Fall From Grace: AT&T Explores Sale Of Ad Tech Unit Xandr

xandr

AT&T is reportedly exploring a sale of Xandr, the ad tech unit it launched in 2018 with lofty ambitions to transform the TV advertising industry with data and automation.

The talks are still preliminary and a deal may not go through, per The Wall Street Journal, which broke the news.

Xandr made a big splash when it launched as a core pillar of AT&T’s strategy to monetize (and justify) its $85 billion acquisition of WarnerMedia and transform into a media powerhouse. Xandr’s founder and CEO, Brian Lesser, was backed by AT&T’s CEO at the time, Randall Stephenson, to make his vision a reality.

Under Lesser, Xandr acquired digital ad exchange AppNexus in June 2018 for $1.6 billion and began operating AT&T’s legacy addressable TV business AdWorks.

The company rebranded AppNexus’ assets to Xandr Invest (DSP) and Xandr Monetize (SSP), brought on small cable providers including Altice and Frontier to sell against AT&T data and launched an OTT marketplace called Community for digital video.

But Xandr struggled to gain access to enough linear TV supply from broadcasters and publishers competitive with WarnerMedia.

While Xandr did sign deals with Disney and AMC to sell inventory through Xandr Invest via its linear SSP Clypd, those deals were limited to RFP tools that allowed the broadcasters to optimize campaigns against AT&T data. Xandr didn’t actually have sales rights over the inventory.

“As long as it’s affiliated with another media company, there’s going to be that perception of conflict of interest,” said Forrester principal analyst Jim Nail. “Xandr under WarnerMedia, or even sitting next to WarnerMedia, is challenging to grow outside of the WarnerMedia world.”

Xandr also had difficulties turning the legacy AppNexus platform, which primarily sells display ads, into a video marketplace. Internally, it faced resistance when trying to gain access to inventory from WarnerMedia.

Saddled with debt from the WarnerMedia acquisition, AT&T started getting pushback on its media strategy from activist investor and shareholder Elliott Management in fall 2019. Elliott demanded AT&T pare down its assets and focus on its core telecom business, and Stephenson laid out a three-year plan to improve AT&T’s bottom line.

That plan led to structural changes at Xandr. Lesser, who originally reported directly to Stephenson, was moved under WarnerMedia CEO John Stankey. When Stephenson stepped down as CEO of AT&T in April, Stankey took his place. And when it became clear Lesser wouldn’t get the top job at WarnerMedia, he resigned in March.

“Management changes like that are so often a trigger for strategic readjustments,” Nail said.

Meanwhile Xandr, while profitable, faced weak demand for its targeting and measurement capabilities, and the company was folded into WarnerMedia in April.

“I don’t think strategically AT&T management understands the opportunity at Xandr,” Nail said. “Xandr could articulate it, and Brian Lesser could articulate it quite persuasively, but it does seem like he didn’t really have the backing for his vision.”

WarnerMedia has been hit hard by the COVID-19 pandemic, losing $1.5 billion in Q2 due to the cancellation of major sporting events.

Xandr’s interim head and former chief business officer, Kirk McDonald, stepped down in August to become CEO of GroupM in North America. Xandr is now led by AT&T exec Mike Welch.

AT&T is not the first telco to abandon a serious play in the media business. Verizon acquired AOL in 2015 and Yahoo in 2017 to build a digital media conglomerate under the Oath brand, and ended up writing down the business by $4.6 billion in 2018.

“AT&T views Xandr as a distraction without a tremendous amount of financial upside,” Nail said. “If they want to sell it, there’s enough anticipation that the market will grow dramatically, and there is still no settled leader or infrastructure yet.”

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