Pasadena-based OpenX Technologies Inc., the online advertising firm whose products are built on largely open-source technology, has raised $20 million in additional venture capital, an infusion it believes will be the last one it needs on the way from being a tiny start-up to a full-fledged digital ad concern.
Since its founding in 2007, OpenX has raised $50 million over four investment rounds. OpenX makes and distributes software that allows websites to sell the space on their pages to marketers, much like highway billboard owners look to profit by renting their blank signs to whatever advertiser will pay the highest price. The company says its ad software is used by 200,000 websites in more than 100 countries.
"We continue to make a lot of progress," said Tim Cadogan, the company's chief executive. "That's drawn attention from a lot of really interesting big global companies who want to help us grow."
The latest venture round was led by SAP Ventures, the investment arm of German business software giant SAP. The round included AOL Ventures, Japan's Mitsui & Co. Global Investment Inc. and Presidio Ventures, as well as earlier investors Accel Partners, Index Ventures and DAG Ventures.
OpenX is trying to capitalize on the rapid growth of the display advertising business, which deals with the visual ads you see on Web pages rather than the text-based kind alongside search results.
Across the industry, display advertising revenue grew by 24% in 2010, to $10 billion. That growth was twice as fast as that of the $12-billion search advertising market, long dominated by Google Inc., according to a recent report from the Internet Advertising Bureau.
Unlike the painstaking hand-selling of ads well-known in the print and magazine world, OpenX's systems enable digital blank space to be automatically sold and resold every time a new user visits the page -- potentially thousands of times every minute. Those transactions are taken care of by bidding algorithms that conduct lightning-fast auctions, seeking the best price in milliseconds, then sending the winning ad to be featured on the Web page. OpenX takes a 20% cut of most of those transactions.
The company says that revenue from its ad marketplace, called OpenX Market, has increased 600% over the last year and that the firm brings in "many tens of millions" in annual revenue. OpenX expects to be profitable within a year, and, Cadogan said, the added cash should help the company go "the whole way" toward going public.