AT&T Inc. agreed to buy online ad exchange AppNexus as Chief Executive Randall Stephenson aims to turn the TV-and-wireless giant into a media conglomerate after its $85-billion acquisition of Time Warner Inc.
AppNexus, which runs a global advertising marketplace that matches ads to users’ viewing interests, will become part of AT&T advertising and analytics, AT&T announced Monday.
Financial terms of the deal were not disclosed. Last week, the Wall Street Journal, citing unnamed sources, said AT&T was in talks to acquire AppNexus for about $1.6 billion.
Similar to Verizon Communications Inc.’s recent focus on media, AT&T is betting advertising will become a pillar in its plan to build itself up beyond just a set of telecom pipes. AT&T took over Time Warner a little more than a week ago after a drawn-out antitrust battle. The Time Warner deal, originally announced in 2016, will enable AT&T to offer wireless data and entertainment content matched with ad technology to extract some of the revenue that has been going to companies such as Alphabet Inc.’s Google and Facebook Inc.
“Here comes telecom to the advertising fish bowl!” Jennifer Fritzsche, an analyst with Wells Fargo Securities, wrote in a note Monday. “While AT&T and Verizon are still minnows in this bowl compared to the two big fish of Facebook and Google, they are staking their claims to build their assets to be better able to compete.”
Stephenson outlined his plan to build and acquire ad technology at an investor conference Thursday.
“This is going to be a 24-month time horizon kind of thing” to get the advertising business going, Stephenson told investors at the conference, signaling that there may be more deals to come in this area. “This will probably require some level of [mergers and acquisitions]. But it’s not going to be big M&A. This is going to be smaller M&A.”
Last week, AT&T also agreed to sell data-center operations to Brookfield Infrastructure Partners for $1.1 billion, and it is reportedly preparing to acquire the portion of Otter Media that it doesn’t already own.
AT&T shares edged up 2 cents to $31.71 on Monday. AppNexus, based in New York, is privately held.
AT&T can capitalize on customer data about viewers’ likes and habits, but it won’t be easy trying to challenge Facebook and Google in online ads, Allan Nichols, an analyst at Morningstar Inc., said last week.
AT&T is “late to the game,” he said. And the carrier will probably still know less about its customers than Facebook and Google do, Nichols said.
“A company like AppNexus would likely enhance its ability to offer ads, but I’m skeptical about advertising significantly changing AT&T,” he said.
Moreover, spending heavily on deals might ultimately spark questions about whether the company is being smart with its money.
“While one purchase in the low billion-dollar range wouldn’t concern me, several would,” Nichols said.