Walmart's decision to shell out $2.3 billion to purchase TV manufacturer and smart TV platform operator Vizio may be one of the biggest ad tech stories this year — but why did Walmart do it?
The reasons themselves may be why the story is so captivating since they span the hottest topics in ad tech: connected TV, retail media, and first-party data.
There is no shortage of articles explaining Walmart's reasoning behind its big splurge on Vizio, but I wanted to take a more ad-tech-focused examination of the decision.
Chasing Amazon
There's no doubt that Walmart has watched Amazon's astronomical growth in retail media with envy — but they have not done so idly.
Walmart launched its Walmart DSP under its Walmart Connect media business back in 2021. Walmart DSP offers advertisers tools to:
- Target Walmart shoppers on its properties in-store or digitally
- Target Walmart shoppers offsite using Walmart purchase data
- Conduct closed-loop measurement, connecting online-to-offline sales directly to advertising campaigns
This retail media play has started to pay off as Walmart's global advertising business grew 28% in 2023 to $3.4 billion. However, the fact remains that Amazon is dominant relative to Walmart. According to Insider Intelligence:
Amazon will capture 75.2% of the $45.15 billion US retail media advertising market [in 2023], more than 10 times that of No. 2 Walmart Connect.
The company has room to grow in this sector, plus advertising offers a highly profitable segment of its business relative to its retail arm. Acquiring Vizio may fit neatly into a strategy to propel growth and compete more fiercely with Amazon.
Expanding Inventory
Walmart can offer advertisers its owned-and-operated display inventory on its shopping properties, in-store checkout screens, and even audio placements on Walmart radio. But Walmart needs a destination to sell advertisers the most desirable ad format: connected TV.
By owning Vizio, Walmart can offer advertisers direct placements on the big screen through Vizio's WatchFree+ service or other streaming services if they follow Amazon and Roku's same strategy and require an inventory share.
Owning the inventory guarantees 100% margins and lops off a nice chunk of US smart TV inventory you can only access by buying through Walmart while commanding a CTV CPM premium.
Owning a CTV platform also offers a haven for advertising features based on identity as Apple and Google continue to clamp down on legacy methods of identifying users on apps and the web.
The Data Play
We all know why first-party data is essential, with cookies crumbling and device IDs under assault. Owning Vizio would give Walmart guaranteed first-hand access to publisher user data — helping the company achieve closed-loop measurement without being subject to the capricious whims of Google, Apple, Amazon, or any platform operator that could yank user identifiers at a moment's notice.
Walmart even has the option to restrict access to Vizio device identifiers or IP addresses if they choose to throw up some walls around this blossoming garden they are planting. Restricting access to user identity could funnel more advertisers into Walmart's DSP if they want to effectively audience target and measure Vizio users.
The Trade Desk powers Walmart's DSP, a company that happens to operate one of the most popular alternative ID solutions, UID2. The Trade Desk and Walmart have already announced the integration of UID2 into Walmart DSP, so the identity solution could offer a quick method to pipe in Vizio user data and expand its usefulness for targeting or measurement.
Being a TV manufacturer also has a unique data perk not available to most publishers or device manufacturers — ACR data. TV manufacturers can collect Automatic Content Recognition (ACR) data regardless of whether a user watches on the TV manufacturer's operating system. ACR data gives Vizio a complete understanding of what shows a user watches and ads they view, even if it happened on a Roku, Amazon FireTV, or any device plugged in via an HDMI cable.
ACR data is precious and offers unique ways to target audiences or allows advertisers to measure ad exposure across disparate devices or platforms. Walmart can retain this data for its DSP, offering advertisers a significant value proposition.
Why Vizio?
Why did Walmart choose to acquire Vizio and not someone else? There are few realistic options for a company wanting to purchase a smart TV platform at scale. Google (Android TV) and Apple (tvOS) are off the table, but what about the other players?
- Samsung: Walmart probably doesn't have a spare $365 billion
- LG: Unless you want to put ads on washing machines and dishwashers, probably not an ideal fit
- TCL: It licenses Roku's operating system, so it has no user base of its own
- Roku: A little expensive at a $9.2B market cap and a nascent panel manufacturing business, possibly running into a ceiling with external hardware as built-in smart TV operating systems improve, and its growth trajectory may be slowing
Vizio has a 12% market share in Smart TVs, an established ads business ($156m net revenue in Q3 2023), is a pure-play platform + advertising business, and has a user base growing at a nice clip (its SmartCast operating system has 18 million users and is up 400% since 2018). Vizio is also a profitable company despite operating at a loss in device sales — a worthy compromise to fuel the higher-margin advertising segment.
Walmart can now push Vizio TVs in-store to expand that user footprint rapidly and lower device sales costs. A newfound focus on pushing Vizio panels may spell bad news for competitors like Roku since Walmart is currently one of the largest sales channels for Roku TVs.
The Vizio deal is likely not the beginning of a consolidation phase in this space. Roku may be the only realistic acquisition target left if a big player wants into this game, but that may only be feasible with a further drop in its $9B market cap — which is not entirely unrealistic given that the company is down nearly 86% from its all-time high reached in July 2021.
Walmart's acquisition of Vizio positions the company as a real force in advertising, but it still has a long way to go to catch up to the king of retail media, Amazon.