At the same time, Xandr has been more closely aligned with WarnerMedia ad sales efforts. Xandr was brought under WarnerMedia in a reorganization in April and the two teams went to market together for the first time in this year’s upfront negotiations.
The goal of Xandr from the onset was to connect traditional TV, addressable TV, over-the-top streaming and digital video inventory into a marketplace that’s data-driven, while also improving how advertisers gauge ad results on a variety of goals.
It was a grand plan that was expected to have $20 billion—or one-third of the TV marketplace—run through it, according to a person familiar with the situation. But that premise was flawed from the start, the person says.
The platform was built from the bones of longtime Google rival AppNexus, which Xandr acquired for about $1.6 billion in 2018. It also acquired Clypd, a sell-side platform that specializes in providing marketers the ability to buy both digital and linear TV ads with improved targeting, in October 2019.
The company launched its buy-side platform, Xandr Invest, in the second quarter of last year, selling digital inventory for A+E Networks, AMC Networks, Bloomberg, Vice, Tubi and Xumo, as well as WarnerMedia digital inventory, among others. In March, it partnered with Disney and AMC to make linear inventory available on the Invest platform (along with WarnerMedia linear inventory). But those deals were focused on allowing ad buyers and marketers a way to more consistently target audiences across TV networks using AT&T data. Xandr doesn’t actually sell that inventory.
Tal Chalozin, chief technology officer at Innovid, a digital video and connected TV ad buying platform, says that AT&T bought Clypd to bolster AppNexus. AppNexus was more known for display ads, not video, and Clypd was the missing piece. “With AppNexus, they bought a display-based technology, and it takes time to build video, let alone TV capabilities, on top of that," Chalozin says. "And they’re just not there."
TV publishers have been reluctant to sell their premium ad inventory in Xandr because of competition with WarnerMedia. Even internally, Xandr ran up against pushback in getting WarnerMedia inventory for the platform, according to people familiar with the situation.
“They were not able to get traction with Xandr inside AT&T and WarnerMedia, let alone outside on a collaborative basis with other content companies,” says one ad tech CEO, who was not authorized to speak publicly because of close relationships with current and former Xandr executives.
In grading Xandr on creating a marketplace for the industry at large, it’s hard to call the unit a success, according to multiple industry insiders. But the company has been able to make inroads in places including addressable advertising—the ability to target consumers at a household level.
According to one major marketer, Xandr has been able to find households they might be underserving with their national TV buys and help balance frequency. This can be done as part of its bigger upfront deal with WarnerMedia.
Advanced advertising was the cornerstone of former AT&T CEO Randall Stephenson’s campaign to acquire Time Warner, and he brought Lesser in to be the glue between the distribution and the content from networks including Turner’s TNT and TBS.
Stephenson retired from the company earlier this year and was replaced by John Stankey, who previously served as CEO of WarnerMedia.
While other companies have tried to reinvent TV advertising by making commercials smarter and more data-infused, Stephenson argued at the time that the acquisition of what is now WarnerMedia meant the company had the pipes for distribution with DirecTV and AT&T’s pay-TV service, premium content from cable networks and a plethora of mobile and TV data.
But Stephenson, a veteran of the telecom space, knew little about advertising or media—with one agency exec saying AT&T was “utterly clueless” about advertising.
“Stephenson justified buying Warner by implying they would be able to triple the yield of ad inventory that Turner had,” the exec says, speaking on condition of anonymity because of relationships with former Xandr executives. “They genuinely thought they could expand the advertising by multiples, and that was one of the core rationales behind the deal. But this is so ludicrous.”
DirecTV could also be up for sale, according to The Wall Street Journal.
Innovid’s Chalozin says that much of Xandr’s value relies on filling ad inventory through DirecTV deals. “They cannot really sell unless it’s the same company that buys DirecTV,” Chalozin says.
Most of Xandr’s revenue, according to Chalozin, comes from selling inventory in two minutes of commercial time on DirecTV. If DirecTV is acquired, then Xandr wouldn’t be the preferred partner anymore, making Xandr valuable only to whoever buys DirecTV.
AT&T lost 886,000 pay-TV subscribers in the second quarter and 68,000 subscribers to its streaming bundle AT&T TV Now. It ended the quarter with about 17 million pay-TV subscribers and 720,000 AT&T TV Now subscribers.
“They keep talking about how the marriage of Xandr and Warner will unlock all of these benefits. They have been getting closer to that, but at the same time DirecTV is bleeding households [and] AT&T Now has not caught on. So that piece, which provides the household penetration to distribute ads, is shrinking,” one media buyer says.
Ultimately, however, the decision to sell Xandr might rest more on if AT&T wants to be in the media business, rather than Xandr’s proposition, according to one industry insider.