CTV & Retail Media: Examining the Walmart-Vizio Acquisition

Retail Media CTV

CTV and retail media - two of the key pillars for 2024 across the media, marketing, and e-commerce industries. Therefore, it isn’t surprising that the news that Walmart is set to buy TV manufacturer Vizio for a hefty USD$2.3bn (£1.8bn) has set tongues a-wagging across the landscape. In this article, we examine the ramifications of this tectonic collision, and how other players within the space may react.

The margin and omnichannel play

Some commentators have queried the cost of the acquisition but, at just 1.4x revenue, it looks like quite the bargain. Based on full year figures, the acquisition takes Walmart’s ad revenue from USD$3.5bn (£2.8bn) to USD$4bn (£3.2bn). A 14% increase looks solid but not spectacular, especially when you consider that advertising makes up just 2% of Walmart’s overall revenue. However, it’s profitability that is the name of the game here. Over 2023, Vizio achieved a gross profit margin of 61% on its advertising operations. Walmart’s margin over that same period? 4%.

Furthermore, Smart TV OS (Smartcast), Vizio’s owned and operated system, is purportedly used by 18 million active accounts, giving Walmart a substantial panel right off the bat (for context, Nielsen’s measurement and analytics panel amounts to some 42,000 households). Scale is king as we enter the post-cookie ecosystem, so being able to touch so many households in an inherently cookieless environment is an enticing prospect for marketers. In-housing a retail media channel as valuable as CTV allows Walmart to fully integrate and adapt it with its own systems, rather than relying on a more off-the-shelf solution.

Amazon’s vast e-commerce empire has often been cited as the reason as to why it currently attracts such a high proportion of retail media spend. However, Walmart has an old-school ace up its sleeve which Amazon doesn’t: physical stores. Walmart’s 4,600+ US stores massively outnumber the 500 Amazon owns across its Whole Foods and Amazon Fresh marques. This opens up omnichannel avenues Walmart that are unavailable to Amazon, and appealing to marketers looking to run these campaigns. Walmart is already heavily pursuing this approach, reflecting advertiser demand, given that in June last year, the company announced a significant expansion of its Connect offering, focusing on in-store experiences. These now include in-store audio, digital signage, and in-store activations such as product demos and sponsored events. 

Going it alone?

To-date, Walmart’s CTV strategy has been forged through partnerships, which it may elect not to renew in order to exert more end-to-end control of its owned ecosystem. For instance, Yahoo’s DSP currently has exclusive use of Vizio automated content recognition (ACR) data for pre-bid advertising. Walmart is highly likely to bring this under the wing of its Walmart DSP, built in partnership with The Trade Desk, in order to more closely package the ACR data with its retail media data segments for advertisers. Likewise, Roku powers Walmart’s Onn television sets, though once this partnership ceases it is less obvious which approach Walmart will take. On the one hand, Vizio’s Smartcast could simply replace Roku as the default operating system on all Onn sets. Alternatively, Walmart executives may be enticed to extend the deal, given Roku’s market penetration in the FAST segment, as well as potential antitrust scrutiny (more on that below). One partnership which Walmart will do well to retain however is that with NBCUniversal, whereby Walmart shopper data is used to power CTV advertising within live sports streams, as well as a trial of “shoppable episodes” on Peacock.

While by no means as hyped-up as the likes of AI and software, consumer hardware is an important revenue driver for general retailers. To bolster sales of Vizio hardware, and thus increase its consumer data footprint, Walmart may pursue a more aggressive discounting strategy versus other television sets, or go even further and give Vizio TV sets away for free to customers with a Walmart+ loyalty subscription, capturing yet more user data. A notable missing piece of the strategy puzzle is content. Amazon has built up an impressive array of movies both organically and via acquisitions, most notably via its USD$8.45bn (£6.66bn) purchase of MGM. If only there were an established broadcaster on the market which has reportedly broken off talks with another buyer, which Walmart has an existing partnership with…

Roadblocks: Antitrust and quality

Barring corporate drama to rival that one would watch on a Vizio screen, the sole potential fly in the ointment for the acquisition is antitrust concerns. Regulators in the US have woken from their decades-long slumber when it comes to competition, and are now scrutinising multiple deals, including in the retail space where the FTC is currently suing Kroger’s merger with Albertsons

Vizio is also a known quantity to the FTC, given it has previously fallen foul of the agency and the New Jersey Attorney General over its data collection practices, for which it made a settlement in 2017. How users are given the option to consent to their data use across Walmart’s portfolio is therefore going to be critical in avoiding regulatory examination.

Additionally, should Walmart aggressively discount Vizio sets relative to third-party rivals, or reduce the range of rival TVs available in its stores, this is likely to irk regulators and consumers alike, therefore it may need to strike concessions for the deal to go ahead. This may impact any denigration of the partnership with Roku for Onn devices, or indeed lead to the shuttering of the Onn range.

As a final note, CTV has long been touted as a high-quality source of inventory, and in combination with retail data is set to attract many multiples more of ad dollars in the post-cookie environment. While it is critical as an industry to avoid falling into the pitfalls of a single ad following you around your favourite TV programmes or films, simply because you looked for a kettle two years ago, the user experience can be improved significantly if advertising aligns contextually with a given programme, or matches their general interests. This is something Walmart needs to get right in order to avoid angering consumers, particularly those more likely to switch between different grocery retailers. Admittedly, it’s very early days, but from personal experience Amazon’s rollout of advertising on Prime Video has been disappointing on that front. The e-commerce giant has more than a decade’s worth of data around what I buy, and can therefore reasonably infer some of my key hobbies, interests, and gifting habits. And what have I been treated to when watching a certain motoring series? Back to back adverts for Peppa Pig.