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As Publishers Embrace Native Ads, OpenX Has $100 Million Reasons To Love Programmatic, Too

Look under the hood at many of the buzziest digital publishers of the moment and you’ll hear all about native advertising, a new(ish) kind of paid programming that offers content that’s supposed to be more appealing than a banner ad asking you if you need to lose weight or want to sell your eggs. From BuzzFeed to the New York Times, publishers see native ads as a tactic that offers more quality control, brand consistency—and a higher price tag.

 

At one ad tech shop, the notion that display advertising is untrustworthy doesn’t add up. Profitable and now with revenues of more than $100 million, seven-year-old OpenX has built a big business in its own right—and CEO Tim Cadogan argues that his California startup can help bring publishers’ trust back to automated sales of their ad inventory.

“Publishers have more control than they realize. In many cases, people felt like they lost some element of control in the early stages of programmatic,” Cadogan says. “They’re swinging around, finding their feet, but other people are still saying, ‘You have what we want.’ So publishers need to get assertive.”

The crux of Cadogan’s argument, and the reason OpenX’s core U.S. business is growing at a 70% clip, is that advertisers will want a blend of tactics that work. If they can target a sub-set of potential customers who are more likely to buy than the average set of eyeballs browsing the Web, they’ll still pay value. So even as the industry tests new ways to charge for inventory and some look to shift away from the time-old “CPM” (the cost per thousand impressions that’s the basic currency of digital advertising), Cadogan believes that programmatic ads will find homes in smart cars, wearables, and live TV.

His argument’s already being born out on the television side. For this year’s Super Bowl, brands looking to match with customers likely interested in the game helped drive the average cost of a display ad up by 43% on Feb. 1 compared to the previous Sunday, according to data from the Exchange Lab. On television sets themselves, Mondelez bought the first multi-million dollar spot through a programmatic bid.

OpenX’s fastest area of growth has been in programmatic ads bought and sold over mobile, now one quarter of its inventory and a business that grew 100% in the last year. Cadogan says that growth parallels the shift of OpenX’s own customers’ readers. The company’s exchange supply-side platform business, meanwhile, are outstripping the overall market in their growth (70% compared to the overall real-time bidding market, which grew 52% to $21 billion in 2014, according to Magna Global).

As the publisher-facing side of the programmatic process, OpenX partners with many large private ad tech firms who work with buyers and handle their own exchanges, like AppNexus, MediaMath and Turn. One or more of those companies could go public in the next year, joining Criteo as one of the ad tech industry’s few public independent billion-dollar players. Cadogan says OpenX isn’t actively looking to go public itself anytime soon, though he expects a couple “major conglomerates” to form in the next few months as the programmatic market solidifies more.

They all play in the shadow of Google, whose massive advertising business anchored by DoubleClick dwarfs the entire sector with its overall ad revenues, $59 billion in 2014. But OpenX customers like Ask.com work with both, preferring not to rely on just one option for their inventory. “OpenX is well-established and credit-worthy—which was our main decision criteria relative to size/independence,” says Ken Leeder, senior vice president of programmatic Advertising at IAC. “OpenX has done what their name implies, they have opened advertiser markets for us,” says chief revenue office Kraig Kitchin at The Blaze, another customer.

With 360 employees and cash from its operations to consider investments like aggressive hiring and potential acquisition, OpenX’s CEO says the company’s positioned to hold its ground in the face of power plays by large social media companies like Google and Facebook even should they exert more control moving forward.

“Look at the richness and diversity of the Web. There are so many different players out there, that it’s hard to see just one or two.” Still, it’s right there in the name that OpenX isn’t looking for trouble from any one other vendor—and Cadogan, like others in the industry, is banking that his company will find customers on both sides of any future ads battleground. “We believe you have a much better chance if you are a true technology company.”