AppNexus Secures Funding, Adds Microsoft As Investor

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AppNexus revealed Tuesday that it raised $50 million in Series C funding to expand globally and build out features for its real-time (RT) bidding ad platform. It allows companies to auction off ads for specific spaces on publisher Web sites before it serves up on the page.

Ads load on a Web page in a blink of an eye. The average response time from AppNexus to the browser is about 70 milliseconds. During that time the browser makes a request to the ad exchange partner such as AdMeld, Google or Rubicon, which sends off requests to several RT bidding platforms that hold the auctions for the space. A signal prompts AppNexus to run an algorithm to determine the best bid from its 120 clients.

It all started about three years ago. The group built out data centers and custom software, most in the language C, along with "a lot of patents" -- although Brian O'Kelley, AppNexus chief executive officer, declined to discuss the exact amount. About 65 employees support a variety of ad networks, demand-side platforms (DSPs) and other online advertising companies like Google and Microsoft.

O'Kelley points to finding qualified people to build the business as the company's business challenge. "We must hire more people," he says. "We need to double or triple our staff in the next 12 months, and that will be difficult because we need to find really smart people who can operate at our pace."

Evidently, backers think O'Kelley and crew can do it. Series B venture capital backers Venrock, Kodiak Venture Partners and First Round Capital returned for the Series C round. Microsoft, a longstanding AppNexus client, also joins this round as an investor.

In fact, Microsoft is in the process of mothballing AdECN Exchange technology, swapping it out for AppNexus during the next few months. The partnership, in response to demand from advertisers for quicker response times, will allow Microsoft to unlock more demand for the inventory, according to Rik van der Kooi, corporate vice president of Microsoft's Advertiser & Publisher Solutions group. "It was a simple decision for us to focus on yield and marketplace management tools," he says.

Van der Kooi believes Microsoft can cut costs by tapping into the AppNexus platform, reducing the number of industry platforms to which advertisers will need to connect. It also will provide better yields for publishers and return on investment (ROI) for advertisers because they can access demand in real time.

"On a scale of one to 10, if you compare it to the complexities that we're dealing with on the search side as we bring together the Microsoft and the Yahoo marketplace, the integration of AppNexus is much simpler," van der Kooi says.

Led by ad exchange pioneers at Yahoo's Right Media and Google's DoubleClick, AppNexus drives million of dollars into the marketplace. In the past three years, the company has grown to support more than 120 ad networks in 12 countries. It auctions more than four billion ads daily, representing about 676% year-over-year growth.

Recently, AppNexus added a data center in Amsterdam, the Netherlands, to bring real-time bidding to the European Union and the Middle East, adding to two centers in the U.S.

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