OpenX Bids to Lead Display Ad Boom With LiftDNA Purchase

When the advertising technology company OpenX Technologies debuted its online ad exchange three years ago, it faced huge challenges from rivals such as Yahoo's Right Media and Google's DoubleClick exchange, which launched anew later that year. It seemed apparent (and still does) that only a few ad exchanges, which work like the stock exchanges to match buyers and sellers of ads, could eventually survive. Back then, OpenX looked like a pipsqueak sure to get squeezed by giants.

Not so fast. While the Los Angeles-based company still faces stiff competition, including a surging Google DoubleClick exchange and a new exchange formed by Microsoft, Yahoo, and AOL, OpenX is profitable at a $100 million annual run rate and it's handling 200 billion ad transactions a month.

Today, it's taking another step today to become one of the keepers. It's buying LiftDNA, a so-called supply-side platform that helps publishers automate their ad selling on exchanges like OpenX's, for an undisclosed amount.

The purchase provides the Web publishers that OpenX serves first and foremost a way to streamline their ad sales, by combining the LiftDNA technology with OpenX's ad server and exchange into an integrated whole. "Our unique thing is to put them all together," says OpenX CEO Tim Cadogan, who says OpenX can now help publishers optimize their revenues for all their ad channels, from direct sales to ad networks and so-called demand-side platforms used by advertisers to exchanges. "There's this burning need for someone to come in and make sense of this space."

However, the acquisition does echo Google's $400 million purchase of supply-side platform AdMeld, which closed in December. "Google is the only other player that's taking a run at the whole thing," Cadogan says.

OpenX and LiftDNA have been partners since 2010, so the combination isn't a big surprise. But it does point up the rise of real-time bidding, which allows publishers to analyze and serve the ads that will bring in the most revenue in real time instead of arranging those sales in advance.

OpenX's success also exposes what's becoming less of a secret lately: Display ads, which had been fading in importance for years to Google's search ad juggernaut, are seeing a resurgence, growing faster than search by some estimates. That's thanks in part, says Cadogan, to search seeing a bit of saturation in terms of what marketers think they can do with it. Moreover, brand marketers that had been very slow to warm to the Web finally looking to display ads of various kinds to tell brand stories, most obviously on Facebook. Then there's the advent of more data-driven display targeting and real-time bidding.

Not least, apropos of today's acquisition, both marketers and publishers are beyond weary of the continuing onslaught of acronym-prone ad tech startups, each offering a small piece of the display puzzle and leaving these customers to figure out how to put it all together. So stronger or broader companies like Google, big agency holding companies like WPP and Publicis and, yes, to a smaller degree OpenX are snapping up weaker or narrower startups to offer a more integrated system.

With so many new ad tech startups continuing to get funding--too many?--it seems unlikely that such acquisitions will soon reduce the byzantine market mess called the Display Lumascape that you see in nearly every ad conference slide deck. But OpenX's latest moves suggest that, as it considers an IPO this year, it aims to be predator more than prey.