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OpenX buys King of Prussia's LiftDNA

The first acquisition for OpenX is LiftDNA, founded by a former employee who was looking to help Web publishers make more from their online ad inventory.

LiftDNA Inc., a 29-month-old online advertising technology firm in King of Prussia, has been purchased by a OpenX Technologies Inc., of Los Angeles.

Terms of the transaction between both privately held companies were not disclosed.

Launched in September 2009, LiftDNA helps Web-based publishers maximize revenue from their online advertising inventory -- the display advertising opportunities that have not be sold by a direct sales force.

LiftDNA was started by Kingchih Fan and Vadim Telyatnikov, who was one of the first dozen employees of New Hope-based, a social-media site focused on teenagers.

In an interview, Telyatnikov said the idea for what would become LiftDNA emerged from his challenges at in trying to monetize the inventory of unsold ad space. "I built a yield management system out of necessity," he said.

Publishers sell online advertising by the number of "impressions" that get displayed to users. The appearance of a banner ad on a Web page opens on a computer screen counts a single impression.

Typically, publishers' ad inventory is transferred to an advertising exchange which works like an auction where hundreds of thousands of buyers can bid for impressions, said Jason Fairchild, OpenX's chief revenue officer.

OpenX provides both ad serving technology to publishers, which is software that enables them to decide how to display the ads on their Web pages, as well as an ad exchange. The company said it served more than 1 trillion impressions in 2011 and now handles about 200 billion ad transactions per month.

Begun about 10 years ago as an open-source project, OpenX became a for-profit company four years ago and has raised more than $50 million in venture capital from investors, such as SAP Ventures, Accel Partners and AOL Ventures.

Earlier this month, OpenX said it turned its first profit in the fourth quarter. It's on pace to generate more than $100 million in annual revenues.

LiftDNA is OpenX's first acquisition. The two companies had been working together since 2010, and LiftDNA's technology has been fully integrated into OpenX's enterprise-level platform, Fairchild said.

There is a lot of competition in the online advertising technology business, with Google Inc. and Microsoft Corp. have spent billions of dollars in recent years in an effort to dominate the market. One of Google's 2010 acquisitions was Invite Media Inc., the Philadelphia developer of a display-advertising exchange.

(Invite Media's technology focuses on the demand side -- helping advertisers trying to place their messages -- while LiftDNA's operates on the supply side.)

Internet advertising revenue continues to grow at a rapid clip. The Internet Advertising Bureau said revenues for the third quarter were $7.88 billion, up 22 percent from the same quarter of 2010.

Fairchild said publishers are confronted with all sorts of choices in technology providers for different parts of their online advertising efforts. The combination of LiftDNA with OpenX should provide a more "seamless" solution to what can be an inefficient process of moving inventory, he said.

Publishers can lose up to 10 percent of their inventory when they move it from their internal ad server to an outside ad exchanges and ad networks, Fairchild said.

Vadim used the analogy of mining raw materials to explain the difference between what LiftDNA does and how the ad server/ad exchange method has typically operated. Once raw materials are extracted from the mine, they're put on a train to be shipped to various points for sale. "In transit, some of the materials fall of the train. The products are shipped to different locations for different prices," Vadim said.

"We sell all the raw material at the mine," said Vadim about the ability of LiftDNA's technology to work within any type of ad server. "There's no loss in transit."

Still, if publishers don't want to use OpenX's ad server, they'll still be able to use LiftDNA, Fairchild said. "We don't force publishers to choose," he said. "We have a long open-source heritage."

LiftDNA will not only retain its Philadelphia-area offices, it intends to expand them, said Telyatnikov, who will carry the title of senior vice president at OpenX. Currently, LiftDNA has about 30 employees companywide, with 19 working in King of Prussia.

OpenX employed about 135 people before its acquisition of LiftDNA, Fairchild said.

LiftDNA had raised about $1 million in outside capital, including $250,000 from the state-funded Ben Franklin Technology Partners of Southeastern Pennsylvania in February 2011. Among its local individual investors are Scott Becker, the former chief technology officer of Invite Media; Edward Harvey, a member of Robin Hood Ventures; and Gunter Pfau, founder of Stuzo, a Philadelphia digital agency focused on social media.