Microsoft Turns From Client to Investor in Real-Time Ad-Bidding Platform AppNexus

AppNexus

Microsoft has long been a client of AppNexus, a New York company that aids real-time online ad-buying. It must have been getting good service, because Microsoft decided to take part in a $50 million round of funding, it was recently announced. The exact amount Microsoft pitched in is unknown; it joined a number of other investors who had participated in a previous financing round that raised $5 million.

Real-time ad bidding is a trendy idea that's still in its infancy--but it's not hard to see the attraction. Ad buying and selling is still a fairly slow process, often relying on data that is days if not weeks out of date, and using a static bidding system (the advertiser pays a flat fee for each impression). But what if a kind of stock exchange for ads were to emerge, where buyers could bid up or down on how much an ad is worth based on the amount of traffic and who is visiting the page? As advertisers get better at behavioral targeting, and the analytics for tracking traffic improves as well, there's no reason to think this won't be possible in the near future.

Real-time bidding volume has grown 600% in the past year alone, and AppNexus for its part foresees that by 2012 fully 20% of online display ads will be bought via real-time bidding.

Still, what exactly AppNexus does, and how it distinguishes itself in the already cluttered world of online ad buying, is a bit unclear. According to David Kaplan of paidContent, some media executives are frankly a bit confused by "where AppNexus fits in" to the complicated online ad buying ecosystem. AppNexus bills itself not as a competitor to ad exchanges or ad networks, but rather considers itself a "gateway" to "ad inventory aggregators."

Microsoft and others clearly have faith enough that AppNexus plays an important role in the online ad buying landscape; the new funding will support AppNexus's new plans to go global. "We view AppNexus as a clear leader in the emerging real-time bidding space," said Microsoft's Rik van der Kooi in a news release, adding that supporting AppNexus "will accelerate the availability of real-time demand via the Microsoft Advertising Exchange offering, providing broader access to our ad inventory."

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