Google Cloud, looking to invade Amazon's turf, inks deal with OpenX

Google's $110 million deal with the ad exchange network is part of plan to grow its cloud business

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Credit: Google

It's common knowledge in ad tech circles that Amazon's AWS cloud services dominate among advertising technology companies. But Google Cloud is looking to play catch up with its offering.

Although Google is a stalwart in the ad tech arena, its cloud offering currnetly has little to no market penetration in the ad tech space. On Thursday, however, it inked a five year, $110 million deal with ad exchange network OpenX. It's the first time that Google Cloud has struck a deal with a well-known, or large exchange, according to both companies.

"We are making a radical change here," Tim Cadogan, CEO at OpenX, says. "We are saying, 'no,' it's time to make a radical change so it can enable us to offer more benefits for publishers and marketers to innovate at an aggressive rate; we must shift gears and make step improvements, and that is our quest for the year."

Many large ad tech companies own their own servers and use cloud services in the event that there's a surge of traffic, or to power their consumer-facing software, for example. But OpenX is going "all-in" with Google, moving its entire opeartion into its cloud.

Why it matters

The news is significant on a number of fronts: Many ad tech companies believe that owning their own servers – or "metal" as they like to call it – allows them to fine tune infrastructure and offer speeds unrivaled by those who operate in the cloud; and faster speeds often translates to more money.

But that sort of mentality is outdated, says Paul Ryan, chief technology officer at OpenX.

"We used to believe exactly that," Ryan says. "But we weren't looking at reality square in the face. The conventional wisdom of the cloud has changed in the last 18 months and people just haven't caught on quick enough."

He adds: "The idea that a midsize company with several hundred engineers can compete with these tech behemoths is humorous."

Although OpenX says it's profitable, it laid off roughly 100 people last month. The company previously dedicated roughly 25 percent of its staff to maintain its 15,000 or so servers. Now, those employees will instead turn their attention toward innovating new targeting features for marketers using machine learning, OpenX says. The company believes it can also expand into other regions such as Asia or Australia faster, as operating entirely in Google Cloud won't require OpenX to lay down servers in foreign lands.

"We can now innovate at an expansive rate," Cadogan says. "We are going to overlay basic [programmatic] transactions with more insight and knowledge about consumers so a marketer can come up with a better match. And Google Cloud is a building block of achieving that."

Overall, AWS is the internet's largest cloud provider, and generated revenues of $6.7 billion in its most recent quarter. For comparison, Google Cloud said last February that it was generating $1 billion per quarter; more recent figures have not been released since then.

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