OpenAds Funded by Index, Mangrove, First Round, OATV

This story has been heard before: distribute millions of copies of your open source software for free, then build a business by servicing the customers who’re using that software. Red Hat, JBoss, MySQL have all made a great success with this business model.

Why did it take so long for someone to figure out that this could also be a brilliant new take on the online advertising business? Step one: distribute a free, open source ad server; step two: package up the resulting publisher network for advertisers, regardless of which ad network they want to work with; step three: build additional services for those advertisers.

I caught up last week with Scott Switzer, OpenAds co-founder and community activist, to learn a bit more about OpenAds. It took me a few minutes to understand the OpenAds story (and even now, I may have a few details wrong.) As it turns out, OpenAds is a new name for a project that started in 1999 as phpAdsNew. Since then, it has quietly amassed a network of tens of thousands of web publishers collectively delivering 60-100 billion page views a month. (Compare this with industry-leader DoubleClick’s reported 300 billion.)

Unlike say, DoubleClick, which combines an ad server (named Dart) with an ad network (actual connections with paying advertisers), OpenAds simply provides the ad server software, which helps web publishers to “manage, deliver and track both paid-for and in-house ads, review statistics and create Advertiser reports.” This software allows publishers to connect with their choice of participating ad networks, including Google Adsense, Commission Junction, ValueClick, Kontera, and others.

With those kinds of numbers, though, it’s pretty clear that OpenAds has a lot of possible angles to commercialize its business.

So, this project has been going along, quietly gaining steam, a bit under the Silicon Valley radar because of its UK location. The big news today is that it’s now gotten funding as a commercial company, with a $5 million Series A round led by Index Ventures (who also funded Skype, MySQL, and Zend). O’Reilly’s fund, O’Reilly AlphaTech Ventures is also an investor. Look to the OpenAds blog for more details. (Scott Switzer will also be answering questions at the O’Reilly Radar Executive Briefing on Open Source at OSCON.)

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