Walmart is purchasing Vizio, a smart TV manufacturer, for $2.3 billion in order to expand its advertising business and compete with Amazon, which is experiencing rapid growth.

If the agreement is finalized, Walmart would have access to Vizio’s SmartCast operating system. This would enable the retail giant to provide its suppliers with the opportunity to advertise on streaming devices.

Walmart has been increasing its focus on media and advertising through Walmart Connect, providing advertisers with the opportunity to reach a vast number of Walmart customers. In its latest earnings report, released on Tuesday, Walmart reported a 28% growth in its global advertising business, totaling $3.4 billion for the year.

Amazon recently made the decision to implement a $2.99 monthly charge for its Prime subscribers in order to access ad-free movies and TV shows. This will be in addition to the existing Prime fee of $14.99 per month or $139 per year.

Vizio’s SmartCast system boasts 18 million active accounts and has experienced a 400% growth since 2018. According to the companies, Vizio’s platform has over 500 direct advertisers and advertisements now make up the majority of the company’s gross profit.

Makers of streaming hardware like Roku and Vizio have increasingly shifted their focus to ad revenue in recent years. Vizio launched its Vizio Ads business unit in 2019, claiming that it was “one of the few connected TV companies with the device penetration, consumer opt-in and infrastructure to deliver meaningful scale.”

Walmart identified the growing number of consumers using Vizio products and eagerly took the opportunity to enhance its Walmart Connect division.

Seth Dallaire, the executive vice president and chief revenue officer for Walmart U.S., stated that merging these two businesses would have a significant effect as they redefine the crossover of retail and entertainment.

Major streaming platforms like Netflix and Disney have adopted a hybrid approach, which allows them to generate income from advertisements while also providing the choice for subscribers to pay a higher fee to remove ads.

But with the streaming industry constantly changing, it is uncertain if consumers are willing to pay extra to see fewer advertisements when they are already paying for multiple subscription services. Many people have cancelled their cable TV subscriptions due to frustration over rising bills.

In the afternoon, Vizio’s stock saw a rise of almost 15%, reaching $10.96 per share.

Walmart’s sales and profit exceeded Wall Street’s predictions, resulting in a 3.1% increase to $175.66 per share.

Roku’s stock, which is a major rival of Vizio, fell 6.4% by noon.

Source: wral.com