AppNexus Takes A $US90 Million-Plus Investment And Is Now Valued At $US1.2 Billion

AppNexus, Brian O'KelleyRobert Libetti/ Business InsiderAppNexus CEO Brian O’Kelley in his New York HQ.

AppNexus, the New York-based adtech giant, has taken a $US90 million round of investment that values the company at $US1.2 billion, CEO Brian O’Kelley told Business Insider. An SEC filing detailing the deal is expected on Monday as the news is being announced at an all-hands meeting inside AppNexus’ New York headquarters.

About $US60 million of the new funding comes from “a large, Boston-based public equity and asset management firm,” which should get the attention of Wall Street. Other investors are considering adding up to $US40 million to the round, which could make the total top out at $US100 million.

The investors will get new equity in the company and none of the funding is being taken off the table by existing stockholders. AppNexus has now taken a total of about $US230 million in investment funding. The company also increased its debt facility to $US75 million-$100 million in a deal shepherded by Silicon Valley Bank and JPMorgan.

The company also had its first profitable quarter in Q2, O’Kelley says, on net revenues “significantly above $US100 million.” The company runs a web ad buying, serving, and data management platform. It shows readers up to 16 billion ads across the web every day, and its reach is said to be second only to Google.

The move probably means that AppNexus has pushed off the need to stage a widely expected IPO. It also makes the company even harder to acquire by others because its price has gone up so much. (One rumoured suitor was Yahoo, but since Yahoo bought mobile adtech company Flurry recently a Yahoo-AppNexus deal makes less sense.)

AppNexus will use its new cash to fund new acquisitions, O’Kelley says.

“Adtech stocks have been crushed this year,” O’Kelley says. “It’s been a tough year for the adtech sector.”

All the recent adtech IPOs — YuMe, Tubemogul, Rocket Fuel, Criteo, Rubicon Project, Millennial Media, Tremor Video, and Marin Software — have seen their stocks decline after going public. The new funding means that AppNexus gets to avoid the humiliation that has been heaped on the rest of the industry by Wall Street.

“With everyone else going public, there is a risk if you’re private you’re without access to capital,” O’Kelley says. “You can’t compete in mergers and acquisitions, you can’t expand into new areas internationally.” AppNexus acquired Alenty in June. The 20-person Paris-based company monitors ads for “viewability,” making sure that users actually see the ads being bought and sold. “I expect us to do other acquisitions in the next 12 months.”

It also cements AppNexus’ reputation as the most significant tech startup in New York. That honour previously rested with Tumblr, acquired by Yahoo in 2013 for $US1.1 billion. But Yahoo has yet to disclose any revenues generated by Tumblr. (Tumblr is certainly generating sales — there are ads running all over the network — but the scale of the business is undisclosed).

AppNexus, in addition to booking more than nine figures of revenue annually, has nearly 600 employees, twice that of Tumblr, which has about 277 staff. AppNexus’ London office alone has about 50 people in it, making it one of the city’s more significant tech companies. About $US2 billion in ad spending runs through the AppNexus platform, the company says.

The new funding will also go some way to chastening AppNexus’ critics. The company suffered some sniping recently over its deal with mobile ad company Millennial Media to create “MMX,” a mobile ad exchange on which ads are bought and sold on a “programmatic,” real-time bidding (RTB) auction basis. Mike Shields of the Wall Street Journal said early predictions that the pact would become huge with advertisers “is increasingly feeling like bluster.”

“It’s the biggest premium mobile ad exchange that there is,” O’Kelley says, noting that the mobile ad business is still shifting from traditional to programmatic buying. That means it’s still pretty small compared to the existing mobile display ad business, but “Millennial, relative to anyone else, they are way ahead.”

O’Kelley was clearly excited about the announcement, when he talked with Business Insider about it recently. “There is a lot to be said for being a unicorn,” he quipped.

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