AT&T’s Xandr Works for Closer Ties With WarnerMedia (EXCLUSIVE)

Brian Steinberg

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At Xandr, the ad-technology firm that is part of AT&T, the time to start talking about the advertising of the future is now.

The AT&T unit is best known, perhaps, for selling commercial inventory related to the company’s DirecTV. But Xandr CEO Brian Lesser expects to be recognized soon for taking part in many other areas of the telecommunications-and-media giant.

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Already, Xandr is in talks with the ad-sales team at AT&T sibling WarnerMedia about how best to team up and sell to Madison Avenue during the TV industry’s annual “upfront” sales session next year. “We are working together to go to upfront next year. We are working with them now to figure out how we are going to do that,” says Lesser, during an interview Friday in the company’s midtown headquarters. A WarnerMedia spokeswoman declined to comment on the format of the company’s upfront in 2020.

Executives are also at work, Lesser says, devising new commercial formats for the ad-supported version of HBO Max, the streaming-video service that AT&T expects to launch in 2020. The ad-supported version is currently expected to debut sometime in 2021, says Lesser, “if not sooner.”

The steps Xandr (the name is a 21st century tip-of-the-moniker to phone progenitor Alexander Graham Bell) is taking could put it closer to the heart of a company that has been working aggressively to make its mark in the video-entertainment sector. Yes, WarnerMedia and DirectTV are big assets in the media industry, but it’s Lesser’s unit that is quickly turning into the company’s monetization engine. While WarnerMedia ramps up the creation of video content to bring audiences to screens big and small, and DirecTV tries to establish a connection in consumer homes, it’s Xandr’s job to find new ways to get Madison Avenue into the mix and provide financial fuel.

“What we want to get to is we want to say to one of our clients, ‘You can now reach the audience you want to reach across any program, in any device’,” he explains.

Lesser is one of many media executives waging a quiet but intense battle to win over advertisers who are moving away from the traditional ways of buying TV ads and placing new emphasis on digital alternatives. Armed with swirls of consumer data from loyalty programs and set-top boxes, advertisers are better able to understand where they can find distinct consumer types, like first-time car buyers or expectant mothers, and run their commercials accordingly. For some marketers, running ads across different viewing experiences might be more efficient than airing commercials solely in day-and-date primetime TV.

But others are rushing to win this category as well. Rivals like Fox Corp., ViacomCBS and NBCUniversal operate Open AP, another new video-ad marketplace that lets advertisers establish and define consumer niches, and then buy those audiences across many different companies. WarnerMedia, a founder of Open AP before it was acquired by AT&T, walked away form the organization earlier this year, and many media executives believe it was because of the importance the new corporate parent places on Xandr. Indeed, Xandr earlier this year founded a marketplace called Community that includes not only WarnerMedia assets but also A+E Networks, AMC Networks, Bloomberg, Vice, Vudu, Hearst Magazines, Tubi and Xumo.

“There are a lot of players and competitors in this space,” says one media buying executive. Lesser says Xandr, which saw its employee base grow to 1800 from around 1200 earlier this year, intends to keep hiring in 2020.

It is not a job without a certain amount of pressure. Xandr was only established in 2017, charged with building out the ability to sell new kinds of advertising. WarnerMedia has for years sold TV commercials, and, more recently offered to help advertisers place those commercials more precisely through use of data about specific kinds of viewers and how they can be found. Xandr’s heft is built primarily on its sale of so-called “addressable” ad inventory available on DirecTV – the kind of ads that can be placed and sent to particular niches of subscribers – and, more recently, a distillation of data culled from set-top boxes and customer connections.

AT&T’s desire to move more aggressively into this arena has been hard to miss. In 2018, the company boosted its new ad-tech unit with the acquisition of AppNexus, a technology unit that assists in so-called “programmatic” placement of commercials, or automated assignment of where ads ought to run based on specific online audience attributes. More recently, Xandr acquired clypd, another technology firm that assists in similar placement of ads on traditional TV. Many companies can place ads in digital realms. But AT&T, thanks to its many acquisitions in recent years, has built up new bulk in traditional TV, satellite, and broadband.

Lesser has faced some headwinds, including skeptical media buyers. The recent acquisitions represent “some sort of effort to be this marketplace hub for all the different networks to take part. I don’t see how Disney, Comcast or Discovery, all these guys, are going to want to play ball with AT&T in that way,” says one media-buying executive. But Lesser says he expects Xandr’s efforts to continue. “We are going to greatly expand our marketplace,” he says. “You will see more partners.”

Some buyers say they have at times been confused as to whether they should deal with WarnerMedia or Xandr. Indeed, there is an expectation the two will only move closer together, a sentiment with which Lesser agrees. “I would expect the two organizations, the WarnerMedia ad sales team and Xandr, to get closer and closer over time,” he says. “In fact, that’s already happening.” Lesser declined to comment when asked about how ad-sales leadership at WarnerMedia might develop in the wake of the departure of Donna Speciale, the former president of WarnerMedia’s ad sales efforts.

There has also been some confusion as to whether Xandr’s main purpose is to sell addressable DirecTV inventory or a broader suite of products. Lesser acknowledges that the unit’s main source of revenue comes from the DirecTV sales, but notes the expansion to other types of sales and management is of great importance. “If there is confusion, it probably comes from this pivot we are making from selling addressable television to our sale of a premium advertising marketplace across multiple channels and devices,” he says. “This brand is only a little bit over a year old.”

Meanwhile, there are other tasks to consider. Lesser says Xandr is “working to build the different types of advertising formats in the ad-supported version of HBO Max.” He does not envision a time when HBO series like “The Sopranos” or “Watchmen” have commercial breaks built into them or are accompanied by ads. But some content slated to be part of the project will not be portrayed as part of the classic HBO offering, he suggests, and that will contain commercial inventory. “HBO Max is not only HBO content. HBO Max has other content that is complementary, and I think that’s where the advertising opportunity is for us.”

 

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