Walmart seeks to grow ad revenue
Major retailers can take on Facebook and Google by leveraging data on what products consumers actually buy
Walmart is big in almost every way: 4,755 stores, 1.5-million employees and $380bn in revenue in the US alone. the world ’But s largest one part retailer of remains minuscule. “We have a tiny ad business,” CEO Doug McMillon told investors.
Walmart is big in almost every way: 4,755 stores, 1.5-million employees and $380bn in revenue in the US alone. But one part of the world’s largest retailer remains minuscule.
“We have a tiny ad business,” CEO Doug McMillon said in October. “It could be bigger.”
With about 300-million shoppers visiting its stores each month, according to Forrester Research, and millions more on its websites, Walmart draws in more people than Google, Facebook or Amazon.
That audience, and the purchase data they generate, are catnip for big advertisers such as Coca-Cola and Kraft Heinz.
But Walmart and other retailers have historically not done enough to convert that data into dollars, particularly online.
Having watched Amazon.com build a massive advertising business, brick and mortar stores are looking to do the same. Walmart and Target and grocery chains Kroger and Ahold Delhaize are quietly courting big brands with a sales pitch that goes something like this: Facebook might know what your customers like, and Google might know what they want, but only we know what they actually buy.
“They have a nice story to tell advertisers,” says David Tiltman, head of content at WARC, an advertising analysis firm. “What we see now is a more sophisticated approach to ad sales than retailers have had in the past.”
That push comes at a critical moment with mainstream retailers under attack from rivals as never before. Walmart and others have responded by spending billions to jazz up their websites and build services like home delivery, but those investments crimp earnings.
The tailwinds retailers enjoyed last year from tax cuts and brisk consumer demand will dissipate in 2019, and looming Chinese tariffs could muddle the outlook further. All that uncertainty makes alternate revenue streams crucial, especially for grocers.
Kroger wants to generate $400m in additional profit by 2020, with some of that coming from a new marketing unit that places web ads for the likes of Unilever and General Mills.
Target’s in-house media network has hundreds of clients, including Oreo cookie maker Mondelez International. Walmart has hired executives from NBC Universal and CBS to help boost its advertising business.
The potential is vast. Last year, US ad sales hit a record $208bn, according to researcher Magna. For the first time, 50% of that spending was online. Facebook and Google combined gobble up more than half of those digital dollars, according to data tracker eMarketer. Amazon gets only 5.5%.
That is an opportunity for retailers, which already have long-standing relationships with the big consumer brands that quietly pay them millions every year for prime shelf space.
Those brands are also shifting marketing dollars away from traditional ad agencies, showcased by last week’s surprise sales decline from French ad giant Publicis Groupe.
But Walmart and its ilk will have to move fast.
Amazon’s ad business doubled in size last year and 97% of brands that advertise on Amazon find it valuable, according to a survey by Feedvisor, which sells advertising and pricing software used by Amazon sellers.