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AT&T Acquires AppNexus to Boost Digital Advertising Business

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Confirming industry grapevines, AT&T Inc. (T - Free Report) has inked an agreement to acquire AppNexus, a technology firm that operates the world’s largest independent marketplace for digital advertising. The transaction is likely to be completed by the third quarter of 2018, subject to regulatory approvals and other mandatory closing conditions. The strategic move is likely to augment AT&T’s 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 audience. It operates in both lines of businesses helping publishers to manage ad space on their sites and ad agencies to purchase various ads. The transaction, valued around $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. Verizon also purchased the digital assets of Yahoo in 2016 for $4.8 billion and merged them with AOL to create a new company — 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.

The successful integration of the AppNexus platform across AT&T’s advertising & analytics business is likely to bring new capabilities to the market, improving the overall value of its robust ad-supported premium video content portfolio such as Turner Networks, Audience Network and Otter Media. The transaction also extends AT&T’s advertising and analytics’ footprint worldwide, expanding its reach in various markets across the Asia-Pacific, Australia, Europe and Latin America.

All these initiatives reflect 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 year with an average loss of 15.9% compared with a decline of 7.2% 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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