Korean consumer electronics giant LG has acquired a controlling stake in TV advertising measurement startup Alphonso, investing more than $80 million in the company. LG announced the acquisition Wednesday, a day after Protocol first reported that a deal was imminent. With the acquisition, LG is looking to beef up the advertising business on its smart TV platform and better compete with companies like Samsung, Roku, Amazon and Vizio.
"Our investment in Alphonso is a key component of our digital transformation strategy focusing on AI, big data and cloud to fundamentally change how consumers interact with their devices," said LG Home Entertainment President Park Hyoung-sei. "With Alphonso's TV data analysis capabilities, LG will be able to provide even more customized services and content to consumers and we are proud to welcome Alphonso to the LG family."
The two companies began exploring a deal as early as last summer, according to an industry insider.
Founded in 2012, Alphonso has raised around $6 million in funding. The company has been building technology to measure advertising on traditional television in a more granular fashion, and give advertisers similar insights to those available from digital ad campaigns. Alphonso also promises advertisers to bridge the gap between TV viewing and the internet, allowing them to target viewers on both TV and mobile screens.
LG's acquisition of Alphonso is part of a bigger trend of TV manufacturers and smart TV platform operators chasing ad dollars. As consumers cut the cord by the millions, ad-supported streaming services have become a real money-maker for TV brands like Samsung and LG, allowing them to transition from a business purely focused on unit sales to one with recurring revenue streams.
While some of these companies relied on third-party technology to build their advertising businesses, many are looking for ways to maximize their revenue and cut out any middlemen. Roku acquired ad tech startup Dataxu for $150 million in late 2019, and Vizio recently reorganized its advertising business to bring its subsidiary Inscape back into the fold.
In addition to selling ad inventory for apps on their platforms, smart TV makers also run their own free, ad-supported streaming services. Samsung Electronics SVP Sang Kim recently told Protocol that the company is streaming "billions of minutes every month" on its free TV Plus service, which emulates the look and feel of traditional linear television. LG began adding a similar set of streaming channels to its smart TVs in 2016.
Update: This article was updated throughout following LG's announcement.