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Walmart's new acquisition isn’t about making money selling TVs — it’s about selling the ads people watch on them.
What happened: Walmart plans to spend US$2.3 billion buying TV maker Vizio. On top of a foothold in the cheap TV market, Walmart is also getting 18 million active users on Vizio’s connected TV platform.
Why it matters: Vizio brings connected TV to Walmart’s retail media business, letting the chain target ads to people streaming shows on one of the brand’s TVs. Combining the two fastest-growing segments of the ad industry also helps Walmart compete for ad dollars with Amazon, which has been able to do something similar by having Fire TV in its own retail ad network.
Catch-up: Retail media refers to the networks that retailers have been setting up to target ads across the web, similar to Google. But instead of using cookies and browsing history, companies like Walmart, Amazon, Target, and Loblaw use their first-party purchase and loyalty program data, which is considered to be both more privacy-friendly and more accurate.
Zoom out: Vizio only gets 2% of advertiser spending on open programmatic networks — platforms that brands pump money into to serve an ad to a specific audience regardless of the connected TV they own. Instead, Vizio cuts out the middleman and sells directly to over 500 advertisers, which the company says makes the vast majority of its profit (US$96.5 million last quarter).
- But automated targeting on Vizio could get more attractive, as it will be one of several channels on Walmart’s increasingly popular ad platform, which grew by 33% last year.
Bottom line: One thing holding retail media back is not having enough ad inventory to go around, with connected TV in particularly high demand, so Walmart is unlikely to be the only retailer trying to add it to its network.