What’s the endgame of Walmart’s US$2.3 billion acquisition of Vizio?
Walmart announced this week that it’s buying Vizio for US$2.3 billion.
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The backstory: Walmart is a global retail giant founded in 1962 that operates thousands of stores worldwide where you can pretty much buy anything, from groceries to electronics. But it doesn’t want to be just a store where you can buy lettuce, a garden hose and Minions pajamas all in one place. It’s also been pumping billions into its online presence to keep up with the digital age. Not only is this important to tap into the booming online shopping scene, but the company is following in the footsteps of retail giants that are big into media and advertising, like Amazon. Other retail competitors like Kroger and Target have also been investing more in advertising.
More recently: Last year, Walmart's ad business was just a tiny slice of the pie, bringing in around US$3.4 billion, less than 1% of its total sales. So, it’s on a mission to change that. Walmart is also thinking it can leverage its massive amount of consumer data to deliver personalized ads online. Over the last two years, it has teamed up with companies like Innovid for personalized TV ads, Roku for piloting "shoppable ads" that let you buy things straight from your TV and networks like Snapchat and TikTok to branch out into the social media scene.
The development: Walmart announced this week that it’s buying Vizio for US$2.3 billion. If you're not familiar, Vizio is known for its smart TVs and has over 18 million active accounts on its network SmartCast. So Walmart’s acquisition would give it access to that extensive base of customers to offer advertising as well as create unique entertainment opportunities for Vizio TV owners. This acquisition was announced alongside Walmart's latest earnings report, which beat expectations and showed strong sales through the holiday rush. The move puts Walmart in a better place to compete with retailers that also offer advertising and entertainment, like Amazon – especially if it makes moves in the future to buy a streaming platform or create one of its own.
Key comments:
“We believe VIZIO’s customer-centric operating system provides great viewing experiences at attractive price points. We also believe it enables a profitable advertising business that is rapidly scaling,” said Seth Dallaire, executive vice president and chief revenue officer of Walmart US, in a statement.
"Across countries, we continue to see a customer that's resilient but looking for value," said Walmart CEO Doug McMillon on a conference call.
"The Vizio deal essentially takes Walmart Connect from being an advertising provider through stores and websites to one that can penetrate consumers' homes via television," said GlobalData's Managing Director Neil Saunders. "This multichannel approach gives Walmart a lot more power and reach in the world of advertising and puts it on a more level playing field with the likes of Amazon."
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