AT&T launches online advertising marketplace Xandr

Two multi-billion dollar acquisitions and a funny name later, the AT&T content business vision starts to become a bit clearer.

AT&T has announced the launch of Xandr, its new content business unit which will combine current capabilities (e.g. AT&T AdWork and ATT.net), the Time Warner and AppNexus acquisitions, as well as distribution partnerships with Altice USA and Frontier Communications into a notable advertising entity. While the initial plan is to capture a slice of the digital advertising bonanza which has been fuelling the monstrous growth at Facebook and Google, long-term ambitions are a lot grander.

“Xandr is a name that draws inspiration from AT&T’s rich history, including its founder Alexander Graham Bell, while imagining how to innovate and solve new challenges for the future of advertising,” said CEO Brian Lesser. “Our purpose is to Make Advertising Matter and to connect people with the brands and content they care about. Throughout AT&T’s 142-year history, it has innovated with data and technology, making its customers’ lives better. Xandr will bring that spirit of innovation to the advertising industry.”

In the first instance, Xandr will combine the distribution and data capabilities of AT&T, with content catalogues from Time Warner, Frontier and Altice USA and the technology platform of AppNexus to make a more complete advertising offering. With its 170 million subscriber base of mobile, broadband and OTT products, and the data collected on these customers, AT&T believes it can offer a hyper-targeted advertising solution and more effective ROI, to rival the likes of Facebook and Google.

But this is only the first step of the business. In the long-run, AT&T hopes there will be an opportunity for advertisers to bring their own data, augment this with the AT&T customer insight to provide an even more targeted and efficient proposition. These are the foundations of what the business hopes will eventually become an advertising marketplace, where all distributors, content owners and advertisers can combine. AT&T will enrich these offerings with its own data, and even offer tie-ins to Insight Strategy Group and Advertiser Perceptions in order to understand the dynamics between consumer sentiment and the advertising experience. We might have been waiting a while for this move in the content space, but it certainly is an in-depth one.

The partnerships with Insight Strategy Group and Advertiser Perceptions are certainly interesting ones as well. Understanding the dynamics between sentiment and advertising can aid advertisers in placing the right type of advert, in front of the right consumer, at the right time. Its a science which leans on art, but has the potential to be very useful.

The AppNexus acquisition was only completed in August for $1.6 billion, having announced the intention to buy the business in June. Through AppNexus, AT&T has been able to bolster its capabilities with an advertising marketplace, which provides enterprise products for digital advertising, serving publishers, agencies and advertisers. With AT&T’s first-party data, content and distribution the offering becomes more complete, as the focus turns to creating a platform that makes linear TV buying more automated and data-driven. Of course, part of this deal relies on the successful acquisition of Time Warner, which is proving to be more difficult business.

That said, while this is a good idea from AT&T to provide additional value to the content ecosystem, there will be complications. AT&T will have to convince competitor media companies to put their premium inventory on its network, while regulation could prove to be a hurdle as well. With data privacy a hot topic in the technology world right now, shifting around sensitive information and augmenting in such a marketplace might raise some concerns from privacy advocates.

Some have questioned whether AT&T’s venture into the content world, but this does look like to be a comprehensive strategy, incorporating several promised aspects of the digital economy. There are of course significant hurdles for the business to overcome, but it is a creative idea, perhaps one which would have been more likely to emerge from other segments of the technology world. More importantly, it is an opportunity for AT&T to provide value above connectivity.

The telcos will always have an important place in the digital economy, providing the connectivity cornerstone, though this runs the risk of utilitisation, slipping down the value chain. Using data for the purposes of advertising has always been a sensitive issue, though should AT&T be able to negotiate the red-tape maze, Xandr will enable AT&T to secure ‘UnTelco’ revenue. This is a case of a telco using what it has to add value to a parallel segment, as opposing to disruption and attempting to steal a limited amount of revenue. Its creating additional revenue streams and value.