By Sarah Nassauer
Walmart Inc., the world's largest retailer, wants to become a
big seller of advertisements too.
As Amazon.com Inc. 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 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.
--Alexandra Bruell contributed to this article.
Write to Sarah Nassauer at sarah.nassauer@wsj.com
(END) Dow Jones Newswires
February 26, 2019 19:29 ET (00:29 GMT)
Copyright (c) 2019 Dow Jones & Company, Inc.
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