UPDATE 1-OpenX launches new online ad marketplace

Thu Apr 16, 2009 2:23pm BST

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(Adds background on advertising market)

By Georgina Prodhan

LONDON, April 16 (Reuters) - Technology start-up OpenX launched an online ad marketplace for smaller Web publishers on Thursday designed to be an alternative to offerings from Google (GOOG.O), Microsoft (MSFT.O), Yahoo (YHOO.O) and AOL (TWX.N).

OpenX Market aims to make it easier for advertisers to find smaller Web publishers as the number of sites run by individuals and small organisations with niche audiences balloons, and to help those small publishers maximise their advertising revenues.

OpenX, backed by Index Ventures and Accel Partners, runs more than 300 billion page impressions a month through its software from a network of about 150,000 websites, putting it in the league of the likes of Google's DoubleClick in terms of volume.

Google bought DoubleClick for $3.1 billion in 2007, part of a multi-billion-dollar wave of ad-server company acquisitions that included Microsoft buying aQuantive, AOL buying Adtech and WPP (WPP.L) buying 24/7 Real Media.

"Now the space is very concentrated, which makes it really good for us to be an independent option in the market," OpenX's Chief Executive Tim Cadogan told Reuters.

Cadogan, an industry veteran who formerly ran Yahoo's search business, said OpenX's open-source software that publishers can easily customise was another attraction.

OpenX's new platform stages real-time auctions for online advertising spots, allowing publishers to take advantage of higher bids until the last second. It is likely to appeal most to small publishers, but scalable for large enterprises too.

The Internet is the only medium expected to attract higher advertising revenues this year -- although growth is slowing -- as most companies slash discretionary spending on activities such as marketing to cope with the economic downturn.

In a report released this week, media agency ZenithOptimedia forecast that global advertising spending would fall 6.9 percent this year, but spending on Internet advertising would rise 8.6 percent, down from 20.9 percent growth in 2008.

But mechanisms to link advertisers with online properties are still developing, and made more difficult by an explosion in the number of websites in existence.

AOL, for example, is embarking on a strategy of creating a plethora of niche websites through automated methods on which to place ads, partly through its own ad platform. It has called this "leaning into the fragmentation of the Web."

Cadogan says: "Synthetic creations can be pretty good, but there's something about that organic trend also of consumers creating sites about topics they're passionate about that creates real value."

OpenX, formerly known by a succession of other names including Openads, has developed its ad server through the open-source developer community over nine years, and has raised $20.5 million in two rounds of funding so far.

Cadogan said the company had not received any takeover approaches since he became CEO a year ago. (Editing by David Cowell)

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