Walmart the world’s largest retailer, is no longer satisfied with just winning consumers’ wallet share. Marketers’ advertising dollars are its big new focus as archnemesis Amazon has become the third largest digital ad market player behind just Google and Facebook.
By Andria Cheng
A week after changing its media business name to Walmart Connect to attract advertisers that want to target its 150 million weekly customers in stores and online, Walmart on Thursday said it bought Thunder automation ad-tech company’s technology to reduce the time it takes from when an ad idea is generated to when the ad goes live.
Walmart has also announced a partnership with ad-tech company Trade Desk to help marketers come up with campaigns that they can adapt “on the fly” based on “changing circumstances and real-time performance.”
“Advertising is a hidden potential profit stream” for Walmart, Morgan Stanley analysts said in a report on Friday. “Current ad business is ‘under-punching’ with plenty of catch-up potential.”
Morgan Stanley estimated Walmart’s annual ad revenue at about $500 million and said it could rise to $4 billion by 2025. The profit before interest and tax Walmart generates from the ad business could total $2 billion by then, helping it to make up for the $1 billion loss Walmart’s e-commerce business was expected to have racked up last year, Morgan Stanley said.
The ad business is “an important part of the company’s overall strategy,” Walmart said, adding it helps diversify its sources of revenue. Walmart said it aims to be a top 10 advertising platform. The Bentonville, Ark. retailer said it nearly doubled the ad revenue and more than doubled the number of advertisers in the last fiscal year.
Walmart’s advertising ambition followed that of Amazon. Amazon this week, made up primarily of its advertising business, jumped 64% to $7.95 billion in fourth-quarter sales, the fastest growing segment at the Seattle giant. For the year, Amazon’s “other” business totaled nearly $21.5 billion in sales.
The online giant is expected to be the fastest digital ad market share gainer in the U.S. in the coming years, beating Google, Facebook and even Google’s YouTube and Facebook’s Instagram, as well as TikTok, according to a Cowen & Co. report in January, which surveyed U.S. ad buyers.
Amazon’s U.S. ad market share is expected to rise to 11% in 2022 from 7% last year. In comparison, YouTube’s share of ad budgets is expected to rise by just 1 percentage point to 18% while the core Facebook’s share will decline by 4 percentage points to 14% during the same period and Instagram’s to remain at 12%, the Cowen study said. More than a third of of ad buyers it surveyed expect Amazon to emerge “as meaningful ad platform alongside” Google and Facebook, the report said.
The investment bank expects U.S. digital market to rise an annual average of 13% the next five years and total $165 billion this year. Globally, it expects the market to rise an annual average of 9% to increase to one trillion by 2026.
Amazon’s advertising revenue could top $85 billion in 2026 with its share of the worldwide digital ad market, excluding China, expanding to about 13% in 2026 from about 8% this year, according to Cowen analysts.
Originally published at Forbes