What is AppNexus? We Explain What the Ad Tech Company Does


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By Mike Shields

You know it's a big ad technology company, one that could be valued as high as $2 billion if it goes through with an initial public offering next year, as The Wall Street Journal reported. You might know it is one of those cool, New York-based tech companies--part of what was once called "Silicon Alley."

Perhaps you've heard that the ad-holding company WPP has invested in AppNexus and that its backers see AppNexus as a potential challenger to the dominance of Google and Facebook in online advertising.

OK, so what's AppNexus's business?

While some ad tech companies work only for publishers or ad buyers, AppNexus's business touches both. The firm has a "supply-side platform," meaning it offers software tools to web publishers to help them manage ad space and make more money. It also offers a "demand side platform," or DSP, a software tool that lets ad agencies buy ads across lots of sites.

What specifically do publishers use AppNexus for?

Companies like USA Today and Bloomberg work with AppNexus to sell ads on an automated, or "programmatic" basis, finding the best price at a given moment. Though each partnership is different, AppNexus can sell various publishers' inventory to ad buyers representing marketers, or to other ad tech companies who resell it.

AppNexus operates one of the few major "ad exchange" businesses, essentially a big marketplace where digital ad inventory can be bought and sold. As an example, Microsoft puts much of its ad inventory from the portal MSN into the AppNexus exchange, where ad buyers can bid on ads. There are thousands of sites using the exchange. This is one area where AppNexus competes directly with Google.

Publishers can also use AppNexus's products to set up so-called private exchanges, where they can sell ad space to a defined set of advertisers at price minimums.

Does the company handle display ads? Mobile? Video?

Yes, all of the above. The company has even started providing technology for some audio ads.

How does AppNexus make money?

It varies. When an advertisers buys ads on the AppNexus exchange, AppNexus takes a cut from each transaction. The publishers and brands that license AppNexus' tools pay a flat monthly fee.

Does AppNexus have an ad sales team?

No. All ad transactions on its platforms happen digitally.

Is it an ad network?

No. But, but it does license its technology to other ad tech companies. Instead of building their own software allowing ad buyers to bid on ads across thousands of sites, ad networks can license tools from AppNexus, as companies like CPXi and Bannerconnect have done.

Is it true AppNexus offers a "header bidding" tool for publishers and is betting on that trend?

Yes. Wait, what is header bidding? Click here. We'll wait for you.

Didn't I read something about AppNexus having a big problem with fraudulent ads?

Yes. In 2014, AdExchanger published a big expose which noted that AppNexus' exchange had a serious issue on this front. The story said AppNexus was offering up inventory from shady publishers with fake, computer-generated traffic.

Since then, AppNexus Chief Executive Brian O'Kelley has been vocal about the fraud issue and has taken some steps to correct it. He made headlines in 2015 when he announced plans to move a significant chunk of the company's ad inventory out of its exchange.

What precisely does AppNexus do for the "demand" side of the business, the ad buyers?

The company's demand-side platform provides tools that make it easy to buy inventory across a host of sites. Some brands like Wayfair also use AppNexus's suite of tools to help manage their data and help make decisions about where to best spend their ad budgets. In some ways, AppNexus is ripping a page from "marketing cloud" companies like Salesforce and Oracle by helping marketers manage all these types of needs.

Who are these guys? Who has invested in them?

Mr. O'Kelley is an ad tech veteran. He is credited with building one of the first ad exchanges, Right Media, which he eventually sold to Yahoo in 2007.

Lots of big names have invested in AppNexus, which has raised roughly $280 million in funding to date. The list includes ad giant WPP, which invested $25 million in the company in 2014 ( at the time, that gave the ad company a 15% stake), as well as News Corp and Microsoft. WPP CEO Martin Sorrell has said that investing in AppNexus has actually helped create more competition with Google and Facebook, which continue to dominate online advertising.

Ok, got it. So what is AppNexus exactly?

It's complicated.

Write to Mike Shields at mike.shields@wsj.com


  (END) Dow Jones Newswires
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This article appears in: IPOs
Referenced Symbols: WPPGY


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