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AT&T Aims to Boost Digital Ad Sales With AppNexus Buyout

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AT&T Inc. (T - Free Report) is reportedly holding advanced level talks to acquire AppNexus, a technology firm that operates the world’s largest independent marketplace for digital advertising. The strategic move is likely to augment its foothold in the digital ad sales market, which is virtually commanded by Facebook, Inc. (FB - Free Report) and Alphabet Inc.’s (GOOGL - Free Report) Google.

With more than 34,000 publishers and 177,000 brands transacting in the marketplace, AppNexus allows advertisers to buy space across thousands of websites, targeting their desired audiences. It operates in both lines of businesses helping publishers manage ad space on their sites as well as ad agencies purchase various ads. The transaction, valued in the vicinity of $1.6 billion, is therefore expected to place AT&T deeper into the digital ad realm.

The acquisition will also offer the requisite wherewithal to better compete against its rival Verizon Communications Inc. (VZ - Free Report) , which already has a significant presence in online advertising after its 2015 acquisition of AOL for $4.4 billion. Later, Verizon purchased the digital assets of Yahoo in 2016 for $4.8 billion and merged them with AOL to create a new company called Oath, which is currently introducing extended reality ad for marketers.

Oath is using brand advertising intelligence to help marketers build emotional connections with their customers through new 3D ad formats and first-in-market programmatic virtual reality (VR) ads. The programmatic VR enables advertisers to seamlessly extend existing display and video assets into fully immersive and consumer-first VR environments. On the other hand, 3D ads take brands to the next level by creating an interactive experience for customers, allowing them to explore objects and make informed decisions.

By leveraging AppNexus’ digital prowess and online-advertising software, AT&T aims to negate the advances of Verizon and consolidate its position in this booming market. The company’s recent acquisition of Time Warner Inc. has further offered an unrivalled access to TV ad space from channels like TNT, TBS and CNN, in which it already had a fair presence through DirecTV business.

All these initiatives portray this Zacks Rank #3 (Hold) stock’s significant potential. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

AT&T has underperformed the industry in the past six months with an average loss of 9% compared with a decline of 1.8% for the latter. Whether such strategic acquisitions can benefit the shares of the company in the future remain to be seen.


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