Last updated: August 18, 2014 8:47 pm

Online ad group valued above $1bn in fundraising

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Allegations of fake eyeballs and robotic banditry have not damped investor appetite for digital advertising, with online ad company AppNexus becoming one of only a handful of New York start-ups to crack a valuation of more than $1bn after a new round of investment.

The latest $60m cash injection comes from a Boston-based public equity and asset management group, the name of which AppNexus declined to disclose. It valued the company at $1.2bn – putting it on par with New York-based online luxury goods retailer Gilt Groupe, and MongoDB, an open-source document database, according to data from research group CB Insights.

AppNexus’ previous investors include Andreessen Horowitz, early backers of Facebook, and Venrock, the venture capital arm of the Rockefeller family.

Sales of online advertising have surged as smartphones and apps mean consumers are glued to screens for ever-larger parts of the day. But the market has become crowded and complex, with brands needing to react within fractions of a second to ensure their ads are targeted at fast-moving online customers as they trawl the web and scroll through apps.

There has also been growing concern about the accuracy of viewing figures for online ads. A recent campaign run for car company Mercedes-Benz, for example, was viewed by more automated “bots” than real people.

AppNexus acts as middleman between brands that buy advertising space and so-called “exchanges” that sell it, with algorithms that manage bids for ad slots in response to real-time user behaviour. Its competitors include Google, Yahoo and AOL.

Spending via this type of automated advertising brokerage is expected to increase 60-fold from $230m in 2013 to $14bn by 2018, according to IDC, a technology research group.

AppNexus was founded in 2007 by chief executive Brian O’Kelley – formerly chief technology officer of advertising exchange Right Media, which was acquired by Yahoo for $850m in 2007. Customers spent more than $1bn on AppNexus’s platform in 2013, a figure it expects to double this year.

“The industry is moving from just one device – the desktop – and into multiple devices,” says Rashid Mansoor, co-founder of mobile-based advertising start-up AdBrain. “Platforms with a legacy in desktop, such as AppNexus, will need to either build the tech to deal with that from the ground up, or partner or acquire companies to do it for them.”

In June, AppNexus bought Alenty, a company that measures whether an ad has been seen by a consumer, and for how long. This week Facebook unveiled better tracking of how users reacted to advertising on the social networking site, including when they viewed an ad on one device but then purchased a product on another.

“It’s very early days in the innovation around biddable display advertising, and therefore systems and auditing techniques are still catching up,” said Paul Cooper, a partner at Clarity, a London-based technology corporate advisory group. “But these are ripples and noise around a fundamental shift that is going to happen.”

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