OpenX Secures VC Funding To Expand Globally

Cadogan

Ad network OpenX plans to announce Tuesday securing $20 million in venture capital funding. SAP Ventures, the VC arm for enterprise software maker SAP, led the round and will take a seat on the company's board of directors.

AOL Ventures, Mitsui & Co. Global Investment, and Presidio Ventures, Sumitomo's wholly owned investment subsidiary, also participated in the round, along with existing investors Accel Partners, Index Ventures and DAG Ventures. The infusion brings total investments to more than $50 million.

Marketers following the move by enterprise software makers into the digital ad space can see how managing ads through an ad network supply chain can become analogous to moving physical goods from manufacturing to the retail store floor.

"The world of enterprise software and the world of software for digital ads will likely continue to connect as the digital world becomes more mainstream," said Tim Cadogan, CEO of OpenX, Pasadena, Calif. "For us it's useful to learn from SAP on how enterprise software works and scales."

OpenX will use the funds to further expand internationally by making acquisitions and building out technology, Cadogan said. International plans will find the company in China, but he said research on the country's structural business nuances will become important to avoid missteps. Yahoo recently became the focus of controversy in terms of how it handled the transition of its 43% stake in Alibaba Group, especially the ecommerce site Alipay. It turns out that Chinese law prohibits foreign ownership of online payment companies.

Aside from China, the company will look into further expanding across Europe, and Korea and Latin America. It also will search for acquisition targets.

"The capital will allow us to look at potentially buying smaller companies and teams that fit in with the platform we have," Cadogan said. "We build the platform in modular, which means it's easy to connect with third-party systems, but also technologies we may buy in the future."

Three areas Cadogan would like OpenX to expand into: video, mobile, and reporting and analytics. While at Yahoo, Cadogan's acquisition strategy focused on business traction and talent. In general, the larger acquisitions typically center on "business trajectory," but talent would contribute.

The company also will invest in marketing communications to spread the word about its vision. Pushing a revenue serving platform, a combination of an ad exchange and ad server, so publishers can manage revenue in one place will require evangelism and marketing because it's a bit of a paradigm shift in the way networks work.

During the past two years since launching, revenue generated from the OpenX Market rose nearly 600%, from zero to "tens of millions of dollars" annually, Cadogan said. "By this time, most companies rarely get above the $10 million dollar mark," he said. "Few get above the $100 million mark, but we're tracking to get there quite quickly."

In the past year, OpenX struck international partnerships for the exchange with Dentsu-cci in Japan and Orange-France Telecom in Europe.

 

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