By Lara O'Reilly and Alexandra Bruell 

CANNES, France -- News of AT&T Inc.'s talks to acquire advertising technology firm AppNexus was welcomed by marketers, who are eager to have more options in the online ad sector beyond Google Inc. and Facebook Inc., the dominant players.

AT&T, which is fresh off its acquisition of Time Warner Inc., has a treasure trove of TV and digital content from brands such as CNN and TNT. Now the telecom giant is in talks to buy AppNexus for $1.6 billion, a deal that would help it monetize that content better, using data from wireless customers to serve highly targeted ads.

"It's a lightning bolt across the industry," said Bob Rupczynski, McDonald's global vice president of media and customer relationship management, on the sidelines of the ad industry's annual Cannes Lions festival on the French Riviera. Mr. Rupczynski said the deal would give AT&T immediate infrastructure and more data and could give marketers "more leverage" in dealing with Google and Facebook.

"The more options we have available, the better it's going to be for the market," said Antonio Lucio, chief marketing officer at Hewlett-Packard Co.

Some industry executives speculated that AT&T could also look for further advertising technology acquisitions in the coming months to strengthen its offering to marketers.

AppNexus's technology helps advertisers buy ads using automated systems, across swaths of websites and apps. The firm also supplies technology to publishers so they can manage and sell the advertising space on their websites. Its marketplace, which connects the buyers and sellers of ads, also extends into video and the web-connected TV space.

AppNexus's capabilities could be useful as AT&T launches new streaming services of its own that aim to generate some revenue from ads. On Thursday, the company unveiled a $15-a-month video service offering a "skinny bundle" of TV channels. Unlimited data plan subscribers will get free access to the service, which is called WatchTV.

The AppNexus deal "would be a key step towards helping AT&T build out a much more significant digital advertising business than it currently has, " said Brian Wieser, a senior analyst at Pivotal Research, in a note.

Marketers are all "very keen for diversification," said Quentin George, founder of the ad-tech consultancy Unbound. "They're concerned about their reliance on Facebook and Google."

Google took a 31.7% share of the $232.27 billion spent globally on digital advertising last year, according to eMarketer, while Facebook took a 17.9% share. Their market share in the U.S. is even higher.

AppNexus should help AT&T develop a more advanced business in targeted TV ads, said industry executives.

"It would provide some of the capabilities the company would expect it needs in order to apply data and automation to traditional TV advertising," said Mr. Wieser in his note. However, he added, "we think this latter opportunity is relatively limited in the near-term."

On closing the Time Warner deal, AT&T restructured the combined company into four units, including an advertising and analytics business. Brian Lesser, who was on the board of AppNexus, joined last October from WPP's GroupM media-buying division to oversee those operations.

If AT&T does acquire AppNexus, it is unclear whether it would continue the ad tech firm's offering for third-party publisher websites or focus on monetizing its own content with ads.

"One has to ask how other media companies feel about working with a very large competitor now that AT&T is a media company via their Time Warner acquisition," said Anthony Katsur, senior vice president of digital strategy at Nexstar Media Group. "That could create a natural tension."

AT&T declined to comment.

Around one-third of AppNexus's business is in Europe, according to people familiar with the matter. That means AT&T will also need to be mindful of compliance with the region's sweeping new General Data Protection Regulation, also known as GDPR.

One of AT&T's strongest assets is its customer data, said Michael Nevins, chief marketing officer at Paris-based ad-tech company Smart. "GDPR would certainly be one of the filters they would have to be thinking through when they think about how they activate that data [in Europe]," Mr. Nevins said.

Write to Lara O'Reilly at lara.o'reilly@wsj.com and Alexandra Bruell at alexandra.bruell@wsj.com

 

(END) Dow Jones Newswires

June 22, 2018 14:51 ET (18:51 GMT)

Copyright (c) 2018 Dow Jones & Company, Inc.
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