MoPub, a mobile advertising startup founded by former Google and AdMob employees, today is launching a Nasdaq-type exchange where buyers and sellers can bid in real-time for ad space on smartphones and tablets.
The San Francisco-based company, which in July scored $6.5 million in funding, is one of several firms trying to capture the swelling mobile advertising market, which is on track to double this year to $3.3. billion worldwide, according the Gartner research.
CEO and co-founder Jim Payne says that among several players, including Google, MoPub is the first to offer a self-service system--he calls it a "virtual trading floor"--that should appeal to all types of publishers, from big media firms to makers of mobile apps and social games.
A big part of Payne's pitch is that MoPub Marketplace offers full transparency--a common pitch for anyone going up against Google and its black box approach--so users know exactly what they're buying and without having to blindly trust the ad networks.
"The current process is so opaque," says Payne, who started Google real-time search initiatives and then worked at AdMob before it was bought by Google. "With the ad networks, you hand your app over to someone else to handle and don't really know what you're getting."
That was fine to a point, says Payne. But as app publishers grow, he says, they are demanding better and better tools and control.
MoPub often gets described as DoubleClick for mobile. Its business help mobile app publishers of all sizes manage and monetize their ad inventory. It works with all forms of ads, including banners, video, and interstitial ads and is now serving billions of ads a month across thousands of apps.
What Payne is trying to do is reminiscent of Right Media, a firm started in 2003 by a former DoubleClick employee named Mike Walrath. Walrath built an exchange for unsold display advertising. The system took off, and shortly after Google bought DoubleClick for for $3.1 billion in 2007, Yahoo snapped up Right Media for $680 million--a purchase considered steep for such a young firm.
Walrath created a powerful system that users could plug into to buy or sell cheap and fast, with Right Media taking a sliver of the each transaction--just how it works on electronic stock exchanges. The opportunity was big because there was so much demand from advertisers looking for places to buy ad space on web pages.
Whether the same opportunity exists of Payne and is hard to tell. Such as system makes sense for mobile advertising, but the market is still young. The supply is clearly there, with smartphone sales booming and app usage growing in lockstep, but the demand part of the equation still needs to emerge.
Sure, $3.3 billion of mobile advertising worldwide this year is a big number. But it's a crumb next to what's getting spent on web advertising, which is on track to approach $30 billion this year (PDF)--and that's just in the United States.
You just need huge liquidity to make the exchange model work," says Andrew Frank, a Gartner analyst. "It takes a while to build up the buying side because the agencies and marketers all worry about metrics and who they're reaching."
Payne is well aware of that, of course. "Real-time bidding will bring a whole bunch more spending," he argues. "We're trying to get the virtuous cycle going."