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.
That said, do you know what AppNexus does, exactly? CMO Today
can explain.
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
December 01, 2016 17:58 ET (22:58 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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