Ad Tech Briefing: Microsoft’s DSP closure signals ad tech consolidation, as well as the AI arms race
This Ad Tech Briefing covers the latest in ad tech and platforms for Digiday+ members and is distributed over email every Friday at 10 a.m. ET. More from the series →
Earlier this week, it emerged that Microsoft is shutting down its demand-side platform, Xandr Invest. This move signals the broader strategic shift toward AI-driven advertising and an end to the old AppNexus as many once knew it.
The company informed clients on May 14 that the DSP would cease operations by Feb. 28, 2026, citing misalignment with its evolving priorities.
The core reason for the closure is Microsoft’s belief that traditional DSPs cannot support the kind of private, personalized, and conversational advertising experiences it envisions for the future. For many, this is a harbinger of consolidation in ad tech and a sign that there is only so much advertiser budget to go around.
Instead, Microsoft is consolidating its efforts around a single, AI-powered buying platform — the Microsoft Advertising Platform — central to delivering better business outcomes in a more privacy-centric, agentic digital environment.
The move marks a broader retreat from conventional ad tech infrastructure in favor of integrated AI tools. Microsoft has already introduced generative AI capabilities within Copilot, enabling automated ad creation, and launched a new “ad voice” experience to make ads feel more natural.
In parallel, Microsoft is doubling down on its sell-side offerings. Tools like Microsoft Curate and Microsoft Monetize will be prioritized to facilitate curated programmatic deals and improve publisher monetization. This strategic pivot follows other changes, including its transition away from the PromoteIQ retail media platform in favor of a partnership with Criteo, leveraging its broader retail media reach.
According to sources, the decision also entails layoffs — a depressingly common occurrence — as Microsoft continues to restructure its advertising unit.
The rise of curation signaled consolidation
As part of the industry’s ongoing AI arms race, Microsoft aims to reposition itself in advertising by focusing on AI integration and curated, high-quality media buying, moving beyond legacy DSP models that no longer support its long-term goals.
The rise of “curation” in ad tech underlined the intensifying market competition, with the lines between DSPs and supply-side platforms becoming increasingly blurred.
Within this context, Microsoft concluded that the industry doesn’t need another DSP generating ever-thinner margins.
Originally, DSPs championed supply path optimization to streamline programmatic buying by eliminating unnecessary intermediaries and cutting hidden fees.
In response, SSPs’ own strategic initiatives, dubbed demand path optimization, are increasingly butting heads with their original trading partners, i.e., DSPs. Products like Magnite’s ClearLine and PubMatic’s Activate allow advertisers to bypass DSPs and buy directly through SSPs — essentially reversing the flow of money in the programmatic chain.
Industry experts suggest competition over curation tools is becoming a core battleground. Many view SSP-driven curation as a countermeasure to DSPs’ SPO efforts, enabling sell-side players to assert new value by offering both platforms and data services.
Some (valid) voices assert that sell-side curation helps fill this accountability gap, offering more trust and transparency. Speaking with Digiday in late 2024, Index Exchange CEO Andrew Casale referred to this new SSP behavior as “sell-side value creation,” citing partnerships like his outfit’s Chalice tie-up as signs of market maturity. Still, the long-term effect remains uncertain, especially as changes in user behavior and traffic sources (e.g., from search to AI-driven discovery tools) continue to shrink usable inventory.
However, many question whether these efforts are true innovations or merely reactive repackaging, indicative of a market requiring further consolidation. Ultimately, the evolving rivalry between DSPs and SSPs is redrawing the map of who controls programmatic advertising, and the closure of Microsoft Invest is the latest high-profile move in a market that will likely see further consolidation.
If you feel strongly about any of the issues discussed above, then feel free to get in touch – no PR pitches please.
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