AppNexus’s $75 Million Funding Round Quiets Acquisition, IPO Talk

Ad tech firm's focus lays beyond 2013, says CEO

2013 may finally be the year for consolidation in the advertising tech space, but as All Things D’s Peter Kafka tweeted on Thursday, AppNexus probably won’t get picked up any time soon. That’s because the ad tech company has raised $75 million in funding, which should keep AppNexus independent for the foreseeable future.

“What motivates me personally is the idea that we can really change how advertising works,” AppNexus CEO Brian O’Kelley said in a phone call Thursday. “As an independent company, we can be 100 percent focused on that mission. I’m not against an acquisition as long as the company that buys us is as focused on that mission as I am.”

An IPO may be just as likely as an acquisition, given the most recent addition to AppNexus’s board. As part of the round—led by Technology Crossover Ventures (TCV) with participation from Venrock and Tribeca Venture Partners—TCV general partner David Yuan has joined AppNexus’s board.

“David’s been pursuing me since 2007,” O’Kelley said. “I was out in Palo Alto trying to raise $2 million [at the time], and he said, ‘When you’re ready to raise $50 million, call me.’”

Yuan led TCV’s investment in Facebook and has invested in online marketing companies Merkel and ExactTarget; both Facebook and ExactTarget went public last year. O’Kelley described TCV as “a cross-over firm” that specializes in transitioning companies “from private startups to successful public technology leaders.” However, AppNexus, which has raised a total of $140.5 million in five and a half years, isn’t looking to go public anytime this year, said O'Kelley, although he didn't rule out the possibility of that happening a year or two after.

“We took this round of financing from private equity investors as opposed to the public market. While we have money in the bank, there’s no reason to raise from public [investors],” O’Kelley said.

For now, O’Kelley aims to build on the business that last year served more than 13 billion ads a day—quintuple the company’s 2011 mark—and $700 million in ad spend. In a blog post announcing the latest funding round, O’Kelley teased new products and features that will roll out over the next few months and bring about the third generation of the ad exchange era, but he didn’t say much more during Thursday’s call. “There’s some stuff I’m not going to talk about until [AppNexus Summit in April]. As a Steve Jobs fan, there’s something fun about going on stage to announce something,” he said, before hinting at AppNexus’s focus on automating publishers’ reserve inventory.

“The industry knows that more and more of what’s beng done by people and spreadsheet is going to be automated. ‘Programmatic reserve’ is a term that gets tossed around, and that means a new technology layer that will take years to put in place. We’ve created a team [tasked with research and development] towards that outcome. This isn’t about 2013; it’s about 2016,” O’Kelley said.

AppNexus may be better suited to that end than most ad tech companies. It’s often cited alongside Google’s AdX and Yahoo’s Right Media as a top source of real-time biddable online ad inventory. An original Facebook Exchange partner, AppNexus has positioned itself as the successor to Right Media, helped by the fact that O’Kelley founded Right Media, then left after Yahoo acquired it to start AppNexus. Last summer, AppNexus had even been in talks with Yahoo about replacing Right Media and handling Yahoo’s owned-and-operated inventory.

O’Kelley declined to disclose AppNexus’s revenues, saying that “most companies in our space disclose their top-line ad spend as their revenue number” therefore AppNexus’s $700 million figure is comparable to those other firms’ figures. Though its core business is in the black, AppNexus as a whole isn’t profitable, O’Kelley said. “Anytime you take capital like this and invest, it shows up on your P&L as a loss,” he added. O’Kelley also declined to disclose AppNexus’s valuation, which could frustrate observers who look at a private company’s valuation as a signal of what company could afford to acquire it or whether the private firm would need to go public.

AppNexus staffs more than 400 employees across nine offices, including its New York headquarters and newer outposts in Paris, Hamburg and Toronto.