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    A066570   KR7066570003

LG ELECTRONICS INC.

(A066570)
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LG Electronics Takes Majority Stake in TV Data and Advertising Firm Alphonso

01/06/2021 | 02:30pm EDT

By Sahil Patel

LG Electronics Inc. has taken a majority stake in Alphonso Inc., a TV advertising technology, data and measurement company, as it seeks to accelerate its efforts to build a streaming-TV ad business.

The move comes as streaming TV is seeing significant growth in viewership, advertising and players seeking to capture the spending on those ads.

LG is investing almost $80 million for a nearly 60% stake in Alphonso, which had a pre-money valuation of about $125 million, according to people familiar with the matter. Alphonso's existing investors, including Manifest Investment Partners, will be bought out by LG as part of the transaction, with the remaining shares owned by Alphonso founders, current and former employees, and various advisers, one of the people said. Alphonso had raised $6.3 million to date.

The deal gives LG the option to acquire the remainder of Alphonso within three to five years, the person added.

The shift toward streaming video, which accelerated during the coronavirus pandemic as homebound viewers had more time on the couch, has created opportunities for those selling ad time on apps and distribution platforms. TV manufacturing giants such as LG, Samsung Electronics Co. and Vizio Inc. are seeking to supplement their sale of TV sets with advertising as a new, recurring source of revenue.

"LG Electronics has been providing consumers our own free and ad-supported streaming service called 'LG Channels' since 2016, and will continue to put effort in enhancing consumer services," said Edward Lee, director of the LG webOS ad business team, based in Seoul. "The purpose of the acquisition is to leverage Alphonso's software, data analytics, and media activation capabilities across LG's home entertainment products, mainly smart TVs, and to better fulfill consumers' needs on their content consumption."

Alphonso is known for its TV data and analytics business as well as its ad targeting and buying tools. Rival TV marketers such as Sharp and Hisense, for example, use Alphonso's technology to capture viewership data on their sets. Some 15 million U.S. households have opted in to such collection, which helps inform the ad retargeting for which advertisers use Alphonso.

Alphonso revenue will be booked under an existing business unit called LG Ads, with the combined entities expecting to generate $100 million in revenue in 2021, according to one of the people familiar with the matter.

LG will use Alphonso's ad-buying, data-management and other tools to build a complete streaming-TV ad sales and measurement offering more quickly than it could on its own, said Ashish Chordia, chief executive of Alphonso. It will package ad inventory from LG with Alphonso's analytics and ad-buying capabilities in a unified offering, much as other streaming-TV platforms operate, he said.

But TV manufacturers still have a long way to go to catch up with established streaming ad players. Roku Inc., for example, in the third quarter of 2020 generated $319 million from its platform business, which includes revenue generated from advertising as well as Roku's cut of subscription and transaction fees from apps and content on its platform.

TV makers will need to prove they are committed to a business area that is new to them, but tie-ups such as the one with LG and Alphonso can assist in creating the advertising and tech infrastructure necessary to build such businesses, said Mr. Chordia.

Mr. Chordia said he doesn't expect LG's investment to affect Alphonso's work for other TV manufacturers, partly because Alphonso will continue to operate as an independent subsidiary with provisions to keep clients' proprietary information private.

Mr. Chordia said he wants to eventually take Alphonso public. The rise of Roku, whose market value has expanded 30 times to more than $40 billion since going public in 2017, is an example of what is possible as the streaming-TV industry grows, he said.

"If you look at what's happening in the market, TV is becoming much more important than just some dumb media-watching device," Mr. Chordia said.

Write to Sahil Patel at sahil.patel@wsj.com

(END) Dow Jones Newswires

01-06-21 1430ET

Stocks mentioned in the article
ChangeLast1st jan.
ACTIVATION GROUP HOLDINGS LIMITED 40.66% 1.28 End-of-day quote.66.23%
LG CORP. -0.31% 95600 End-of-day quote.-0.40%
LG ELECTRONICS INC. 2.24% 160000 End-of-day quote.18.52%
ROKU, INC. 0.60% 420.32 Delayed Quote.26.59%
SAMSUNG ELECTRONICS CO., LTD. 1.84% 82900 End-of-day quote.2.35%
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Sales 2021 71 987 B 63,1 B 63,1 B
Net income 2021 2 381 B 2,09 B 2,09 B
Net Debt 2021 2 960 B 2,59 B 2,59 B
P/E ratio 2021 11,8x
Yield 2021 0,79%
Capitalization 27 364 B 23 910 M 23 971 M
EV / Sales 2021 0,42x
EV / Sales 2022 0,37x
Nbr of Employees 38 119
Free-Float 69,0%
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