Why LG Ads Solutions turned to the media and hedges its bets on CTV OEMs
LG Ads Solutions responded to the name of Alphonso.
Until January 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 industry as original equipment manufacturers or OEMs.
“That’s how we built our relationship with LG,” said Raghu Kodige, founder and former chief product officer of Alphonso and now CEO of LG Ads Solutions.
Alphonso was renamed LG Ads Solutions in March 2021.
Previously, Alphonso “focused very heavily on measurement and analytics to give advertisers insight into the effectiveness of their TV ads,” including cross-platform CTV ads, Kodige said.
But once the company was integrated into LG, “our focus completely shifted to the media side,” he said. Selling ads and monetizing smart TV inventory have become top priorities. Analytics is still part of the company’s business model, but it’s no longer the main push.
“We still use analytics, but we don’t sell it as an independent product. [anymore]“, said Kodige.
Instead, LG Ads uses its data and ACR technology to sell media.
The reason for the pivot? LG has its sights set on the CTV OEM gold mine.
The OEM battlefield
Smart TVs are a marriage of hardware and software that can support the entire lifespan of an effective TV campaign, from activation to attribution.
LG, for example, can track household-level audiences and preferences across linear and streaming. It can then distribute advertiser audiences that are “available across all apps,” Kodige said. Audience buying is independent of the app, as the content is “fully integrated 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 user preferences, Kodige said. . LG sees smart TV home screens as the next “entertainment portal” as they are a primary source of real estate.
Marketers used to allocate ad spend to reach audiences on particular networks. “Now they go to three or four big OEMs,” Kodige said, referring to Samsung, VIZIO and Roku. (Roku is technically an OEM because it produces remotes, but it doesn’t make TVs. At least not yet.)
But while OEM CTVs are great for scale, manufacturers draw hard lines when it comes to competition.
“More [CTV] OEMs have an almost exclusive audience,” Kodige said, which makes sense. Someone with an LG TV, for example, probably doesn’t have a Samsung TV as well.
According to Kodige, this makes the various OEMs “must-haves” for marketers trying to penetrate these proprietary footprints at the household level. OEMs are the next “CTV battleground” because that’s where the allocation of ad dollars goes, he said.
At the moment, Roku is not a direct competitor in this respect. But that would change if Roku started making its own TVs.
Despite the hardware initially being a “loss leader” on the margins, Kodige said, CTV OEMs have advantages in scale, inventory control and even user experience.
For example, large OEMs can afford to invest in a proprietary operating system (OS). A smart TV business needs both hardware and software to enable reach, scalability, and good experiences.
“Someone else’s hardware might not have the best specs for your operating system,” Kodige said. But having control of “the entire vertical integration” as a single unit, he noted, is the best way “to optimize all the pieces.”