If Walmart buys smart TV set maker Vizio, it could disrupt the connected TV advertising market, analyst Michael Nathanson of MoffettNathanson said.
Walmart is in talks to acquired Vizio for more than $2 billion, according to a report in the Wall Street Journal.
Vizio stock jumped 25% to close at $9.75 a share on Tuesday. The company had no comment on the sale talks.
While Walmart could push to sell Vizio’s inexpensive sets in its stores, a bigger impact could be in the advertising business, where TV set and streaming device makers are increasingly building profitable businesses selling commercials based on the data they get from their TV operating systems.
“Walmart's reported move to acquire Vizio can be seen as a challenge to the CTV advertising landscape as they can also marry first-party data with full-funnel ad inventory. Walmart and Amazon both have the ability (and assets) along with Alphabet's YouTube to be highly disruptive to CTV incumbents,” Nathanson said in a report.
CTV advertising is popular as more viewers switch to streaming. It is also valuable because it is addressable, enabling advertisers to more precisely target the viewers they want to reach.
Nathanson notes that TV set makers (or OEMs, original equipment manufacturers) are willing to lose money selling set in order to make money on their ad and data platforms.
In the third quarter, Vizio’s Platform Plus business grew gross profits by 20% to $99.8 million as revenue rose 22% to $156.2 million. Ad sales were up 27%. At the same time, Vizio’s device business lost $3 million as smart-TV shipments dropped 8%.
Vizio also announced that its was looking to license its WatchFree Plus operating system to other set makers, a move that would expand its total addressable market and build scale to attract more marketers as advertising clients.
For Walmart, Vizio would grow its already burgeoning media business. Like other retailers, Walmart is in the data business, helping marketers figure out if their advertising is driving store sales.
It is also in the retail media business, selling space on its websites, social platforms and in-store displays to marketers. The combination of selling media and documenting retail results is a powerful one, particularly for consumer packaged goods marketers.
Media agency GroupM forecasts that retail media will grow by 11% to $42.5 billion this year and hit $59.7 billion by 2028.
Nathanson notes that Amazon is also pushing harder into the CTV advertising market, putting advertising on Amazon Prime Video.
Amazon has 17% of the streaming operating systems market, behind Roku, the leader with 25%, according to Parks Associates. Vizio has an 8% share.
Nathanson notes that he recommends selling Roku stock because of increasing competition from better capitalized rivals.
“We did not think Walmart was one of those competitors. Once again, 2024 is shaping up to be a year of tremendous change for an industry that was already in flux,” Nathanson said.
Walmart is already Vizio’s biggest customer and sell more Vizio sets than any other brand. Walmart also sells sets with its own Onn brand, which run on Roku or Google TV operating systems.
