Microsoft Corp. signed an agreement with AT&T Inc. to acquire the Xandr Inc. advertising technology unit of the carrier, the companies announcement today.
Separately, Axios reported This morning Microsoft is teaming up with publicly traded content recommendation company Taboola Inc. on a new advertising service. The service is said to be aimed at enabling brands to purchase advertising space on a large number of websites.
Microsoft is best known as a provider of software and cloud services, but the company also competes in the digital advertising market. Microsoft has a long history of allowing brands to serve ads to users of its Bing search engine. In 2019, the company expanded into the e-commerce advertising market by to acquire a startup called PromoteIQ for an undisclosed fee. PromoteIQ, now a subsidiary of Microsoft, offers a platform that allows online retailers to place vendor product ads on their websites.
The acquisition of Xandr expands Microsoft’s advertising business into another area: television commercials. Xandr provides cloud services that allow businesses to purchase TV commercials from broadcasters and measure the performance of advertising campaigns.
For broadcasters, the AT&T unit offers software that optimizes the income generated by the sale of advertising spots. Xandr also provides advertising tools for other marketing channels.
Rumors that Microsoft may buy Xandr first has emerged in July. At the time, it was reported that the AT&T unit generated annual revenues of between $ 300 million and $ 380 million. Following the acquisition, Microsoft could potentially increase Xandr’s revenues by promoting the software tools developed by the AT&T unit to its large corporate customers.
“Microsoft’s shared vision of strengthening a free and open web and championing an open industry alternative through a global advertising marketplace makes it an ideal choice for Xandr,” said Mike Welch, executive vice president and general manager of Xandr. “We look forward to using our innovative platform to help accelerate Microsoft’s digital advertising and retail media capabilities. “
Microsoft’s growing advertising activity is creating increased competition for Google LLC and Meta Platforms Inc., formerly Facebook Inc., the two largest players in the digital advertising market. In the last quarter, Microsoft reported that search and news advertising revenue increased 40% year-over-year, excluding traffic acquisition costs.
Amazon.com Inc. is also becoming an increasingly important player in the digital advertising market. The online retail and cloud computing giant’s revenue from its ‘other’ segment, which is primarily made up of ad sales, jumped up 50% last quarter year over year to $ 8.09 billion.
Microsoft does not disclose advertising revenue. The company also didn’t say how much it is paying to acquire Xandr, but it was reported earlier this year, AT&T was hoping to receive $ 1 billion for the business unit.
AT&T formed Xandr in 2018 from several existing divisions, including the AppNexus digital advertising market which it acquired a few months earlier. The recently announced deal to sell the unit to Microsoft follows a similar move by rival Verizon Communications Inc. earlier this year. In May, Verizon disposed of key elements of its ad technology business as part of the Yahoo sells for $ 5 billion to private equity firm Apollo Global Management.
The partnership between Microsoft and Taboola which was separately reported today by Axios could further strengthen the former company’s presence in the advertising market. Businesses are developing a service that “allows advertisers to bid for ad inventory at many places on the open web.” This is an area where Microsoft already competes with its Microsoft Audience Network platform, which allows brands to purchase advertisements on services operated by Microsoft such as Bing and on third-party websites.
Microsoft’s partnership with Taboola will run until 2024. Taboola has previously used the tech giant’s Azure public cloud services to Support parts of its business activities.