Walmart Acquires Vizio for $2.3 Billion to Boost Advertising Business

The acquisition comes as the largest U.S.retailer reported its fourth-quarter earnings and is expected to boost Walmart's ad business through Vizio's SmartCast Operating System, which allows users to stream free ad-supported content on their TVs.

Walmart Financial Background

• Walmart reported $5.49 billion in net income for the quarter, down from $6.28 billion in the year-ago period. However, revenue rose to $173.39 billion from $164.05 billion.
• Comparable sales grew 4% for Walmart U.S. stores and 1.9% for Sam's Club, showing continued sales momentum.
• E-commerce sales were a major growth driver, increasing 23% globally and accounting for over $100 billion in total e-commerce sales.
• Walmart expects sales growth to continue in the current quarter and fiscal year, guided by the consumer's ongoing need for value products.
• Advertising was called out as a "high-margin, fast-growing" business for Walmart, making the acquisition of Vizio strategic.
• While some cost-cutting is happening economy-wide, Walmart is investing in its stores and employees, planning upgrades, new locations, and higher wages.

Walmart has entered into a definitive agreement to acquire high-tech TV company Vizio for $2.5 billion, further boosting Walmart’s growing advertising business. The deal will give Walmart access to data on Vizio’s installed base of over 80 million internet-connected smart TVs in the United States, allowing it to better target and measure advertising campaigns.

Walmart Connect: A Growing Advertising Segment

Vizio’s SmartCast platform serves ads to consumers alongside content from popular apps like Netflix, Disney+, Hulu and Peacock. SmartCast’s first-party viewer data enables Vizio to sell targeted advertising placements at a premium price. Last year alone, Vizio generated over $500 million in profit from its advertising and data business, with analysts projecting robust growth in the years ahead.

The acquisition represents Walmart’s largest foray into advertising technology and streaming entertainment to date. While Walmart previously acquired Vudu’s video-on-demand service in 2010, it struggled to scale and later sold Vudu off to Comcast’s Fandango unit. In contrast, Vizio arrives with an established ecosystem that can reinforce Walmart’s e-commerce ambitions.

“With access to Vizio’s valuable data and analytics engine combined with Walmart’s existing media and commerce business, we can power a non-linear revenue model that supports the future of video entertainment and retail,” said Walmart CEO Doug McMillon.

The integration of Vizio’s television software and data capabilities aims to bolster Walmart’s own advertising division Walmart Connect, whose sales grew over 20% this past quarter. Going forward, brands that buy Walmart Connect’s display, sponsored search and marketplace ads may decide to amplify campaigns on Vizio televisions to achieve optimal reach across stores, sites and screens.

Competing with Amazon

With this move, Walmart aims to compete directly with Amazon's growing ad segment. By controlling Vizio's platform, companies that advertise through Walmart will have a greater reach and access to more potential customers. This acquisition is expected to help strengthen Walmart's position in the digital advertising market and allow them to better compete with industry giants like Amazon.

The strategic move appears designed to help Walmart catch up with Amazon’s dominance in the advertising market, where it now claims over 10% market share behind only Google and Facebook. Over 120 million Americans visited Walmart’s stores and websites last quarter, presenting a tantalizing offline and online audience for marketers. Now in one fell swoop, Walmart can access millions more consumers through Vizio’s screens.

While financial terms were undisclosed, the deal is expected to close later this year pending necessary regulatory approvals. But Walmart leaves no doubt about its intent to become a diversified media and commerce leader for the next generation. The acquisition of Vizio and SmartCast’s treasure trove of data represents the opening salvo towards that future.

Sources

• CNBC, 20 February 2024
• Walmart Press Release, 20 February 2024