AT&T to Sell Digital Ad Tech Platform Xandr to

AT&T Inc. T -0.73% will sell online advertising platform Xandr Inc. to Microsoft Corp. MSFT 0.21% , ending its bid to become a major force in digital marketing.

Microsoft said Xandr’s digital ad marketplace will help boost its digital advertising and retail media capabilities. Financial terms weren’t disclosed. Last year, The Wall Street Journal reported that AT&T was considering a potential sale of its digital advertising operations, as it scaled back its media ambitions.

AT&T acquired the advertising technology company formerly known as AppNexus in 2018 for about $1.6 billion with an aim to challenge heavyweights such as Google parent Alphabet Inc. and Meta Platforms Inc.’s Facebook in the digital ad market.

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Xandr’s online ad exchange allows advertisers to buy space across thousands of websites and target audiences. AT&T executives hoped to leverage the reams of data the company was gathering from its various businesses—from the viewing preferences of its DirecTV subscribers to where AT&T subscribers take their phones—to help advertisers spend their money more efficiently.

“I have yet to speak to a [chief marketing officer] or an advertiser who says, ‘I wish I could spend more money with Google and Facebook’,” AT&T’s then-Chief Executive Randall Stephenson said in 2018 when discussing the company’s ambitions for Xandr.

The unit failed to yield the explosive revenue growth its owners hoped to generate and often struggled with technical problems. AT&T’s WarnerMedia unit—which includes Xandr—generated $1.4 billion in advertising revenue in the third quarter, down 12% from a year earlier. It was only a fraction of AT&T’s total revenue of nearly $40 billion.

Xandr lost its chief executive, Brian Lesser, early last year. Then the unit’s interim chief, Kirk McDonald, departed in August, shortly after AT&T struck a deal to merge its WarnerMedia business with Discovery Inc.

AT&T’s decision to spin off WarnerMedia was its latest move to unwind its big bet on entertainment and instead focus on its wireless business. Earlier this year, the company agreed to sell a stake in its DirecTV business to private-equity firm TPG.

Microsoft is one of many businesses moving to invest in advertising technology lately. Digital advertising has gotten a boost from the pandemic, with homebound consumers spending more time shopping online and watching videos and streaming shows. A flurry of ad tech companies have either sought out deals or gone public this year.

“Microsoft has been placing more of a focus on advertising in recent periods,” said Brian Wieser, global president of business intelligence at GroupM, a media-buying company inside ad agency behemoth WPP PLC. “Buying Xandr will certainly help them to expand the business faster than might have been possible without it.”

Microsoft’s search advertising business had revenue of $8.5 billion in the year ending June 30, 2021, making up about 5% of the tech giant’s revenue. The company makes money by selling ads on various services, including its Bing search engine, business-focused social-media platform LinkedIn and in its Xbox videogaming platform.

Write to Kimberly Chin at kimberly.chin@wsj.com and Alexandra Bruell at alexandra.bruell@wsj.com

Copyright ©2021 Dow Jones & Company, Inc. All Rights Reserved. 87990cbe856818d5eddac44c7b1cdeb8

Appeared in the December 22, 2021, print edition as ‘Microsoft Buys Ad Firm From AT&T.’

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