Walmart Inc could turn into an online advertising leader if its plan to acquire popular short-form video app TikTok goes through, analysts said on Friday.
The proposed purchase, in partnership with Microsoft Corp, would allow the world’s largest retailer to quickly compete with Amazon.com Inc, Facebook Inc and Alphabet Inc’s Google for eyeballs on social media, reaching customers across virtual and physical sales channels.
TikTok is up for sale as the Chinese-owned company is under fire from the Trump administration as a potential national security risk due to the vast amount of private data the app is compiling on U.S. consumers.
Walmart, which pitched its ad business to large consumer goods companies and advertising firms for the first time last year, said on Thursday it was “confident” it could meet U.S. TikTok users’ expectations and satisfy U.S. regulators’ concerns.
TikTok owner ByteDance aims to ink a deal by Sept. 15, people familiar with the matter told Reuters on Thursday.
“Walmart is going to see a very quick rise in ad spend” if its bid succeeds, said Scott Smigler, president of e-commerce marketing agency Exclusive Concepts.
“From a brand standpoint, it’s a no brainer because of the reach Walmart has and the huge shift we’re seeing right now from offline to online (spending). … For all of our brands and retailers that are eligible, we’re going to want them on Walmart for sure.”
Last week, Walmart posted its biggest-ever quarterly growth in online sales, as the unprecedented spike in demand seen by big-box retailers at the peak of the coronavirus lockdowns has remained strong even as restrictions ease.
Walmart does not break out revenue from sponsored ads for products sold on its website. But online ads yield much higher margins than product sales, and ad revenue is growing as the retailer boosts investments in the area.
It has been more important than ever for Walmart to find new ways to win market share from its closest e-commerce rival Amazon.com, a fast-growing ad platform, as customers increasingly shop online.
Amazon reported $4.2 billion in advertising and other revenue for the most recent quarter, nearly double what it brought in for the same period two years prior. That amount is up 41% from the year-ago period.
Retailers including Target Corp and grocers such as Tesco Plc have aggressively wooed big advertisers to their websites to drive sales through pop-up banners and search-bar keywords.
In July, Bentonville, Arkansas-based Walmart rolled out new features for its in-house advertising platform Walmart Media Group.
Walmart has seized many opportunities to scoop up online brands like Bonobos, which it purchased for $310 million in 2017, and Art.com, which it bought for an undisclosed amount in 2018.
In 2010, Walmart announced its new video-on-demand service with its acquisition of Vudu, which also offers a free ad-supported streaming option. However, Vudu still lags far behind the monthly viewership numbers that competitors Netflix and Hulu pull in, and Walmart sold it to Comcast Corp-owned Fandango Media LLC, a movie ticketing service, in April.
Investors are viewing Walmart’s play for TikTok as a potential win, and are raring to know more details.
“It’s really hard to put a value on the return they’re (Walmart) going to get from this” possible acquisition, said Randy Hare, portfolio manager at Huntington Private Bank.
“But clearly the market’s excited about this because this could really help Walmart with a new channel of advertising.”
Source: Reuters.com