Brian O’Kelley’s Next Move Has Nothing – And Everything – To Do With Advertising

What does physical commodities trading have in common with programmatic advertising? Quite a lot.

So it makes sense that ad tech godfather and AppNexus founder Brian O’Kelley is revving up a new startup called CMDTY (pronounced “commodity”) that aims to apply data and technology to the old-school industry of supply chain and logistics management.

His co-founder is Andrea Aranguren, the former VP of operations for the physical commodities business at Goldman Sachs, who also helped develop an AI-based commodities document digitization and inventory reconciliation platform at IHS Markit.

Having sold AppNexus to AT&T last year for $1.6 billion, O’Kelley, a serial entrepreneur, was looking for a next move outside of advertising.

“The synapses started to fire” when a longtime friend told him about inefficiencies in the commodities logistics space and the lack of technology to solve them, O’Kelley told AdExchanger over the phone from Sienna, Italy, where he recently relocated with his family.

At first, O’Kelley planned to bootstrap the venture himself, but he was quickly able to raise $10 million from VC firms Venrock and Rucker Park. Both were drawn in by his track record of lucrative exits, which also includes the $680 million sale of Right Media to Yahoo in 2007.

And with CMDTY, O’Kelley is still in the delivery business – in a sense. An ad exchange facilitates the delivery of advertising between buyers and producers in real time, or near real time, while logistics does the same for raw materials over the course of days or weeks.

“We’re talking about a similar set of challenges, and there are a lot of ideas that have been applied to advertising that can also apply to logistics,” O’Kelley said.

“Although personalized advertising doesn’t seem to have a corollary here – and I’m going to take that as a positive,” he ribbed.

The buying, selling and moving of physical commodities is a $4 trillion industry, but the infrastructure that supports it has barely changed in decades.

There’s fraud, the inability to easily track the movement of goods and inefficient processes.

“Remind you of anything?” O’Kelley said. “Yeah, advertising.”

Phase One for CMDTY will be to create an operating system to help commodity trading companies better manage their operations and logistics.

“Think of it as an ad server for commodity trading companies,” O’Kelley said. “If that sounds familiar, it’s a lot like how Right Media built an ad server for ad networks.”

Traders still use physical pieces of paper, excel and, in some cases, even whiteboards, to track the movement of billions of dollars’ worth of commodities such as copper, iron, coffee and agriculture products as they move around the world on boats, trucks and trains.

Some shady traders use fake warehouse receipts to either secure more than one loan against a single load of cargo or to steal receipts to borrow against commodities they don’t own.

And tracking the movement of goods is an antiquated process, O’Kelley said. It’s possible for consumers to track their Amazon purchases almost to the minute – “You know where the UPS delivery guy is in real time” – but purchase $20 million worth of iron ore and there’s no online tracking equivalent. In some cases, a shipment might even arrive at a warehouse days before the bill of lading gets there.

On top of that, there are a handful of behemoth companies in the commodity space that like to throw their weight around in the market. Swiss multinational trader Glencore, for example, is worth tens of billions of dollars and owns its own metal mines.

“They have market power not unlike a Google or a Facebook, and they can be either amazing allies or scary competitors – or both,” O’Kelley said. “It’s sort of like how Google was one of AppNexus’ biggest trading partners and one of our biggest competitors.”

But why hasn’t someone else come along to solve all of these problems before now? That was the first question every VC asked, O’Kelley said.

Many blockchain companies are working on it, but the challenge goes beyond tech. Blockchain can help eliminate the potential for fraud, but if a truck goes off the road at 2 a.m., you still need a human to pick up the phone and tell the customer that their shipment won’t arrive on time.

“We still need people to be the operators and that’s going to be true for the foreseeable future,” O’Kelley said. “But we can use technology to make them incredibly efficient.”

For now, the CMDTY team will stay lean. O’Kelley plans to hire 10 people. In terms of the skill sets required, ad tech professionals need apply.

“We’re looking for systems thinkers, people who can understand complexity,” he said. “And ad tech certainly has a lot of that.”

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