What: Ad technology company AppNexus has closed a US $60 million investment round from a Boston equity and asset management firm, valuing the company at about US $1.2 billion, while expecting US $40 million in additional financing from other investors.
Why it matters: The equity financing will give AppNexus the cash it needs for future M&A, boost engineering talent and further global expansion, in addition to being under less pressure to raise capital through the public markets.
Ad technology company AppNexus has closed a US $60 million investment round from a Boston public equity and asset management firm, valuing the company at about US $1.2 billion. The company also expects up to US $40 million in additional financing to follow from “other interested parties” in the coming months reaching a total of US $100 million. AppNexus powers many open and private ad-exchanges including some in Hispanic and Latin American markets (e.g. Orange’s private ad-exchange)
According to current co-founder and CEO Brian O’Kelley, although the company did not necessarily require further investment, having raised US $75 million in January 2013, the public equity financing will give AppNexus the cash it needs for future M&A, boost engineering talent and further global expansion. This additional funding also means AppNexus is under less pressure to raise capital through the public markets.
the public equity financing will give AppNexus the cash it needs for future M&A, boost engineering talent and further global expansion
Mr. O’Kelley explained that AppNexus will not rush to follow other advertising companies’ footsteps with an IPO of its own now, boy possibly next year. To him, there is little incentive to go public other than liquidity for investors and employees. He wants AppNexus to go public when investors understand more about what it does and where it fits into the complicated online ad ecosystem.“On one side, Q2 was our first-ever profitable quarter. We truly didn’t need money and we still had about half of the money we raised last year in the bank, but if you think about the difference between having a lot of money and not needing money, there’s definitely a difference in those two scenarios. And because these are public investors, it would be a validation of the value of our equity and we could use that as currency to go be acquisitive. It lets us get the benefits of being public without the overhead of being public,” O’Kelley said.
In the past two years a handful of online advertising companies have held initial public offerings of their own, but have subsequently performed poorly. Programmatic ad network Rocket Fuel has seen its stock price dip 73% since January, for example. YuMe is off 38%; Tremor Video, 46%; and Millennial Media, 66%. Rubicon Project is down 27% from its $15 initial-public-offering price in April. (WSJ owner News Corp has a 13.7% stake in Rubicon).
O’Kelley suggested also, that the market was not a factor into the company’s decision to raise its most recent round of funding “We did this financing after one of the worst quarters in the public markets ever for ad tech, which of course has been really painful and so the fact that an active public investor would value us at US$1.2 billion gives you a good sense of the amount of confidence they have in our business and what we’re doing. It feels important.”
“We did this financing after one of the worst quarters in the public markets ever for ad tech”
Appnexus primary goal with following the investment is to have enough capital to compete with some of these public companies and create a real currency to do M&A with. The company didn’t disclose names of investors.
According to a press release, the company is planning to use the new cash to “continue the rapid expansion of its global team and to invest in creating innovations that will transform digital advertising.”
In June, AppNexus acquired Parisian ad viewability firm Alenty, which could definitely help the company become a bigger player in the ad tech sector.
“Right now it’s a pretty hot M&A market and there are a lot of companies who are sort of trying to find a way in. We’re going to be pretty price-sensitive on anything we do but we’re interested in the idea of finding good teams and technology. To the extent that there’s folks out there with really, really strong tech and really strong people, we will certainly talk but I think it’s more about that than trying to buy revenue or buy customers, ” said O’Kelley.
Last Year AppNexus partnered with Milennial Media, a mobile ad network and service provider to create mobile Ad-Exchange Milennial Exchange.