Walmart Inc is aggressivelyexpanding its advertising business after years of tutteringprogress, even as a proposed deal to buy a stake invideo-sharing app TikTok remains stuck in limbo.
The world’s largest retailer is making better use of itswealth of shopper data to link promotions on its website and appwith ads inside its network of 4,700 U.S. stores, according toReuters interviews with six advertising agencies and Walmart adtech partners, three major brands plus bankers and ex-employees.
The refocused strategy was born early last year when Walmartcut ties with its external advertising partner and took thebusiness in-house, calling it Walmart Media Group.
The company bet it could do a better job of bridging onlineand offline data for its advertisers and give itself a shot atdeveloping an ad platform that could take on Amazon.com Inc, the sources said.
The shift has been paying off, according to one sourcebriefed on the company’s plans who said Walmart Media Group wason track to earn nearly $1 billion of advertising sales thisyear, more than double the amount it brought in last year.
Walmart declined to comment on the sales estimate, but itexplained its approach to the ad business. “One thing we do atWalmart Media Group is make sure that the advertising we’replacing is additive to the customer experience, that we’re notjust throwing ads on anything anywhere, that we’re reallystrategic,” Walmart spokeswoman Molly Blakeman said.
The big challenge now, according to the source, is figuringout how it can continue to expand the ad business into one thatwill matter to investors for a company that earned about $524billion in total revenue in fiscal year 2020.
“It’s going well, and they want it to go very, very well,”the source said. “There have been very material gains but itdoesn’t yet put a dent in Amazon’s lead or Walmart’s top orbottom line.”
A deal for TikTok, which reaches 100 million U.S. users amonth, was supposed to supercharge the strategy by helpingWalmart’s ad machine engage with younger audiences that may notshop regularly at Walmart. But the talks to invest in theChinese-owned TikTok remain shrouded in political uncertainty.
That, however, has not stopped Walmart from moving aheadwith its strategy, the advertising agencies and brands said.
Yet it’s early days in the drive for Walmart, which hashistorically struggled to create new lines of business and hasnever turned a profit form its e-commerce business. Someadvertisers and ad agencies said the retailer still had adistance to go on the technology front, including tracking howads translated into sales – a key selling point for brands.
Walmart faces a huge task chasing Amazon, which is expectedto generate about $13 billion in ads this year according toeMarketer, while it is also battling smaller rivals includingTarget and Kroger which are building their own adplatforms.
Another challenge it must overcome: Walmart disclosed thismonth that Stefanie Jay, leader of Walmart Media Group, willleave the company for a “new opportunity.” Rich Lehrfeld,Walmart’s interim chief marketing officer, will now also leadWalmart Media Group.
‘ALWAYS IN, ALWAYS ON’
In meetings with brands and advertising technology partners,Walmart’s executives have summed up its goals with a tagline -“Always In, Always On” – a reference to how its store networkwill help advertisers reach more customers, Walmart toldReuters.
“Whether it’s online or in the shopping aisle on a screen inthe grocery section, they want that brand message through thewhole ecosystem,” said Nich Weinheimer, general manager ofe-commerce at ad tech firm Kenshoo, which works with Walmart.
Walmart has used its data to improve targeting of ads andconvinced some advertisers to sign long-term advertisingcontracts, brands and former employees say. The company toldReuters that its deals, which include store and digital ads, aretypically worth low double-digit millions of dollars.
Dan Cooke, head of e-commerce at jam-maker JM Smucker Cowhich places ads with Walmart, told Reuters that theretailer had gathered better data on consumers and theirpurchases this year.
Walmart has uses the data to improve its online displayadvertising, give clients a better idea of how their ads areperforming and provide “critical” online tools that makes iteasier for them to monitor and control campaigns themselves, headded.
“There’s a bit of an arms race that’s going on – Amazon hascertainly been a trailblazer,” said Cooke, adding that Walmartwas responding “very aggressively.”
KNOWING WHAT SELLS
Walmart executives view the advertising drive as significantto the success of the retailer’s e-commerce business as a whole,according to the source briefed on the company’s plans.
Nearly 90% of Americans live within 10 miles of a Walmart,according to the retailer’s website. This is a strength thatWalmart needs to leverage more, according to the ad agencies andbrands, as it has an insight into consumers’ shopping habits.
Walmart’s stores and Walmart.com together count about 160million visitors a week, data from investment bank Cowen shows.
Walmart’s advertising strategy has nonetheless been somewhathit or miss over the decades.
The retailer, based in Bentonville, Arkansas, dabbled withthe advertising business in the late 1990s and early 2000s withan in-store TV network that aired commercials. It expanded thebusiness about 15 years ago to include its website through TriadRetail Media.
The retailer cut ties with Triad in February 2019 andbrought all ad operations in-house under Walmart Media Group.
The company still faces a series of challenges.
It needs to improve ad-measuring capabilities to showexactly how certain ads lead to specific sales, Smucker’s Cookesaid.
Some advertisers have also complained about “glitches” whereads occasionally disappear from Walmart.com or don’t show up atall. Kimberly Williams, a former campaign manager at WalmartMedia Group, said this happened “all the time”, recalling an adfor Mars Inc’s M&M candies that disappeared for several hours.
According to brands, this happens from time to time on otherretailers’ platforms as well. Walmart declined to comment.
Longer term, the challenge for Walmart is to figure out anoverarching media content strategy to keep customers engaged forlonger periods, according to the industry players interviewed.
Walmart considered launching a subscription video service in2018 but decided against it, according to sources. In otherforays, it invested $250 million in a joint venture to developinteractive content and struck a deal with “James Bond” studioMetro Goldwyn Mayer to create content for the Vuduvideo-on-demand service, which it sold last April.
Walmart is also going after a new channel of ad revenuecalled “brand advertising,” typically reserved for TV, byoffering more formats like online display ads, said GeorgeManas, chief media officer at ad agency OMD USA.
Executives hope successful advertising relationships couldhelp it secure promotional tie-ins with the Walmart+subscription service, its version of Amazon Prime.
Losing the TikTok deal won’t be a disaster, but landing itwould help Walmart flesh out a competitive media strategy, saidMark Boidman, managing director and head of media and techservices at PJ Solomon, which advises Walmart.
“Amazon surrounds the consumer in a 360-degree manner,”Boidman said, referring to Amazon Prime and the freevideo-streaming service that comes with it.
Walmart is still “getting there.”(