This story was originally published February 15. It has been updated after Walmart announced on February 20 that it has agreed to buy Vizio for $2.3 billion.
Walmart just said it will buy TV manufacturer Vizio for $2.3 billion, in an effort to bolster its ad business. The deal talks were first reported by The Wall Street Journal.
The retail giant’s ad unit drove $2.7 billion in revenue in 2022, making it the second-biggest retail media business, but well behind Amazon’s $47 billion behemoth. Here are three ways Vizio would power-up Walmart’s ad business and make it a much bigger competitor to Amazon, according to several ad industry experts.
Walmart and Vizio declined to comment.
It would expand the inventory Walmart can sell, and lower their margins
As retail media matures, retailers have been jockeying to use their data to target ads to consumers on other websites in order to grow their businesses. This is necessary, because many retailers have limited on-site inventory to sell.
“Once you’ve tapped out in-store and the known customer base in terms of available ad impressions you can put in front of them, there’s not much growth left,” said an adtech executive close to Vizio.
While Walmart buying Vizio would grow its ads business, it would also improve the margins for its current ad business, said Nikhil Raj, chief business officer of adtech company Moloco’s retail media business. Raj also helped build Walmart’s retail media business from 2011 to 2016.
“Every advertising impression on Walmart.com is served at zero cost, and every impression served off Walmart.com has a huge margin of cost to it,” Raj said.
This is because retailers selling off-site ads have to pay the publishers that own the inventory as well as the adtech middlemen who place those ads.
“The biggest benefit here is they’re taking over supply that used to be off-site and it becomes on-site, so it turns from a low-margin business into a very high-margin business because they own all that supply,” Raj said.
The new inventory Walmart would inherit would let it tap TV and branding budgets
In buying Vizio, Walmart inherits connected-TV ad inventory, which it doesn’t currently have. Most of Walmart’s retail media business comes from search ads, though it’s expanded that to include some display and video ads.
Vizio’s ad units by contrast are meant for the big glass. During a 2023 presentation to advertisers, Vizio executives touted home screen ads — many with video as well as deep-links and QR codes to facilitate interactivity — a content studio that produced video series for brands, and ad inventory available on Vizio’s bundle of free streaming channels called WatchFree+.
The executives also emphasized viewership data that could be used to power ads. That data came from 22 million devices that had opted in to share that data.
“Having a smart TV platform, they can attract TV and CTV budgets and power that advertising with their data,” Raj told BI. “That puts them in a completely different league of retailers and truly in competition with Amazon.”
Forrester analyst Nikhil Lai said that the acquisition of Vizio could help Walmart attract budgets from brands like insurance companies that spend heavily on advertising but don’t sell items in Walmart.
“Walmart wants this deal to help Walmart Connect win upper-funnel ad dollars from endemic and non-endemic brands,” he said. “Until now, [Walmart] Connect has mostly been a direct response play for endemic brands, who use their ad spend as negotiating leverage during joint business planning.”
While most streaming TV advertising today is focused on brand marketing, streamers are increasingly focused on performance advertisers — Walmart’s core advertiser.
“With the deprecation of cookies and signals, it’s created a real window of opportunity for companies trying to make CTV measurable,” said Eric Franchi, general partner at Aperiam, a VC firm that invests in adtech companies.
Walmart can prove out its claims that ads drive sales
Walmart’s promise to show advertisers that ads drive sales is a key part of its pitch. Acquiring Vizio could make it easier for Walmart to prove that out to advertisers because streaming TV uses a fixed IP address, said Eric Seufert, a mobile industry analyst and founder of Mobile Dev Memo. Other types of digital advertising like mobile advertising is harder to track because of Apple’s privacy feature.
“It expands their closed ecosystem,” he said.
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