Report: AT&T hoping to sell Xandr advertising technology business for $1B

Less than four years after AT&T Inc. launched its Xandr advertising technology business, the carrier is holding negotiations to sell the unit, Axios reported today.

AT&T executives would reportedly consider any potential sale a success if Xandr fetches a $1 billion price tag. However, multiple people familiar with the company’s finances told Axios that they believe the carrier is setting an overly optimistic price goal.

Xandr was formed in 2018 from the combination of two advertising technology firms that AT&T had bought during the preceding years. The unit sells software that enables brands to buy TV advertising spots from broadcasters.

For brands, Xandr provides a platform that enables their marketing teams to purchase ad space through a web-based dashboard. The platform also includes analytics features that marketers can use to estimate the number of people an advertising campaign has reached.

For TV networks, Xandr provides tools that help them with the process of selling ad spots to brands. Xandr offers technology for header bidding, a practice whereby a TV network lists an ad spot on multiple online ad marketplaces to garner more bids than it could by using only a single marketplace. The AT&T unit’s software can also help companies optimize their ad prices to increase revenues.

The reason insiders don’t see the unit fetching $1 billion, even though AT&T spent more than $1.6 billion to create it, is said to be the combination of several factors. One is that Xandr currently isn’t profitable: Axios reported that the unit is losing $50 million to $90 million annually on revenue of between $300 million and $380 million. Another factor behind why AT&T may struggle to secure a $1 billion bid for Xandr is that the unit is described as having been “grossly mismanaged” by the carrier. 

AT&T is currently said to be negotiating with India-based advertising technology giant InMobi Pte Ltd. about selling Xandr. The carrier reportedly has held talks with a number of other potential buyers as well at one point, including Microsoft Corp. and multiple private equity firms.

The timing of AT&T’s reported effort to sell Xandr has to do with its recent shift away from the TV market. Xandr is said to have generated most of its income from selling ad spots in TV properties owned by AT&T subsidiaries DirecTV and WarnerMedia. The carrier is spinning off DirecTV and WarnerMedia, which means that it would have fewer opportunities to make money from Xandr’s technology if it were not to sell the adtech unit. 

AT&T’s reported efforts to offload Xandr come amid a flurry of mergers and acquisitions in the adtech market where the unit competes. Further complicating the competitive landscape in this segment is Google LLC’s recently delayed efforts to reduce the use of the third-party cookies. Google’s effort could have a major impact on the industry, since countless brands and ad platforms currently use third-party cookies to deliver ads. 

In May, AT&T rival Verizon Communications Inc. offloaded key parts of its own adtech business as part of the $5 billion sale of Yahoo to private equity firm Apollo Global Management. The sale also included other assets, including several major online publications.

The two carriers are offloading secondary businesses while pursuing an extensive, and costly, modernization of their respective internet networks. AT&T recently announced a deal with Microsoft Corp. that will see the carrier use Azure to host its so-called 5G core, the complex array of software applications responsible for orchestrating its 5G infrastructure. Verizon likewise is in the process of rolling out 5G to subscribers. As part of the effort, Verizon is working with Amazon Web Services Inc. to harness the high-speed connectivity standard for new edge computing offerings aimed at the enterprise.

Given that Xandr is reportedly losing up to $80 million annually, selling the unit should free up financial resources for AT&T that it could spend on boosting efforts to compete with Verizon in the internet market.

Photo: AT&T

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