What AT&T’s Acquisition of AppNexus Means

Telecom giant aims to be bigger player in digital advertising

The deal, reportedly worth around $1.6 billion, will bring AppNexus’s digital advertising capabilities under AT&T’s expanding roof. Getty Images

AT&T has acquired digital advertising technology company AppNexus, it said Monday, signaling that the telecom giant is looking to become a bigger player in digital advertising and siphon digital ad dollars from Google and Facebook.

The deal, reportedly worth around $1.6 billion, will bring AppNexus’s digital advertising capabilities under AT&T’s expanding roof. AT&T will likely use AppNexus’ capabilities to better leverage its existing customer data and its vast portfolio of television content it just acquired in a landmark $85.4 billion merger with the entertainment giant Time Warner.

Buying AppNexus also gives AT&T a chance to square off with its biggest corporate rival, Verizon. In 2017, Verizon acquired AOL and Yahoo, now known as Oath, giving Verizon access to advertising technology as well as digital content operations. These acquisitions over the past year signal that the telecom companies may be pursuing similar strategies to compete in the digital ad space: Create the content, distribute the content, sell the content.

“[B]y buying AppNexus, [AT&T has] bought one single ad-tech platform, and it sounds like maybe they’ll build around it,” Ben Tregoe, svp of corporate development at Nanigans, said in an interview Monday. “What Verizon did was that [it] bought AOL and Yahoo, and if you look at the combined ad stacks of Yahoo and AOL, it’s [several] platforms they’re trying to stitch together.”

AppNexus is one of the largest ad exchange companies in the world, giving publishers the tools to sell ad space on their digital properties and allowing advertisers to buy ads. An AT&T press release emphasized that AppNexus’s technology would help AT&T with its capabilities in advanced television advertising.

“The combination of AT&T advertising and analytics and AppNexus will help deliver a world-class advertising platform that provides brands and publishers a new and innovative way to reach consumers in the marketplace today,” AT&T Advertising and Analytics CEO Brian Lesser said in a statement.

In an interview with the Wall Street Journal Monday afternoon, Lesser indicated that AT&T hopes the acquisition will help the company substantially bolster the data it can provide to advertisers and publishers.

The acquisition is the latest instance of a telecom giant aggressively pursuing a path to growth in the digital ad space, which is dominated by the so-called “digital duopoly” of Google and Facebook. According to an eMarketer estimate, nearly 57 percent of all digital ad spend in the United States is expected to go to Google and Facebook in 2018.

Tregoe said that the deal will let AT&T streamline its advertising process and give it a better shot at competing with the big platforms. Companies like Facebook and Google control the entire process of selling and buying ads from end to end, which gives them control of all of the data that comes along with it; companies that use exchanges, demand-side platforms and other tools to analyze their ad buys stand to lose a bit of information—and money—each step of the way.

“If you want to be a big player in this space, you have to control your ad stack,” Tregoe said. “You have to have that end-to-end capability … The value of a streamlined ad stack is that it helps you monetize your audience better.”

According to the Interactive Advertising Bureau, digital ad spend hit a record high of $88 billion in 2018. Competing with Facebook and Google makes sense, then, as that’s where the budgets are.

That doesn’t mean it will be easy. Brian Wieser, a senior analyst at the research firm Pivotal Research Group, said it would be “fanciful” to imagine that AT&T would seriously threaten Facebook or Google’s vice grip on the market right away.

“There’s a business to be built, but they’re so tiny in comparison [to Google and Facebook],” Wieser said. “Can they compete? Sure. But can they compare directly?”

The deal raises other questions about consumer privacy and how the data AT&T is seeking to leverage will be used at the company. AT&T is a close partner with the NSA, and on Monday, the Intercept identified and reported on a number of facilities owned by AT&T that the NSA uses to conduct mass surveillance programs.

@kelseymsutton kelsey.sutton@adweek.com Kelsey Sutton is the streaming editor at Adweek, where she covers the business of streaming television.