Why LG Ads Solutions Shifted To Media And Is Hedging Its Bets On CTV OEMs

LG Ads Solutions used to answer to the name Alphonso.

Until January of last year, when LG took a majority stake in the company, Alphonso was an analytics startup that collected data through the automatic content recognition (ACR) technology it deployed for TV manufacturers, known in the biz as original equipment manufacturers or OEMs.

“That’s how we built our relationship with LG,” said Raghu Kodige, founder and formerly chief product officer of Alphonso and now the CEO of LG Ads Solutions.

Alphonso rebranded to LG Ads Solutions in March 2021.

Previously, Alphonso “focused very heavily on measurement and analytics to give advertisers insights into the effectiveness of their TV ads,” including cross-platform CTV ads, Kodige said.

But once the company was folded into LG, “our focus completely shifted to the media side,” he said. Ad sales and monetizing smart TV inventory became top priorities. Analytics is still a part of the company’s business model, but it’s no longer the main squeeze.

“We still use analytics, but we don’t sell it as an independent product [anymore],” Kodige said.

Instead, LG Ads uses its data and ACR tech to sell media.

The reason for the pivot? LG has its eyes on the CTV OEM gold mine.

The OEM battleground

Smart TVs are a marriage of hardware and software that can support the full lifespan of an efficient TV campaign, from activation to attribution.

LG Ads Solutions, for example, can track audiences and preferences on a household level across linear and streaming. It can then parcel up audiences for advertisers that are “available across all apps,” Kodige said. Audience buying is app agnostic because the content is “all built into the TV itself.”

In addition to aggregating media inventory, smart TV home screens are also full of customizable units that can be used to recommend new launches or related content based on a user’s preferences, Kodige said. LG sees smart TV home screens as the next “portal of entertainment” because they’re a prime source of real estate.

Marketers used to allocate ad spend to reach audiences on particular networks. “Now, they’re going to three or four large OEMs,” Kodige said, referring to Samsung, VIZIO and Roku. (Roku is technically an OEM because it produces remotes, but it doesn’t manufacture TVs. At least not yet.)

But although CTV OEMs are great for scale, manufacturers draw hard lines when it comes to competition.

“Most [CTV] OEMs have almost exclusive audiences,” Kodige said, which makes sense. Someone with an LG TV, for instance, probably doesn’t also have a Samsung TV.

According to Kodige, that makes the various OEMs “must-buys” for marketers trying to break into those exclusive footprints at a household level. OEMs are the next “CTV battleground” because that’s where the ad dollar allocation is going, he said.

For the moment, Roku isn’t a direct competitor in that regard. But that would change if Roku did start making its own TVs.

Despite the fact that hardware is initially a “loss leader” on margins, Kodige said, CTV OEMs have advantages when it comes to scale, control over inventory and even the user experience.

For example, larger OEMs can afford to invest in a proprietary operating system (OS). A smart TV company needs both hardware and software to enable reach, scale and good experiences.

“Someone else’s hardware might not have the best specs for your OS,” Kodige said. But having control of the “entire vertical integration” as a single unit, he noted, is the best way to “optimize all of the pieces.”

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