AppNexus Dials Up Its Mobile Business

Aims to be first enterprise ad tech firm in mobile

Despite every year for the past decade or so being proclaimed “The Year of Mobile,” no company has cracked the mobile market to level it on par with online advertising and close the infamous monetization gap.

Despite every year for the past decade or so being proclaimed “The Year of Mobile,” no company has cracked the mobile market to level it on par with online advertising and close the infamous monetization gap. New York-based ad exchange AppNexus, fresh off a $75 million funding round, thinks it can be the first.

“We’re actively taking our entire enterprise platform for display, which we’ve spent the last five years building, and made the whole thing work for mobile. It’s significant because there’s no real enterprise company in the mobile space today,” said AppNexus CEO Brian O’Kelley, adding that mobile-focused companies exist “but not a full-on ad tech enterprise company like AppNexus,” which boasts 500 clients globally. O’Kelley will present AppNexus’s mobile vision at the company’s AppNexus Summit in San Francisco on Wednesday.

A number of ad tech companies, including major demand-side and supply-side platforms, have claimed mobile capabilities despite some falling short in crucial capabilities like being able to track users between apps or target ads according to geolocation. So it’s fair to be skeptical of AppNexus’s mobile offering.

“A lot of companies have said ‘Mobile is interesting. Let’s hire a person to do mobile’ and built the most basic capabilities,” said O’Kelley. “Our approach is if we want to do something, we have to do it right. We’re all-in on mobile; we have 30 to 40 people focusing only on mobile.”

AppNexus has “had our toe in the [mobile] water since late 2010,” O’Kelley said, but made a more aggressive commitment last September in dedicating a team to mobile. Then, about a month ago, the company began running an alpha test of its mobile capabilities with five customers—which it will expand into beta with 10 more clients in the next week—that ties in with mobile ad exchanges Nexage, MoPub and Smaato to improve how mobile inventory is bought and sold.

Theories abound as to whether advertisers or publishers need to make the first move toward closing mobile’s monetization gap. Should advertisers push more of their budgets toward mobile to encourage publishers to develop ad products worthy of that increased investment? Or should publishers build that mobile Field of Dreams and advertisers will come? O’Kelley, whose company serves advertisers and publishers, favors the former theory. “Publishers have issues because advertisers have issues. The issue we hear from publishers is monetization is lower on mobile than display, and it’s lower because advertisers don’t know how to make mobile work for them,” he said, adding that AppNexus’s approach is “more advertiser-driven than publisher-driven. If buyers are not interested, I don’t think it will work.”

As with online display, AppNexus is focused on upgrading the plumbing that pipes supply and demand and providing the technological underpinnings to evolve the mobile market from that foundation. “Our basic thesis right now is the plumbing is what people are missing. If you take away the plumbing problems, you unlock a huge amount of value,” said O’Kelley.

Of course, as with online display advertising, there’s something to be said for the actual ad units and their current deficiencies that may inhibit performance and thereby discourage investment. O’Kelley acknowledged the dilemma but made clear that “we won’t be doing our own [mobile ad] formats most likely because we’re facilitating innovation, but we’re not a creative agency. It’s not our place to say this will work, that won’t work. Hopefully our clients and partners go crazy [in developing units on the back of AppNexus' technology].”

While AppNexus is positioning itself as the first full-fledged enterprise ad tech outfit to enter the mobile ad market, there is Google, which is similarly working to tighten the ties between online and mobile advertising. In January, the search giant announced Enhanced Campaigns to link advertisers’ desktop and mobile AdWords campaigns while accommodating adjustments for creative, calls to action and pricing. But O’Kelley considers Google to be going after direct-response dollars whereas AppNexus’s aim is higher up the funnel. “The kind of campaign Ford or GM runs on the Web maybe doesn’t make a lot of sense on the phone. … What we’re trying to solve is a different problem [than direct-response calls to action in favor of] what kind of advertising is most effective for brands,” he said.