Another 'walled garden?' Here's what AT&T acquisition of AppNexus means

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Credit: Michael Nagle/Bloomberg

AT&T is acquiring ad tech platform AppNexus, with plans to integrate it into its advertising and analytics unit, the company said Monday. The move will undoubtedly shake up the current ad landscape as well as challenge the so-called duopoly of Google and Facebook.

AppNexus, which has been rumoured to go public for years, mainly serves as a sell-side platform (SSP), meaning it provides publishers with software to automate ad sales in formats such as display, audio and over-the-top video. The company also works with marketers to help them buy ads, competing with outfits such as The Trade Desk and Media Math, though that portion of its business is regarded to be much smaller than the sell-side business with publishers.

The news comes shortly after AT&T's $85 billion acquisition of Time Warner. Brian Lesser, CEO of AT&T's advertising and analytics unit, was previously responsible for billions in ad spending at WPP-owned GroupM, the world's largest buyer of digital media. At Cannes, Lesser made no secret of his ambitions to compete with the duopoly.

"The future state of the ad business is a platform business," Lesser said last week at Cannes. "Google and Facebook prove that platforms rule. When you make it easy for advertisers to efficiently buy at scale and generate performance, that's what they will choose."

WPP purchased a $25 million stake in AppNexus back in 2014 at a valuation of $1.2 billion and used the platform to make ad buys through WPP's programmatic arm, Xaxis.

"This acquisition would provide AT&T the pipes. Period," says Neil Sweeney, founder and CEO of Freckle IoT. "AT&T has a choice of buy versus build. They currently have the data, but not the ability to execute on it. They do not have time to build and they should not. This is step one in a stack. There will be other pieces; this is just the first one."

Sweeney adds that AT&T is on a "collision course" with Google and Facebook. "It is another garden to compete with Google and Facebook," he says.

That's not to say that AT&T will crush the dominant powers. "AT&T will suggest that it is 'bigger' than the pure-play companies like Facebook and Google," Sweeney says. "It will also say that it's solving non-digital issues like television. This is nonsense."

The first major hurdle for AT&T is tying consumer data across mobile, TV and other devices following it acquistion of Time Warner, says Mike Baker, CEO at ad tech company DataXu. "This is the dream for telcos and media companies," Baker says. "While AppNexus would bring them all the ad tech plumbing they need, this kind of next-generation analytics would still be a missing piece."

It's been an open secret that AT&T would buy AppNexus since the company hired Lesser, according to Baker, who pointed to Lesser's relationship with AppNexus during his tenure at WPP.

"It remains to be seen what the strategic value AT&T will see by owning AppNexus' tools," Baker adds. "Will it be an open model selling ad inventory and tools such as Google's DoubleClick? Or will it be a so-called 'walled garden' ad network model like YouTube or Facebook, where there is less advertiser transparency and control and the tools are therefore less relevant?"

Michael Connolly, CEO at ad tech platform Sonobi, says the deal between AT&T and AppNexus will reaffirm the central role of supply in a data driven marketplace. "With addressable audience definition, GDPR compliance, and the ability to provide global reach and frequency all occuring at the consumer level, the supply side of this ecosystem is more strategic than ever," Connolly says. "Appnexus would also afford ATT the ability to allow other buyers to target ATT data sets without that data leaving their new walls."

Who really wins?

Still, others believe AppNexus—and not AT&T—is the clear winner following Monday's news.

"Perhaps the more interesting piece is what this does for AppNexus," says Ben Clarke, co-founder at digital agency The Shipyard. "It's no secret that privacy concerns are paramount, and even though companies like Facebook are taking heat for selling customer data, in the end, Facebook and Google have owned properties where they can gain consent to sell customer data to advertisers."

"If policies were to be written with direct consent requirements to sell that data, it would hurt companies like AppNexus—who owns no publishers directly—much more than Facebook or Google," he adds. "It essentially gives them some growing parity with Facebook and Google at least from an access perspective. Putting the money aside for a moment, this is much more significant for AppNexus' growth and relevance than it is for AT&T."

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