AppNexus on Mobile, the Competition, and, Yes, Its New $75 Million Round

New York-based AppNexus has a lot to crow about. The five-year-old advertising platform — a pioneer in the real-time selling and buying of online display advertising, or “real-time bidding” — has doubled its headcount to 400 employees in the last year. It has grown from one office to nine over the last 18 months. And the company’s momentum just landed it a $75 million round of funding led by Technology Crossover Ventures, bringing its total funding thus far to $140.5 million.

The big question is what happens now. Steven Fletcher, a managing director at the San Francisco-based investment bank GCA Savvian, notes that while AppNexus has a “really good business, ad tech is a cold space” as evidenced by some of AppNexus’s publicly traded peers. ValueClick’s market cap, for example, is $1.5 billion, with its shares trading at $20; meanwhile QuinStreet is valued at just $242 million, its shares selling for $5.66.

AppNexus president Michael Rubenstein says he isn’t worred about a potentially frosty public market. Neither is he concerned with AppNexus’s potential acquirer pool, which appears small. (Microsoft participated in a $50 million Series C that AppNexus raised in 2010, making it unlikely to buy the company. Meanwhile, as Fletcher notes, “Google already has its own tech with DoubleClick, and Yahoo is a mess.”)

In fact, Rubenstein — a longtime DoubleClick executive who was most recently the director of Google Ad Exchange – suggests AppNexus has gained so dominant a position in the world of digital advertising – and, now, raised so much capital — that such concerns aren’t even remotely applicable. We spoke about it yesterday afternoon.

AppNexus seems to have grown like a weed. Are you fully staffed at this point or will you continue hiring, given your new funding?

The company has grown substantially over the past few years. We now have 400 employees and I think we’ll double again this year on an organic basis. We expect to hire hundreds of engineers over the coming years. Not all will be in New York, but it’s our headquarters, so I expect a large percentage [of them] will be.

There was also $700 million in ad spend [transacted across our platform], which is almost triple what it was the year before and a huge number in the digital ad industry.

Are you, or have you ever been, profitable?

I don’t think we’ve disclosed that just yet. But AppNexus is at the stage right now where we realize there’s a massive market opportunity, and our investors are totally supportive of us investing as we need to to become the world leader in ad technology.

Meaning you’ll grow through acquisitions?

We made our first acquisition, of a [fantasy sports] company called Fantuition, last September. In November, we also hired Lynda Clarizio, an extremely well-known executive in the advertising industry who has held many senior roles, including running M&A at Time Warner and serving as president of [the AOL division] With this funding and the hiring of a true M&A professional, we’re signaling that if the right opportunity comes along, we’ll be aggressive.

Speaking of which,  you were reportedly the front-runner in discussions to buy the Atlas ad-serving business from Microsoft last year. What happened?

Atlas hasn’t sold; Microsoft still owns the asset. We did have some conversations with them and did have some interest, but nothing came of it and I don’t know right now what Microsoft’s plans are for the business.

Meanwhile, Microsoft has a stake in your business. How would you characterize the company’s impact?

It’s been tremendously positive. Microsoft is an important client of ours; our technology is used to power its ad exchange, and they’re a true partner to us in every sense of the word. They’ve certainly had a lot of great advice to offer as we’ve grown from a young, New York-based startup into an independent, global tech leader.

You’ve grown like gangbusters, including serving more than 13 billion ads per day. But platforms like yours are facing an uphill battle when it comes to mobile, aren’t they? How much of a concern is it?

Mobile represents an exciting opportunity. It’s really a wide open territory, and I think there’s an exciting future for advertising across wired and wireless devices. The real key trend is ad dollars moving from offline to digital media, and as the largest independent ad company, we’re ideally positioned to capitalize on that trend.

You’re also moving increasingly into online video ads, is that right?

Last April, we announced some groundbreaking innovation in online video that would allow our customers to buy ads not only in standard graphical advertising but also online video. As ad budgets and dollars continue to shift from offline media, including TV, there’s an enormous global opportunity for a tech company like us to be there to support that trend.

You’ve mentioned the company’s independent, global nature a couple of times. At this point, is it fair to assume that you’ll eventually try to go public?

There’s no time line, and certainly, with this new raise and having access to more than $100 million in cash, there’s no urgency. But it’s something we’re thinking about and when the moment is right, it’s a real possibility. We have the financials and team and business to make it happen if we decide it’s the right decision for the company.

Image: Courtesy of AppNexus