Billion Dollar Unicorns: AppNexus In The IPO 2015 Pipeline

According to a Forrester research report released last year, the online digital display advertising spend in the US is estimated to grow to $37.6 billion by the year 2019, compared with $19.8 billion last year. During the same period, Forrester estimates the offline ad market, which includes channels like the cable TV, radio, and television to grow to $239 billion. Within digital advertising, mobile and video advertising are expected to be high-growth segments. Forrester predicts display ads targeted at smartphones and tablets to contribute nearly 40% of all online display ad spending by 2019 compared with 24.4% in 2014. Billion Dollar Unicorn club member AppNexus is providing the market with services to leverage this high growth in Internet advertising.

AppNexus’s Offerings

New York-based AppNexus was founded in 2007 by alumni of Right Media, Brian O’Kelley, and Mike Nolet. O’Kelley is among the prominent software engineers in New York’s ad-tech community and is known as the inventor of ad exchanges. The idea of AppNexus was born when O’Kelley was at Right Media. He had built their network and was interested in connecting networks to form exchanges. He then came up with a plan to license a version of Right Media’s network to an Israeli software firm so that it could bid from within Right Media’s own network. The first time that the auction connected for the two companies, O’Kelley realized he had struck a goldmine.

Within two years, O’Kelley had set up his own company to concentrate on the advertising exchange market. He helped create AppNexus’s technology platform that powers innovative trading solutions and marketplaces for Internet advertising. The platform enables advertisers to get the most value from their ads, the content creators to get the most from their content, and consumers to get the most out of the Internet. Their platform includes analytical capabilities that let organizations trade in online display-advertising space on a real-time basis. By the year 2013, AppNexus was processing 16 billion ad buys per day and handling $700 million in ad spending.

AppNexus’s Acquisitions

Despite its profitable status and a high-growth revenue model, AppNexus is facing a bigger battle from technology giants like Facebook and Google who are market leaders by a mile. But that hasn’t dampened AppNexus’s spirits. With profits piling, the company has gone on an acquisitive mode to help battle competition.

In March this year, AppNexus announced the acquisition of their competitor Yieldex for an estimated $100 million. Yieldex is known for their platform that is able to determine the maximum value of each ad slot. Thus advertising space is sold in the market that values it more. AppNexus plans to integrate Yieldex’s platform to help advertisers serve ads in negotiated web-ad deals. They also believe that with the Yieldex acquisition, they will be able to better compete with Google, which offers its own services to websites that want to sell ads automatically.

Last year, AppNexus had made several other acquisitions including MediaGlu, a startup that focused on cross-device advertising, for an undisclosed sum; Open AdStream, an ad-serving platform and Alenty, a company focused on ensuring that ads are seen by the end customer. Terms of these deals were not disclosed, but market reports estimate that the three put together cost AppNexus nearly $200 million.

AppNexus’s Financials

AppNexus earns revenues by charging a 10% fee to connect buyers and sellers on their digital advertising platform. Their detailed financials are not known, but analysts peg their net revenues at $200 million and gross revenues at $2 billion. Unlike other new-age companies, AppNexus is expected to be operating profitably.

They are venture funded so far with $288.2 million in investments from investors including WPP, Technology Crossover Ventures, Venrock, Tribeca Venture Partners, Microsoft, First Round, Kodiak Venture Partners, Coriolis Ventures, Ron Conway, Ben Horowitz, Khosla Ventures, and Marc Andreessen. Their last round of funding was held in April 2015 when they raised $62.7 million at an undisclosed valuation. Back in 2014, they had raised $60 million at a valuation of $1.2 billion. As of now, they have not disclosed any plans of going public. Analysts are expecting them to list this year.

More investigation and analysis of Unicorn companies can be found in my latest Entrepreneur Journeys book, Billion Dollar Unicorns. The term Unicorn was coined in a TechCrunch article by Aileen Lee of Cowboy Ventures.

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I receive many emails from entrepreneurs who want to discuss their specific businesses. I’m very happy to discuss your situation during my free online 1M/1M Roundtables, held almost every Thursday. During each roundtable, up to five entrepreneurs can pitch their businesses and receive my immediate and straightforward feedback.

To give entrepreneurs all over the world access to Silicon Valley’s knowledge, methodology, and network, I founded the One Million by One Million (1M/1M) global virtual incubator. 1M/1M aims to nurture a million entrepreneurs to reach a million dollars each in annual revenue and beyond, thereby creating a trillion dollars in global GDP and ten million jobs.

For those still testing the waters of entrepreneurship, I’ve written my Entrepreneur Journeys book series to inform and inspire. My newest book, Billion Dollar Unicorns, is now available from Amazon.

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