Could AppNexus’s digital ads be the unlikely saviour of newspapers? — The Guardian

The advertising technology company hopes digital ads will continue to fund great journalism By James Silver, The Guardian, Sunday 16 June 2013 18.08 BST

Brian O’Kelley is an unlikely saviour of newspapers. For one thing, the 35-year-old chief executive of advertising technology company AppNexus – which has morphed from startup to $1bn behemoth with 500 employees in just five years – concedes he knows very little about print.

Digital, however, is his currency and though he will doubtless be accused by some of hyping his company, O’Kelleydescribes saving newspapers as his company’s “higher purpose”.

Moreover, he is “cautiously optimistic” about their future, albeit in digital form, insisting that “there will be great journalism in 50 years’ time, funded by advertising”.

AppNexus has its HQ in New York, and counts WPP, eBay, Microsoft and Orange among its clients and Google, through the search giant’s acquisition of DoubleClick, as its main rival – yet few people beyond the outer reaches of advertising will even have heard of it. So where does his company – which last year managed $700m of advertising spend and in January raised $75m in a Series D funding round, led by Technology Crossover Ventures – sit in the industry ecosystem?

“We’re a technology platform that powers real-time advertising,” explains O’Kelley, his voice hoarse from a presentation he has just given to 300 digital advertising folk, followed by a frenetic networking lunch. “We help content producers, like websites, auction their ad space to the highest bidder. On the flip side, we help agencies and marketers bid for these ads using statistical prediction techniques.”

It is from this data-driven vantage point that O’Kelley is tracking a significant trend which could yet prove newspapers’ salvation. “There’s been a glut of supply [of content] and for more than five years now people in the industry have been talking about [size of] audience mattering more than content,” he explains. “[The typical view is] so long as you have hair, we are going to follow you around the internet to get you to use our shampoo. That means that [marketers] can advertise to you on any kind of site, anywhere. It can be Manga, it can be a game – as long as it’s not explicitly pornographic or fraudulent, that’s success [from their point of view].

“But, of course, that’s not how humans actually experience advertising. In my opinion, context matters to us so much.”

Crucially O’Kelley detects signs that contextual advertising (which is appropriate for the content it appears with) will slowly come to the fore. “The amount of quality supply [of content] online isn’t growing, while I think that advertising interest in it is going to grow significantly and we’ll see CPMs [cost per 1,000 impressions] increase rapidly over the next few years,” he says.

“Is it going to be rapid enough to control the losses in print? I’m not sure, because the medicine we are bringing is still a few years away, and newspapers may not make it the whole way to the point where we can save them with these new ad products. But I do think that over some period of time we’re going to see the marketing community think to themselves ‘Context is valuable to me – that’s an engaged public that I want to reach’. And supply and demand rules in our world.

“So newspapers may not exist in the form we know … there may be different corporate structures, to facilitate the jump to the next wave of how people consume content – but we will still have great journalism in 50 years, funded by advertising.” How does he envisage advertising set in the context of high quality editorial content working – and will it have an impact on the surrounding journalism? “I think we’ll continue to see new ad formats emerge,” he replies. “I doubt we’ll see ads influencing content directly, but we are seeing more advertorial content where the ad looks like it’s content.”

In the wake of Tumblr’s $1.8bn sale to Yahoo, AppNexus has recently been the subject of two lines of speculation. First that the company is next on the shopping list at Yahoo – which acquired O’Kelley’s previous online advertising business, Right Media, for $850m in 2007 – and, second, that AppNexus will go public in New York. O’Kelley fires back that having just taken on investment, the company has no short-term intent to do anything. “I cannot imagine Yahoo buying us,” he says. “But I can’t stop them writing a cheque so big that I couldn’t say no. I am, at some point, subject to many, many zeros.”

Of the possible IPO he says that while there are no plans this year or next, “we will think about it beyond that”. He adds: “There is a time in the future where that would make a lot of sense – and if you look at us from a headcount and net revenue perspective, we are actually larger than many of the companies who have recently gone public or are going public. But just because you can, doesn’t mean you should.”

First published in The Guardian 17th June 2013.