Why Walmart Connect Is Winning
For the first time, Walmart shared how much money its advertising business, Walmart Connect, is generating. And business is good. In announcing its quarterly earnings February 17, Walmart said that Walmart Connect achieved $2.1 billion in revenue in 2021. Why is Walmart Connect succeeding?
What Is Walmart Connect?
Walmart Connect is the name of Walmart’s advertising business. Walmart Connect creates targeted advertising by capitalizing on the customer data it has accumulated about search and shopping on Walmart.com and in Walmart stores. Walmart Connect offers many ad units. For example, Search Brand Amplifier makes it possible for a brand’s logo, a custom headline, and up to three of its products appear at the top of a web page (on Walmart.com), thus improving brand recognition and showcasing a company’s product portfolio.
What Did Walmart Announce?
In a conference call with Wall Street analysts, Walmart said that Walmart Connect is growing remarkably well. According to Walmart’s Chief Financial Officer Brett Biggs, “Walmart Connect advertising experienced robust sales growth this year with a strong pipeline of new advertisers and large growth opportunities ahead. In fact, the number of active advertisers using Walmart Connect grew more than 130% year over year. And about half of the ad sales came from automated channels in Q4, more than double last year. We expect Walmart Connect to continue to scale over the next few years with plans to become a top 10 ad business in the midterm.”
Why Is Walmart Connect Succeeding?
Walmart Connect is benefitting because the company relies on first-party customer data. Ad platforms that rely on first-party customer data are becoming more attractive as businesses such as Apple and Google make it harder for advertisers to capitalize on third-party customer behavior data to create online ads. First-party data is beyond the reach of these privacy initiatives. That’s a big reason why retailer-based ad businesses are flourishing – and Walmart is not the only one, as we blogged here.
Another reason for the success of Walmart Connect is that the company has offered automated advertising tools. As noted above, in a call with Wall Street analysts, Walmart said that half the advertising revenue in 2021 came through automated channels. This suggests that Walmart is doing a good job offering programmatic advertising — or the use of automated technology for media buying (the process of buying advertising space), as opposed to traditional (often manual) methods of digital advertising.
Although we don’t have any numbers yet, it’s also likely that Walmart’s physical stores will play a role in the growth of Walmart Connect. Walmart Connect sells ads on more than 170,000 screens — including televisions and self-checkout kiosk screens — located inside more than 4,500 U.S. stores. For example, TV Wall Ads provide placement of an advertisement on thousands of in-store TV screens in stores, with the goal being to influence shoppers while they’re making purchase decisions. Keep an eye on the in-store ad units. They are primed for growth as people become more comfortable shopping in stores post-pandemic.
What Should Advertisers Do?
- Consider retailer-based ad networks as a complement to your existing digital ad strategy, not as a replacement. If your strategy focuses on Facebook and Google, for instance, don’t move your ad dollars over to a retailer network. Remember that Facebook and Google also already offer proven advertising products that capitalize on their vast user base. For example, location-based digital advertising tools help strengthen Google’s advertising services at the local level.
- Do, however, monitor the effectiveness of your advertising on Meta and Google amid the demise of third-party cookies and the onset of Apple’s App Tracking Transparency, which includes more privacy controls that have had an impact on Meta’s ad business.
- Work with an agency partner that knows the terrain. For instance, at True Interactive, we complement our history of helping businesses advertising on Google and social media with expertise across retailer ad networks such as Amazon and Walmart.
- Learn more about the ad products that might apply to you – and those products are evolving. In 2022, more retailers will use first-party data to help businesses create more targeted ads off-site – meaning advertising across the web, as well as via connected TV.
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For More Insight
“Why Retailers Are Launching Ad Businesses,” Tim Colucci, January 11, 2022.
“Walgreens Doubles Down on Its Advertising Business,” Tim Colucci, May 19, 2021.