AppNexus CEO to Potential Investors: We Don't Need Your Money
These days, there always seems to be one rumor or another about AppNexus, the ad-exchange startup run by former Right Media chief technology officer Brian O'Kelley. The New York City-based company, which had 288 employees as of earlier this week and sees 27 billion ad impressions run through its platform daily, is either trying to raise a huge round of funding or trying to go public depending on who you ask and on what day.
So we decided to sit down with Mr. O'Kelley earlier this week to get an update on the business, and get his take on what's pure speculation and what's grounded in some truth. [Some answers have been edited for space.]
Ad Age : Can you give us a sense of your revenue?
Mr. O'Kelley: Not on the record.
Ad Age : Well I hear that it was just under $20 million in 2011 -- $17 million to be exact -- and expected to be between $40 million and $50 million this year. How does that sound?
Mr. O'Kelley: Both are low.
Ad Age : So there's also some buzz, as well as a report saying that you were trying to raise a round near a $1 billion valuation but were only getting interest at $500 million or $600 million. Is that accurate?
Mr. O'Kelley: We've raised $65 million to date and we have half of that left in the bank today. There's no reason to raise money except opportunistically. We were approached by a number of firms who were excited about what we were doing, but none of them made an offer compelling enough to want to take on money that we really just don't need. We now have one of the best-funded companies in the space so … nothing is forcing us to raise money and there's no reason to.
I think it's funny when people diss you by saying you're only worth a half billion dollars. That's like saying, 'You're only half as good-looking as Brad Pitt.' You know, I'll take any kind of digs that make us successful. Broadly speaking, I could see us raising money again or I could see us not. I could just see us just driving toward an IPO or another kind of large-scale outcome.
Ad Age : I also heard recently that you were very close to a deal last year for Right Media in exchange for a piece of your company. And then talking again recently with Yahoo about a deal. Is that the case?
Mr. O'Kelley: There's been speculation about some kind of AppNexus-Yahoo deal since like the day we founded the company. We would love to find a way to have a closer relationship with Yahoo. We haven't to date. We are good partner of theirs. They are a big inventory source, they are a big buyer. I think we'll continue to look for options to be closer to them, but nothing's real today.
Ad Age : Some people say a deal with Right Media hasn't happened in the past because of personality clashes between you and some people who may or may not still be there. What do you make of that ?
Mr. O'Kelley: I think it's somewhat sibling rivalry. It's hard for me because I spent four years doing everything in my power to make Right Media the most successful company in the world. And then I've spent five years almost trying to make AppNexus the most successful company in the world. When they switched the logo of Right Media, I had a sad moment and said to myself, 'I miss our old logo' and realized I had said 'our.' I still really associate with Right Media in that way. A lot of that talk just has to do with people creating drama. There are customers that we both have. But we are literally running massive amounts of Yahoo traffic back and forth every day. At a very senior level, there are strong, deep, trust relationships, so most of that is just people hoping and wishing that there was some tension that 's not actually there.
Ad Age : What's with the drama in ad tech?
Mr. O'Kelley: Since no one understands the technology, you got to talk about something.
Ad Age : I've also heard that Microsoft would love to see Atlas in your hands. There are obviously some disgruntled customers there, but would buying Atlas make sense for you?
Mr. O'Kelley: That's a good question. Historically Atlas has been an incredible asset. It'll be interesting to see where it is today and how it might fit together with what we do. To date, Atlas has a lot of customers that are marketers; AT&T is a good example of a historical customer. We haven't really been in that business very much. So it would be interesting to see what the fit is . Today, you know, we're happy to work with Atlas customers, DFA (Doubleclick for Advertisers) customers, so we wouldn't want to do anything that would change that mentality. But it's worth investigating and, you know, Microsoft either has to invest heavily in Atlas to get rid of those disgruntled customers or I think they do need to find a happy home for it. I have no idea if we could afford it or if it would be a good fit.
Ad Age : So you haven't had any discussions with Microsoft about purchasing it?
Mr. O'Kelley: I ask Microsoft for all kinds of things (laughs).
Ad Age : What's going on with the Facebook exchange? You're an early partner … are things ramping up?
Mr. O'Kelley: I can confirm that we are part of the Facebook exchange program. We are very excited to be so. I think that 's all I'm allowed to say. And for good reason. They've been clear this is early and I don't think they're ready to have anybody talk about what they're doing there.
Ad Age : Some industry people have suggested it might make sense for Facebook to acquire you for your technology. What do you think of that ?
Mr. O'Kelley: Anything is possible. One-hundred percent of my time is spent on building AppNexus into a great company, so my vision is an independent ad tech company that may be public at some point. But we have a very clear mission. So if anybody were to say that mission is important to us, too, and you'd be more successful as part of our company, I'll listen. But I'd have to be convinced that we could go do what we were built to do, which was to innovate in the ad-tech ad exchange space. So that 's all I think about, and nothing to report on acquisitions.
We almost get no interest in terms of an acquisition perspective. Which I think is a compliment.
Ad Age : A compliment because people think you would say 'no'? You're like the cool girl at the dance?
Mr. O'Kelley: I prefer to interpret it that way and not that we suck. I'm just saying, it feels to me like what's happened is people know -- especially because Michael Rubenstein (AppNexus president) went through the Doubleclick/Google acquisition and I went through the Yahoo/Right Media acquisition -- this company wasn't built to sell. It was built to really do something meaningful and it would be hard for someone to convince Michael, Mike [Nolet], me and the rest of the executive team, all of whom have been acquired before, that that 's an easy, fun process.
Ad Age : Do you still have a book on your desk called "Going public" or "How to go public"?
Mr. O'Kelley: That's funny. A law firm was trying to convince us they were experts on that . So they sent us this massive, multi-thousand page tome, and so I had it on my desk. So everyone was like, 'Brian, does this mean we're going public?' I think at that point we had like 30 employees. And I was like 'Yea, totally.' I have a legal book that I couldn't even read a sentence of .
Ad Age : It's not on your desk anymore?
Mr. O'Kelley: No, it's too heavy. But certainly it's something we're actively thinking about -- being a company that could be a public company, that level of compliance and controls in an organization. This is something that any company as it grows up needs to think about: how to be a real company and not just a startup.
Ad Age : I know Microsoft is a partner, but what do you think of the default Do-Not-Track setting in Internet Explorer 10?
Mr. O'Kelley: First off, do not track doesn't mean anything yet. There's a working group on this that 's actively debating it. I've been taking part in the conversation here and there and in fact if you look at some of my posts, a lot of this about really trying to help the FTC understand how ad technology and ad tech works. From my perspective, I want to make sure consumers feel like their privacy is respected. But if you say you can't use any kind of frequency or recency data, I'd say that 's not privacy, that 's standard ad stuff.
So the first thing to remember is even if IE has this thing that says don't track, it's meaningless until it's defined what that means. So I think of it as "please, do not track" first of all, because there's no bite to it. I respect that Microsoft is making consumer privacy the first priority. I just think it would have been nice if we would have first agreed on what that meant.Ad Age : What are your big priorities right now?
Brian O'Kelley: One thing that 's big for us this year is Europe. Last June we had nobody in Europe and now we have 15 people. And it's been really cool watching how quickly the European market is evolving and doing it it's own way and very different from here and even France is very different from Germany. And what works in England doesn't work in Germany. So part of this is how do you as a company learn to adjust yourself to different markets.
Ad Age : Can you give examples of the differences?
Mr. O'Kelley: Germany has what is called "sales houses", which are companies that traditionally are reps for publishers. And this is how the U.S. was for a brief moment in the '90s. The U.K. was kind of like this until two or three years ago. And Germany, the relationships between the major agencies and the sales houses are very strong. So in the U.S., portals like Microsoft, Yahoo and AOL take this role. So what the major sales houses do, define the market the same way in the U.S. that what Microsoft and Yahoo do defines the market. I was in Germany and France three weeks ago and I have to apologize to these people and ask them to teach me everything you know because I'm just learning how these markets work.
Ad Age : Are they receptive?
Mr. O'Kelley: Not historically. In the last year, France just flipped over. They realized the ways to use exchange technology to their advantage and probably next year will be the year of exchanges in Germany but it will be totally different than how we think of it in the U.S. If you say, 'What is it?' I don't know. They are going to dictate to us what they think the market structure should be and the challenge to us is can we adapt our business to meet their needs.