business in a post-COVID marketplace, characterized by an accelerated pace of digital transformation. Microsoft previously had enabled brands to deliver ads to the users of its Bing search engine. In 2019, the company stepped into the e-commerce advertising market with the acquisition of a startup called PromoteIQ. The price of the deal wasn’t disclosed. Now a Microsoft subsidiary, PromoteIQ enables online retailers to place product ads from suppliers on their websites (providing what can be termed as platform-as-a-service).
With the acquisition of Xandr, Microsoft has extended its advertising business to another area i.e. TV ads. The cloud services by Xandr enable companies to purchase TV advertising spots from broadcasters and measure ad campaign performance.
The AT&T unit for broadcasters offers software that helps optimize the revenue generated from the sale of advertising spots. Xandr also provides ad tools for several other marketing channels.
In July 2021, when the news of a probable acquisition of Xandr by Microsoft broke out for the first time, Xandr was already generating an annual revenue of $300 million and $380 million. Following the acquisition, Microsoft can potentially upsurge the revenue of Xandr by promoting the software tools developed by the AT&t unit to its large enterprise customer bases.
The growing advertising business by Microsoft could be a potential threat to Google LLC and Meta Platforms (Facebook Inc.), the two largest players in the digital advertising dominion. Last quarter Microsoft reported that the net search and advertising revenue of the company surged by 40% on a year-over-year basis.
Amazon.com Inc. also is an emerging and increasingly important player in the digital advertising landscape. The online retail and cloud computing leader’s revenue from other segments which majorly includes ad sales jumped 50% last quarter on a year-over-year basis to 8.09 billion.
When it comes to Microsoft, they don’t disclose their ad revenue. The company also hasn’t shared how much it paid to acquire Xandr. However, it's being speculated that earlier this year AT&T was looking forward to receiving $1 billion for the business unit.
AT&T formed Xandr in 2018 with several existing divisions including the AppNexus digital ad marketplace that it acquired a few months prior. The newly announced agreement to sell the unit to Microsoft follows a similar move by the competitor Verizon Communication Inc., earlier in 2021. In May 2021, Verizon had sold the key parts of its advertising technology business to Yahoo in a comprehensive sales of $5 billion to the private equity firm Apollo Global Management.
The partnership between Microsoft and Taboola reported today by Axios can boost the presence of the former in the ad market. The firms are developing a service that "allows advertisers to bid for ad inventory across many places on the open web." That's an area where Microsoft competes with the Microsoft Audience Network platform that allows brands to buy ads across both Microsoft-driven services such as Bing and third-party websites.
The Microsoft-Taboola partnership will be valid till 2024. Taboola has already been using the Azure services from Microsoft Cloud to support its business operations.