January 16, 2022

Digital Marketing Education

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Microsoft’s Xandr acquisition signals shift to connected TV and esports

It’s an industry on the rise that Microsoft may want a piece of; this year alone, projections for CTV-related upfront spending in the U.S. doubled to $4.5 billion with overall CTV advertising nationwide topping $19.1 billion in 2022, according to eMarketer.

And Microsoft, with a portfolio that includes LinkedIn, Bing and Xbox, may have taken a special interest in Xandr, which can enable its CTV offerings, after AT&T excluded it from the terms of the WarnerMedia-Discovery merger that was announced earlier this year. And with its own ID capabilities already established, the company may see “an opportunity to distribute it more widely via a massive exchange in Xandr,” said Gupta.

Ready Player 1?

Another important consideration for Microsoft is likely Xbox’s role in the realm of OTT streaming, with the company’s consoles now offering access to video-on-demand platforms, including many ad-supported players, in addition to their inherent gaming capacity.

Microsoft “is not out of the battle for the living room,” said Tal Chalozin, chief technology officer and co-founder of Innovid.  “And to have a chance with Xbox, which has a good install base, they must have a play or at least a solution with ads,” which Xandr may help facilitate, he said.

It’s not just Xbox’s video-on-demand streaming that stands to benefit from Microsoft’s purchase of Xandr, though; its long-standing presence as a video game heavyweight may also give the former AT&T ad unit an automatic leg-up over other competitors looking to establish a foothold among esports audiences.

“Microsoft is an incumbent in gaming and esports,” said Matthew Papa, senior VP of global partnerships at search intelligence Captify. Thanks to its growing popularity with audiences in recent years, it’s come to be viewed by many marketers as an equally lucrative and tricky space to navigate, especially given its non-traditional format that consists almost entirely of live gameplay.

But with the legitimacy that Microsoft ownership lends to the Xandr brand, it can give the company “a chance to evolve into the gaming ecosystem,” added Papa.

He suggested that “we could actually see a transformative period in the next 24-to-36 months” as advertising capabilities merge with the tech giant’s first-party data collection and cloud computing infrastructure, giving Microsoft the bandwidth to compete more directly with esports-centric platforms like Amazon’s Twitch.

“If you asked most advertisers what space that would love to get into and test more budget in, gaming and esports is certainly near the top of the list,” he said.

Don’t celebrate just yet

While Microsoft’s Xandr deal is still contingent on a number of factors, some observers have expressed wariness about the benefits given Microsoft’s checkered history with business mergers in the space. 

“Microsoft has struggled in every digital media acquisition they’ve ever tried to make,” said Mike Woosley, chief operating officer at ad tech and data management company Lotame. He pointed to to Microsoft’s 2007 purchase of ad platform Atlas Solutions for $6.3 billion—which it later sold to Facebook for as little as $30 million, or about 0.5% of the original price—as an example.

“Maybe now that they own LinkedIn they’ve had to reconsider digital media and are going to try it all over again,” he added.