Not Your Daddy's Walmart

As you sit back to stream a movie on your Vizio TV, you might not realize that with every ad you see, you're (soon to be) contributing to Walmart’s bottom line.

Walmart's $2.3 billion acquisition of Vizio represents a significant leap into the advertising arena.

Why advertising?

Walmart aims to harness Vizio's smart TV technology to enhance its targeted advertising capabilities, driving higher revenue from ad sales and monetizing consumer data more effectively. This move is part of Walmart's broader strategy to diversify beyond groceries and staples...while bolstering both segments at the same time.

Long-Term Implications

• Ad Revenue Growth: With Vizio's platform, Walmart expects to significantly boost its advertising revenue, potentially turning its retail media network into a $100 billion business.

• Data Utilization: The acquisition provides Walmart with a wealth of consumer data, allowing for more personalized ads and improved ad performance, which can be monetized through various partnerships and services.

• Market Dominance: This deal positions Walmart to compete more aggressively with giants like Amazon and Google in the advertising space. However, it also raises concerns about data privacy and market competition, prompting advocacy groups and lawmakers to call for regulatory scrutiny earlier this week.

Expanding Beyond Retail

Walmart's recent earnings highlight its successful diversification strategy. In Q4 FY24, Walmart reported a revenue of $173.39 billion, beating expectations. Notably, global e-commerce sales surged by 23%, driven by initiatives like curbside pickup and home delivery. The company’s adjusted EPS was $1.80, above the anticipated $1.65.

A significant factor in Walmart’s earnings growth is its expansion into more profitable areas beyond its traditional reach. The company has diversified into logistics, packing, and shipping online orders for third-party sellers, as well as operating a delivery service for major companies and local businesses. Additionally, Walmart's advertising business has grown, with global gains of 33% and U.S. gains of 22% year over year. CFO John David Rainey described the Vizio acquisition as a major catalyst for this "high-margin, fast-growing" segment, providing better data tracking and ad performance.

Bottom Line

Walmart’s acquisition of Vizio is a bold move in retail media, if completed and approved. We'll be watching closely to understand implications for key competitors in advertising, like ROKU and in retail -- from AMZN to TGT.