OpenX raises $10 million for open-source ad server business

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The odds are good you’ve never heard of OpenX. But the company makes the open-source ad servers that are behind more than 150,000 web sites. Its software serves more than 300 billion ads a month into those web sites. Not bad for a little old company from Pasadena, Calif.

And today the company’s announcing it’s raised $10 million in a third round of funding. DAG Ventures led the round, and existing investors Accel Partners, Index Ventures, Mangrove Capital, First Round Capital and former AOL chief executive, Jonathan Miller, the company’s chairman, all participated. The company has now raised a total of $30.8 million.

More than 38,000 customers use the technology to provide ads into web sites. The software is popular because it can be easily extended or customized as needed, said Tim Cadogan, chief executive (pictured above, foreground). It’s free to download and use, but the company makes money selling premium services and customer support. Customers who generate more than 100 million ad impressions a month must pay subscription fees.

OpenX also opened another monetization strategy a month ago. It launched OpenX Market, an ad exchange. With it, publishers can list their inventory of web pages. Ad network providers can bid to supply ads into those pages. If the ads generate more revenue than the publishers would have otherwise gotten, then higher-revenue ads are substituted. With more revenue coming in, the publishers are happy. The advertisers can target a precise audience, and OpenX keeps a share of the money. It’s sort of like eBay for ads and is on a run rate of two billion ad impressions a month.

The company previously raised a $5.5 million round in mid-2007 and a $15 million round at the end of 2007. The most recent round was oversubscribed. The company has 50 employees. It was started as an open source project in the late 1990s and went through a long incubation with Unanmis Ad Network, which then spun it out as OpenAds in May 2007. It later changed its name to OpenX.

Competitors are huge: Google’s Doubleclick, 24/7, and Microsoft’s Aquantive. But Cadogan said OpenX is the lone independent company among the rivals. He acknowledged that the ad industry will have a tough year but said his business is growing because more companies are signing up to build web sites and they’re signing up to use the free software to generate ads. On top of that, more advertisers are shifting money from traditional advertising to the web.

The company will use the money to accelerate its growth and investment in new technologies. OpenX chairman  Miller was just appointed chief executive of digital media at Rupert Murdoch’s News Corp.


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