Walmart's latest fight with Amazon is digital advertising
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The two biggest retailers online and in real life are relying on a reimagined product to sell: advertising space.
Walmart (WMT) this week confirmed plans to extend the reach of its ads business through a $2.3 billion acquisition of smart TV maker Vizio, wielding an array of screens to give Walmart and advertisers in-home tools "to connect to customers" (surveillance?) and another surface for boosting e-commerce.
The Vizio play aligns with Walmart's aggressive advertising build-out. The retailer is poised to grow its ad revenue by nearly 40% this year, according to forecasts by Insider Intelligence. That's more than any other company.
Among the businesses expected to significantly expand their ad sales in 2024 are others in the grocery and retail space seeking the higher margins of digital ads — Instacart (CART), Target (TGT), and, you guessed it, Amazon (AMZN) — turning their online platforms into another system for steering user attention and money. It's a natural evolution for these companies, which have also become powerful search engines, hosts of user-generated content (reviews! usernames!), and content publishers over the years.
Walmart's move to capture more data and advertising power comes as Amazon grew its ads business 27% year over year, according to its most recent quarterly report.
The market's deference to Big Tech and the eagerness to turn legacy and digital operations into ad portals have been revealed in other ways. Next week Amazon, the No. 3 player in the digital ads world behind Google (GOOG, GOOGL) and Meta (META), will join the elite members of the Dow Jones Industrial Average.
"Reflecting the evolving nature of the American economy, this change will increase consumer retail exposure as well as other business areas in the DJIA," said S&P Dow Jones Indices, which manages the 30-stock gauge. Or, as S&P analyst Howard Silverblatt bluntly put it on Yahoo Finance Live, the index added Amazon because it "needs to stay relevant."
Out is Walgreens (WBA), and in is the Big Tech hydra of e-commerce, cloud computing, digital streaming, and online advertising.
Amazon is becoming an ad tech giant while the nation's largest retailer is busy turning itself into a tech company. "Digital advertising is the future of Walmart," Oliver Chen, a senior research analyst at TD Cowen, told Yahoo Finance Live.
And while this may sound somewhat silly at first glance, it's yet another way a company can gain advantage through vertical integration: owning the store and the billboards. Or in this case, the screens that function as both.
"There is a marketplace opportunity in third-party selling, and there's also a big digital advertising opportunity," Chen said. Vizio's smart TV operating system claims 18 million accounts.
In another sign of the times, the ride-hailing giant Uber will replace JetBlue Airways in the Dow Jones Transportation Average so the index can gain exposure to the ridesharing industry.
But as Wall Street has made clear, it's not enough for a transportation company powered by algorithms and human drivers to do business as a tech platform. The ad dollars from users scrolling for Chinese food or riding home are just sitting there.
During the company's most recent earnings call earlier this month, CEO Dara Khosrowshahi said he expects Uber's advertising business to exceed $1 billion in 2024.
Hamza Shaban is a reporter for Yahoo Finance covering markets and the economy. Follow Hamza on Twitter @hshaban.
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