Is Walmart's VIZIO Move a Masterstroke in the Media Retail Game?

Walmart's recent acquisition of VIZIO for $2.3 billion has captured headlines and spurred copious analysis. The deal is a significant play in the ongoing strategic reshuffle of the television landscape, marking Walmart’s foray into the nexus of retail and media. It’s a bold move, but only a single step in a game that's far from over.

At its core, the acquisition is a leap forward for Walmart’s retail media strategy. Previously, Walmart Connect’s collaboration with TheTradeDesk allowed the use of Walmart shopping data to target ads across a demand-side platform (DSP). With VIZIO, Walmart gains a direct conduit into approximately 18 million TV sets, enhancing its ability to glean insights into TV viewing habits through Automatic Content Recognition (ACR) technology. More importantly, it opens up the avenue to own the ad inventory and run targeted ads within its ecosystem (bypassing TheTradeDesk). This approach to ad monetization promises significantly higher revenue potential from its current retail media setup.

The significance of this deal cannot be understated; it’s Walmart’s gambit to challenge Amazon’s dominance, epitomized by its Fire TV operations. But while the strategy is astute, Walmart's journey toward parity with Amazon is still nascent. Amazon’s 160 million-plus Prime subscribers dwarf VIZIO’s 18 million devices (say, a mere 15 million households). Walmart, despite making a commendable start, has not yet achieved a balanced playing field.

Moreover, Walmart must now develop a television advertising product to entice brands and agencies directly—a new endeavor for a veteran retailer. While VIZIO’s direct sales exceeded $200 million in 2022, Walmart’s success hinges on two things. One, transcending the confines of its ecosystem (access to any inventory, not just VIZIO; if not, Walmart is risking the same fate as Roku). Two, offering a robust closed-loop outcome measurement system i.e. exactly what modern advertisers demand. Nielsen-like audience data won’t suffice; advertisers seek a tangible return on advertising spend (ROAS).

To truly revolutionize media and entertainment, Walmart must now execute two strategic plays.

The first involves leveraging its retail heft to massively distribute VIZIO TVs. Walmart, which currently sells more than a third of all TV sets in the US, could swiftly rival Amazon by converting these sales to VIZIO sets. This aggressive distribution could simultaneously erode the market share of Fire TV and Roku, the latter currently relying on Walmart for 40% of its device revenue. There's even a case for Walmart to disrupt the market further by offering VIZIO TVs gratis, leveraging its scale to establish dominance.

The second play is content acquisition. With the ongoing unbundling of cable and broadband, Walmart has a prime opportunity to enter the content fray. As the adage goes, content is king, and Walmart's platform would be well-armed with high-quality content offerings. In this regard, DTC streaming services, struggling to find distribution, could find a partner in Walmart. Paramount+ has already recognized this opportunity, but Walmart could go further, potentially acquiring entities like Paramount or Warner Media to bolster its content portfolio.

In conclusion, Walmart's acquisition of VIZIO is a strong strategic move but merely an opening gambit in a complex chess game of media convergence. Each move in this game, aimed at gaining a competitive advantage, ultimately benefits consumers with richer TV and content options coupled with advertising that resonates more effectively. Walmart's challenge will be to execute subsequent moves with precision and innovative foresight, ensuring that its initial push into television is not a fleeting gambit but the dawn of a media empire.