Microsoft folds Xandr: why it happened, what’s next, and how brands should respond

First and foremost, we want to acknowledge the human impact of this decision. Unfortunately, news like this often comes with layoffs, and we’re sorry to hear about the challenges that some talented individuals are facing. At AI Digital, we’re hiring, and we’d be happy to connect with anyone affected to explore opportunities or help in any way we can. 

At AI Digital, we also view this development as a defining moment in the evolution of digital advertising. It highlights the growing dominance of vertically integrated ecosystems, the blurring lines between supply and demand, and the critical need for independent oversight of AI-powered platforms. Here’s our perspective on why Microsoft made this decision, what it means for marketers, and how our DSP-agnostic approach ensures resilience in this environment.

Why Microsoft is sunsetting Xandr: The official narrative - AI-first advertising

Microsoft’s public messaging frames the sunsetting of Xandr as a strategic move toward a more personalized and AI-powered future. The company emphasized three core pillars:

1. AI-native buying: A new platform powered by tools like Copilot will integrate campaign planning, creative development, bidding, and optimization into a single interface.
2. Privacy and personalization: Enhanced use of first-party data and clean-room measurement to address privacy concerns and regulatory pressures.
3. Focus on supply: Continued investment in Microsoft Curate and Microsoft Monetize, enabling publishers and data owners to package inventory in ways similar to Google’s Performance Max.

The real motivations: Focus, increased competition, economics, and control

Beneath the polished PR narrative lie pragmatic business motivations:

1. Outdated technology and limited market share: Xandr’s legacy infrastructure, built almost two decades ago, required significant engineering resources to maintain. Yet, it accounted for less than 3% of U.S. display ad spend. With AI budgets becoming zero-sum, Microsoft opted to prioritize investments in its AI tools like Copilot and Bing Chat rather than modernizing Xandr’s aging DSP to better compete with industry behemoths such as Google DV360, Amazon, and The Trade Desk. 
2. Supply-side dominance: Microsoft’s recent moves, such as closing PromoteIQ in 2024 and now Xandr, reflect a clear strategy: monetize its O&O inventory. By investing in tools like Curate and Monetize, Microsoft is following the playbook of Google and Amazon, focusing on controlling both supply and demand to maximize profitability.
3. Privacy and profitability concerns: Allowing third-party advertisers access to Xandr created privacy challenges and lower margins. By sunsetting Xandr and consolidating activity within its AI-powered platform, Microsoft can limit external access, address compliance risks, and retain more revenue.
4. AI as a competitive lever: Microsoft’s pivot to AI is also a play for differentiation in a crowded space. Its forthcoming AI-powered ad-buying platform promises real-time optimizations and predictive analytics, giving Microsoft a competitive edge, without sharing these capabilities with third-party tools.

Why it matters beyond the headlines

This move signals several important trends reshaping digital advertising:

1. The blurring of supply and demand

Microsoft’s move reflects a growing trend of platforms like Google’s Performance Max and Microsoft’s AI suite merging inventory and optimization into a single solution. While this bundling creates efficiencies for platforms, it also shifts control away from marketers. Campaign decisions, such as channel mix and inventory allocation, are increasingly made by algorithms, with less transparency and fewer levers for advertisers to pull.

2. Walled gardens grow taller

With Xandr gone, Microsoft’s O&O ecosystem, including Bing, Outlook, Xbox, Edge, and LinkedIn, becomes central to its advertising strategy. This mirrors the behavior of other big tech players like Google and Amazon, who prioritize their own environments. For marketers, this trend limits cross-platform transparency and makes it harder to execute multi-channel strategies without relying on platform-specific tools.

3. The need for AI oversight

AI-driven platforms like Microsoft’s new suite and Google’s Performance Max optimize for platform profits as much as advertiser goals. This makes independent oversight more critical than ever. Without third-party verification, incrementality testing, and clear measurement frameworks, marketers risk losing visibility into their campaigns and the ability to hold platforms accountable.

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AI Digital’s point of view

At AI Digital, we’ve always built our approach around transparency, flexibility, and platform independence. Microsoft’s decision to sunset the Xandr Invest DSP reinforces the value of our DSP-agnostic model, which is designed to adapt seamlessly to changes in the ad tech landscape. Here’s how we’re helping our clients stay ahead:

1. Resilience by design

Unlike agencies tied to specific DSPs, AI Digital operates above the execution layer. Our audience, creative, and measurement strategies are platform-agnostic, allowing us to reallocate budgets across platforms like The Trade Desk, DV360, or emerging CTV players without costly disruptions. Whether Microsoft’s AI-powered platform delivers on its promises or not, we’re prepared to pivot to the solutions that drive performance.

2. Independent oversight for AI platforms

AI-driven platforms are powerful but often opaque. At AI Digital, we audit campaign pacing, incrementality, and ROI across platforms to ensure we’re optimizing against a singular goal for client specific outcomes, not just platform profits. This independent oversight ensures that our clients retain control over their campaigns and business goals.

3. Partnership, not abandonment

While Xandr may be sunsetting, Microsoft remains a key partner. We already leverage Microsoft Curate and MSN CTV supply, and we intend to be early adopters of their new AI-powered platform. By advocating for transparency and performance-focused features, we ensure that Microsoft’s innovations serve marketers’ needs, not just their bottom line.

Guidance for marketers (and how we can help)

The transition away from Xandr offers an opportunity to future-proof your advertising strategy. Here’s how to navigate the shift:

1. Map your exposure: Identify all campaigns, deal IDs, and integrations currently running through Xandr. AI Digital can assist with an audit to ensure a smooth transition.
2. Test alternatives now: Launch mirror campaigns in other DSPs this quarter to benchmark performance and identify the best options before the migration clock runs out.
3. Negotiate portability with partners: Ensure that future contracts with publishers and data providers include portability clauses, allowing you to move segments and private deals across platforms.
4. Layer in independent measurement: Build incrementality testing, clean-room analysis, or marketing mix modeling (MMM) into your strategy to maintain transparency and hedge against platform opacity.
5. Review your tech stack:  Ensure your tech stack is not reliant on a singular platform or partner.  Review marketplace options and analyze your KPIs, available channels, audiences and tactics and identify the appropriate DSP, SSP and publisher/marketplace  infrastructure that will be required to maximize performance and deliver flexibility today and moving forward.  AI Digital can assist with a tech stack review.  
6. Partner with programmatic experts: The transition window is generous, but the strategic work (budget reallocation, supply-path optimization, and AI governance) should begin immediately. AI Digital’s multi-DSP trading desk and Curate specialists can guide you through this process while uncovering new opportunities.
   
   

Bottom line

Microsoft’s decision to sunset Xandr is another step toward an advertising ecosystem dominated by vertically integrated, AI-optimized platforms. While this shift may increase efficiency for the platforms themselves, it also raises risks for marketers, especially those operating without independent oversight or flexible execution strategies.

We know this is a challenging time for many in the industry, but it also presents opportunities to rethink strategies and build resilience. At AI Digital, we’ve built our business on transparency, platform-agnostic execution, and adaptability. As walled gardens grow taller and AI reshapes the industry, our ability to stay nimble and hold platforms accountable ensures that our clients thrive, no matter how the landscape evolves.

If you’re navigating these changes and need support, we’re here to help. Let’s talk. 

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