A Blog by Jonathan Low

 

Feb 28, 2019

Walmart Competes With Amazon In Quest To Dominate Digital Ads

The business has high margins, Walmart has lots of data - and may find success offering an alternatives to companies leery of Amazon's, Google's and Facebook's growing domination of that space. JL


Sarah Nassauer reports in the Wall Street Journal:

Walmart has long offered companies space to place ads inside its 4,600 U.S. stores. It also has a digital ad business that lets suppliers target online ads based on its shopper data. Walmart plans to bring its store and digital ad teams together, using Walmart’s trove of shopper data to sell marketing opportunities in more parts of its business. Deep-pocketed companies with large amounts of data on their customers are in the best position to mount a challenge to (Google and Facebook).Ramping up advertising revenue is one way Walmart aims to fend off Amazon, shoring up profit as it invests to boost online sales, new technology and increase worker wages.
Walmart the world’s largest retailer, wants to become a big seller of advertisements too.
As Amazon.com expands its share of the online advertising market, Walmart is trying to entice suppliers and other marketers with its own ad space and access to shopper data.
Walmart has long offered companies like Unilever PLC, Kellogg Co. and Hollywood studios space to place ads inside its 4,600 U.S. stores. It also has a digital ad business that lets suppliers target online ads based on its shopper data, but looked to an outside firm to sell space on its websites and across the web.
Now it’s in the process of bringing its digital ad business in-house, say Walmart executives, winding down its relationship with Triad, a unit of WPP WPP -0.42% PLC which sells ad space on retail websites and other digital properties. Triad declined to comment.
Walmart also plans to bring its store and digital ad teams closer together, using Walmart’s vast trove of shopper data to sell marketing opportunities in more parts of its sprawling business, including Vudu, its video streaming service.
Digital advertising is a tough business that is dominated by Alphabet Inc.’s Google and Facebook Inc. But deep-pocketed companies with large amounts of data on their customers are in the best position to mount a challenge to that “duopoly,” ad industry experts say. Amazon has already made significant inroads, and AT&T Inc. has designs on building a big digital ad business after acquiring media giant Time Warner Inc.
Walmart, itself, tried several years ago to move into the online ad market but didn’t make much of dent. Now, after a major push into e-commerce, Chief Executive Doug McMillon is making a renewed effort to build an ad business that can challenge Amazon for more of brands’ marketing budgets.
Walmart hopes that if “I’m the CMO of a large branded manufacturer I now think about Walmart as a network I can go advertise on,” said Steve Bratspies, chief merchandising officer for Walmart U.S. The company believes the advertising can be more efficient than with competitors because marketers benefit from Walmart’s online and store purchasing data, said Mr. Bratspies.
For example, a customer who purchases a bicycle in a Walmart store might see ads for a helmet on Facebook or Pinterest. The ad would take the shopper back to walmart.com or sister site jet.com to buy the helmet.
Walmart offered similar services through Triad but if a supplier wanted to advertise a new snack, it had to work with Triad on the digital marketing and a separate Walmart team to hand out samples in stores.
Walmart executives discussed the company’s new focus on building a bigger advertising business for suppliers at a conference near its headquarters in Bentonville, Ark., on Tuesday.
Ramping up advertising revenue is one way Walmart aims to fend off Amazon, shoring up another potential source of profit as it invests heavily to boost online grocery sales, experiment with new shopping technology like virtual reality and increase worker wages.
In recent years, Walmart’s sales have increased strongly in stores and online, but online profits are shrinking, leaving stores as the main profit engine for a business with more than $500 billion in annual global sales.
As Amazon leans on selling space in its cloud-computing operation Amazon Web Services and growing ad revenue to support an expanding retail empire, Walmart’s Mr. McMillon wants more streams of revenue for his business, said people familiar with his thinking. Mr. McMillon is rallying executives to focus on advertising, these people said, and to bring together what has been a disparate ad sales approach splintered between stores and online.
Last year, Amazon—which sells ads in its dominant e-commerce store, on devices like the Kindle and Fire TV, and across third-party websites—became the third-largest seller of digital ads after Facebook Inc. and Alphabet Inc.’s Google, according to eMarketer. Walmart’s digital ad revenue was too small to track, said the firm.
Walmart has data on hundreds of millions of shoppers who visit its stores but its websites draw a fraction of the monthly visitors of the tech giants. Several years ago, Walmart made a similar online ad push, called Walmart Exchange, to sell ads on walmart.com. It ended up outsourcing most of the ad-sales services to Triad but kept Walmart’s customer data in-house.
“Our data has never been monetized and we have a tiny ad business. It could be bigger,” Mr. McMillon said at an investor conference last October.
Other retailers including Target Corp. and Kroger Co. are also pitching themselves to advertisers as a place to promote products directly to shoppers, using their customer data to advertise online and in stores.
Some bricks-and-mortar retailers are feeling Amazon’s pinch in the sector known as trade marketing, which aims to get products onto shelves and in the best locations in stores to get noticed.
Those budgets, particularly used by packaged-goods manufacturers, are increasingly shifting to Amazon, advertising vendors, analysts and brands say. Trade marketing attracts an estimated $178 billion a year in the U.S. and makes up most of Amazon’s ad dollars in the U.S., Morgan Stanley analysts estimated.
Walmart also has courted in-store marketing dollars, but in recent years has encouraged brands to lower prices to gain an advantage rather than paying to market products in aisles. By building an ad network, Walmart aims to give suppliers a way to advertise across the company while keeping product prices low, said Mr. Bratspies.
“We are not going backwards on EDLP,” he said, using Walmart’s acronym for Everyday Low Price. “They might be advertising on cable TV. Instead of cable TV you should put it into Walmart Media.”
A number of advertisers have brought ad-creation and buying operations in-house in recent years. Walmart’s move is different, in that it’s bringing ad sales in-house. Walmart will need to build a team of media and marketing executives that not only can sell ad space but also help its suppliers create ads for its properties—no easy feat for a large company that typically outsources such tasks.

1 comments:

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