Microsoft to sunset Xandr DSP

Microsoft Advertising today announced it will discontinue its demand-side platform (DSP), Microsoft Invest (formerly Xandr, formerly AppNexus), effective February 28, 2026, opting to focus on a more AI-driven, conversational advertising future instead of selling the platform to another ad tech company.

According to Microsoft Advertising Corporate Vice President Kya Sainsbury-Carter, the company is "exclusively focusing our buy-side advertising technology investments on the Microsoft Advertising Platform" starting in 2026. This strategic shift comes as Microsoft strengthens its commitment to AI-powered advertising solutions designed for what they describe as a "conversational, personalized, and agentic" future.

"Our commitment to more private and personalized advertising experiences for a more agentic and conversational world is not achievable with the industry's current DSP model which, therefore, no longer aligns with our investment in this future," Sainsbury-Carter wrote in the announcement on the Microsoft Advertising blog. "We will continue to support access to Microsoft and partner inventory through third-party DSPs who share our focus on privacy, quality, and transparency."

The transparency legacy of AppNexus and Xandr

Microsoft's decision to sunset Xandr is particularly significant because the platform had established itself as one of the most transparent options in the programmatic ecosystem. AppNexus, which was acquired by AT&T in 2018 and later became part of Microsoft through its 2022 acquisition of Xandr, was widely recognized for providing advertisers with unprecedented visibility into fee structures and money flows throughout the advertising supply chain.

Brian O'Kelley, co-founder and former CEO of AppNexus, had positioned the company as a champion of transparency long before it was an industry priority. In a 2017 interview with AdExchanger, O'Kelley revealed that AppNexus charged an average of just 8.5% to sellers on its platform, significantly lower than many competitors.

"I would love to understand why Rubicon got away as a public company taking nondisclosed buy-side fees for two years," O'Kelley told AdExchanger. "We didn't, but they were worth a billion dollars. How is that possible?"

Under O'Kelley's leadership, AppNexus adopted a strategy called supply path optimization (SPO) that allowed it to benefit from having a low take rate. The AppNexus DSP would route demand to the lowest-cost path to supply, which often favored its own exchange because of its competitive fees. This approach gave advertisers confidence that they were getting the best value for their money.

According to Simply Ad Tech, "AppNexus took a risk with every impression bought, based on its prediction what the value of that impression will be towards a goal of only buying in-view. In-view is of course only a proxy for outcome based buying (e.g., a CPA buy), but it was a first step in this direction."

The platform's commitment to transparency extended beyond its fee structure. In December 2018, AppNexus reworked publisher contracts to enable fee transparency for buyers, according to reporting by AdExchanger. This allowed advertisers to see exactly what fees were being charged at each step of the programmatic supply chain—a level of visibility that remains uncommon in the industry today.

The broader transparency challenge in programmatic advertising

Microsoft's decision to sunset Xandr comes at a time when transparency in programmatic advertising remains a major concern for advertisers and publishers alike. Several industry studies have highlighted how much of advertisers' spending never reaches publishers due to the complex chain of intermediaries in programmatic transactions.

According to a study by the Incorporated Society of British Advertisers (ISBA) cited by Simply Ad Tech, "a staggering 49% of the advertising dollar never reaches the hands of the publishers. This means that for every dollar spent, the publisher only receives 51 cents."

The Association of National Advertisers (ANA) conducted a similar investigation, examining metadata on 16.4 billion media impressions from seven major advertisers. The ANA found that on average, 42% of each programmatic dollar was spent on "nonworking media"—meaning it went toward tech or agency fees. In some cases, the split was as extreme as 30% to 70%.

"When the advertiser spends a dollar and only a fraction ends up with the media company, one needs to question whether the intermediaries are adding value or charging too much," said Bill Duggan, group EVP at the ANA, according to AdExchanger.

Even more concerning is what industry reports call the "unknown delta"—money that cannot be accounted for anywhere in the supply chain. The ISBA study found that approximately 15% of advertising dollars simply disappear, with DSP spend typically 15% higher than what SSPs record as gross revenue. According to AdExchanger, even in supposedly "disclosed" programmatic models, as much as 33% of supply-chain costs can remain undisclosed to advertisers.

Impact of fees on campaign performance

The practical impact of these fees goes beyond just the financial losses. As Marcus Pratt of Mediasmith explained in an April 29, 2025, article for The Drum, different fee structures can directly affect campaign performance by altering how much of an advertiser's bid actually reaches publishers.

"In an auction environment, these fees typically reduce the final bid the publisher receives and can impact win rate and ultimate pricing," Pratt wrote. "As a hypothetical example, consider two advertisers bidding on the same inventory. Each has different DSP fees and approaches to campaign setup and uses different supply paths."

Pratt illustrated this with a scenario where two advertisers both input a bid of $5 but end up with drastically different amounts reaching the publisher:

"Advertiser A's DSP has a 20% fee, and they purchase a data segment for targeting at a $1 CPM data fee. Advertiser A's bid went through an SSP that is charging 20%. The final bid received by the publisher is $2.40. Advertiser B's DSP has a 10% DSP rate, and they are not using third-party audience data. The SSP fee is 15%. The final bid received by the publisher is $3.83."

In this scenario, Advertiser B would win the auction despite both advertisers starting with identical bids, simply because their supply path was more efficient with lower fees. This demonstrates how critical transparency is for advertisers seeking to optimize their campaigns.

The industry response to transparency challenges

The World Federation of Advertisers (WFA) has developed an eight-point checklist for programmatic transparency, recommending that brands ask specific questions about their programmatic practices. According to the WFA, advertisers should verify whether they know "the actual amount of spend that goes into actual working media" and ensure their data is transferable to any party or vendor of their choosing.

Muhammad Abdullah, Regional Head of Digital for WFA strategic partners Ebiquity, emphasized that direct relationships with digital partners do not automatically deliver transparency. "Unfortunately, direct relationships do not guarantee the transparency that brands desire," Abdullah noted. "This is because they form only one component of many other steps that brands must take in order to reap the various benefits of a fully-disclosed model."

The industry has seen increased movement toward supply path optimization (SPO) as a response to transparency concerns. As Pratt explained in The Drum, "Since pricing can vary depending on supply sources, optimizing supply paths can help lower tech fees and shift more funds to working media."

Joe Zappa, in a recent LinkedIn post, argued that transparency will be a key differentiator in what he called the "Outcomes Era" of advertising. "Most adtech companies I speak to are focusing on performance or the ability to drive outcomes," Zappa wrote. "But the core problem with these approaches is they're not transparent."

Zappa suggested that while Google and Meta have set a paradigm of "Tell me what outcomes you want and we'll deliver them," advertisers are seeking alternatives that provide both performance and visibility. "Transparency. With us [insert adtech company], you can clearly see what we're doing, whether we're driving incremental sales, and how to repurpose the results for other platforms and inventory sources," he wrote.

The future without Xandr

For advertisers who have relied on Xandr's visibility into the programmatic supply chain, Microsoft's decision means potentially losing access to detailed breakdowns of where their advertising dollars go. This occurs at a time when the ANA and other industry organizations continue to push for greater transparency throughout the digital advertising ecosystem.

Microsoft has committed to supporting clients during the transition period leading up to February 2026, but has not specified whether the transparency features of Xandr will be incorporated into its future advertising solutions.

"We are not just adapting to change; we are leading it," Sainsbury-Carter wrote. "With Copilot at the core of our platforms, we are creating a future where technology empowers businesses to connect meaningfully with people while adhering to the highest standards of privacy and trust."

As Microsoft shifts toward AI-powered, conversational advertising solutions, the emphasis may move from granular fee transparency to measuring overall effectiveness and outcomes. However, this leaves a gap for advertisers who value detailed visibility into their supply chain costs.

Florian Schadauer, Identity and First Party Data Partnerships EMEA at The Trade Desk, noted on LinkedIn that Brian O'Kelley's vision at AppNexus was that "buying outcomes will make ad-tech compete better against Google and Facebook," a philosophy that helped establish Xandr's reputation for transparency.

Microsoft's decision could prompt other DSPs to enhance their transparency offerings to capture advertisers migrating from Xandr. Jonathan D'Souza-Rauto, Biddable Product Lead at Kepler, recently highlighted on LinkedIn that DV360 (Google's DSP) has introduced a Seller ID blocklist feature, though it comes with an additional fee of 1.5%. By contrast, he noted that "competitor DSPs have struggled to even offer this with the exception of Microsoft Invest, where the OG AppNexus team have had this feature since day one."

Matthew Rance, Head of Commercial Data & Analytics at Immediate Media, suggested that the open web adtech ecosystem needs to differentiate itself through transparency rather than trying to match the outcome capabilities of walled gardens like Google and Meta. "We should also not be fixated with the idea of having to provide outcomes with the level of sophistication or scale as the incumbents," Rance commented on LinkedIn.

With over 88% of US display ad spend flowing through programmatic channels according to The Drum, maintaining visibility into supply chain costs remains critical for advertisers seeking to maximize their working media dollars.

The loss of Xandr as a transparent option may accelerate industry efforts to establish clearer standards for fee disclosure. Organizations like the IAB Tech Lab and the ANA continue to push for greater standardization in programmatic reporting, which could help address the "unknown delta" of missing advertising dollars.

For Microsoft, the shift away from a traditional DSP model toward a more integrated, AI-driven advertising ecosystem signals its belief that the future of advertising lies in conversational experiences rather than in the current programmatic model. Whether this vision will deliver equivalent or better transparency than what Xandr has provided remains to be seen.

For advertisers, the key question becomes whether Microsoft's AI-powered future will offer new forms of transparency that compensate for the loss of granular fee visibility, or if this represents a step backward in the industry's progress toward greater fee transparency.

As the date for sunsetting Xandr approaches, advertisers will need to evaluate alternative platforms based not only on their performance capabilities but also on their commitment to transparency—a feature that made Xandr stand out in an industry often criticized for its opacity.

The Outcomes Era

The ad tech industry is rapidly entering what many experts are calling the "Outcomes Era," characterized by a focus on delivering measurable business results rather than mere impressions or clicks. While this shift promises greater accountability and return on investment, it's also creating new tensions around transparency and advertiser control.

Both Microsoft and Google are positioning their AI-powered solutions as the ultimate answer to marketers' performance demands. Microsoft's Sainsbury-Carter described a future where their platform will "harness the full power of AI and our unique audience intelligence to enable personalized and conversational advertising and deliver profitable growth for our clients and partners." Similarly, Google's internal communications reveal their messaging that "PMax gets you 27% more conversions, and not just non-retail."

However, these promises of superior outcomes come with a significant trade-off: reduced visibility into how those outcomes are achieved. As advertising platforms become more automated and AI-driven, they increasingly function as "black boxes" where inputs (budget and goals) and outputs (conversions or sales) are visible, but the processes in between—including targeting decisions, bid adjustments, and fee structures—become opaque.

The emerging divide in the industry appears to be between:

1. Walled garden platforms like Google and Meta (and potentially Microsoft's future offering) that prioritize outcomes at the expense of transparency and control
2. Independent ad tech companies that may offer less sophisticated automation but provide greater visibility and control over advertising investments

For advertisers navigating this landscape, the choice increasingly isn't just between different vendors but between different philosophies of digital advertising. Do they prioritize ease of use and potential performance gains from fully automated solutions, or do they value transparency and control enough to accept potentially more complex workflows?

Google's parallel push toward automation

While Microsoft has been direct about its strategic pivot away from traditional DSP models toward AI-driven solutions, Google has been pursuing a similar trajectory, albeit with a more gradual and less transparent approach. Internal emails from Google, recently reported by Search Engine Roundtable, reveal that Google has been deliberately pushing advertisers toward fully automated solutions like Performance Max (PMax) despite advertiser resistance.

According to these internal Google communications about Google Marketing Live 2024, there was "some real frustration that Google isn't listening and pushing 'full auto' solutions they don't want." One Google employee noted that "nobody was that excited about PMax in my advertiser conversations on the day, at best it was like they were willing to go along."

The emails also show that Google's strategy has been to position PMax as the primary vehicle for all of its AI capabilities, with one Google staffer commenting: "Yesterday we doubled down, unambiguously, that all our AI goodness is PMax. It was a consistent theme throughout the day." The communication indicates that Google went as far as having executive Sylvanus Bent III lead the audience in a "Power Pair chant" to promote their automated solution.

This strategy mirrors Microsoft's move in some ways, as both companies are transitioning toward more AI-driven, automated advertising solutions. However, where Microsoft has been transparent about its intention to sunset its traditional DSP, Google appears to be maintaining the existing structure while gradually reducing advertiser control and increasing automation—potentially making it harder for advertisers to see where their money is going.

The Google internal emails suggest that while advertisers are showing resistance to these fully automated solutions, the tech giants are pushing ahead with their strategies regardless—whether through Microsoft's complete pivot to a new paradigm or Google's gradual evolution of existing products toward full automation.

Timeline

• 2007: AppNexus founded by Brian O'Kelley and Mike Nolet
• 2018: AT&T acquires AppNexus for a reported $1.6 billion
• December 2021: AT&T announces agreement to sell Xandr to Microsoft
• June 2022: Microsoft completes acquisition of Xandr
• May 14, 2025: Microsoft announces plans to sunset Microsoft Invest DSP by February 28, 2026
• February 28, 2026: Microsoft Invest DSP scheduled to be discontinued
• 2026 and beyond: Microsoft to focus exclusively on Microsoft Advertising Platform with AI-driven solutions