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AppNexus: What AT&T’s purchase means for Google and Facebook’s dominance

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AT&T’s purchase of AppNexus has been perceived as a landmark development for the adtech sector and one that is likely to have far-reaching implications in terms of catalyzing more merger and acquisition activity in the space.

Following the aftermath of AT&T’s $85 billion purchase of Time Warner in June, the mass media company confirmed its purchase of AppNexus last week, in a deal estimated to be worth anywhere up to $2bn.

With AT&T’s vast network and the acquisition AppNexus’s unique programmatic platform, the firm has the potential to rival the adtech dominant duopoly of Facebook and Google.

Who is AppNexus and what makes it unique?

While some companies work only for publishers or ad buyers, AppNexus combines both. The firm offers a ‘demand-side platform’ (DSP) which can programmatically buy inventory on thousands of publishers including apps and websites. Publishers such as USA Today and Bloomberg work with AppNexus to sell ads on an automated, or “programmatic” basis, finding the best price at a given moment. Though each partnership is different, AppNexus can sell various publishers’ inventory to ad buyers representing marketers, or even to other ad tech companies who resell it.

What makes AppNexus so unique is that it operates one of the few major “ad exchange” businesses – essentially a big marketplace where digital ad inventory can be bought and sold. There are thousands of sites using this exchange, including Microsoft, which puts much of its ad inventory from the portal MSN into the AppNexus exchange, where ad buyers can bid on ads. This feature makes AppNexus the closest threat to Google’s ad revenue dominance.

Just last year, AppNexus unveiled a “programmable” DSP to rival that of Google and Facebook. Dubbed the ‘AppNexus Programmable Platform’ (APP), the DSP uses machine learning to help media traders more efficiently implement campaigns, a key offering as advertisers are increasingly required to use more targeting variables. The DSP includes both Supply Path Optimization and Automatic Bid Price Optimization to help buyers win auctions at the desired price.

Perhaps what makes AppNexus the greatest threat to the Google-Facebook duopoly is its introduction of a tool that it claimed will give advertisers “100% viewable buying at scale”. Announced last month, the product dubbed ‘guaranteed views’, will give publishers the chance to purchase only ads that they classify as ‘viewable’ against their own standards across the web, offering one solution to the typically complex process publishers and agencies often have to go through, although there are others in the marketplace.

Can building a monopoly rival Google and Facebook’s dominance?

What marks AT&T’s purchase of AppNexus as a landmark development for the adtech sector is that the deal occurred just one month after one of its biggest purchases to date. Last month, a judge gave permission allowing AT&T to go through with its $85bn purchase of Time Warner, owner of media properties including HBO, CNN, Cartoon Network and TBS.

Mergers and acquisition to gain dominance are not uncommon in the adtech industry. Verizon’s $4.48 billion acquisition of Yahoo’s operating business last June formed a new subsidiary called “Oath” that includes both Yahoo and AOL. Advertising is key to Verizon’s plans for Oath. Since Verizon is a home Internet provider and the largest wireless carrier in the US, its access to Internet subscribers’ browsing histories could help boost the Yahoo/AOL advertising business and in turn, combat the dominance of Facebook and Google.

According to CEO Tim Armstrong, “Oath” has claimed some small victories over the likes of Facebook and Google in areas such as ad spending. This suggests that building a monopoly through acquisition may be an effective way to combat the dominance of Facebook and Google.

Speaking to The Drum, Wayne Blodwell, chief executive at The Programmatic Advisory, said AT&T’s decision to purchase AppNexus, on top of its earlier $85bn blockbuster purchase of Time Warner, resembles the strategy of its US telco rival Verizon Wireless which has gone about constructing its own ad stack over the last two years in the guise of Oath.

“Same strategy, just different tech, media and data that sit behind it which they must think bringing all together can be competitive versus Google, Facebook and Amazon,”.

As seen with Oath, by expanding through horizontal and vertical integration, AT&T’s purchase of AppNexus has the potential to cause Google some headaches in the future.

How can publishers benefit?

Above all, the integration of AT&T and AppNexus offers publishers one more powerful alternative to the dominant duopoly. AT&T has the reach and network that AppNexus needs to become a dominant player in the adtech industry. Over 395 million Americans subscribe to AT&T’s wireless network and 224 million Americans use their smartphone with the company according to Statistica. Accompanied with AppNexus’s unique ‘viewable’ DSP, this greater reach will allow publisher’s inventory to be visible to ad buyers on a far greater scale.

Unlike Facebook and Google, AppNexus is it not restricted to working solely with the companies it owns –  as it doesn’t own any. This means publishers can integrate with and build upon their open platforms, without worrying about whether their needs and interests are really being put first. Now AT&T has acquired the company, publishers can continue to build upon their open platforms but on a much larger scale while knowing their needs and interests are continuing to be put first.

It will take time and money for AT&T to be considered a significant rival to Google’s adtech dominance, but its acquisition of AppNexus alongside its global reach is sure to be a talking point in Google’s next adtech meeting.