Brands boosted their spending on Walmart Connect in Q4

The data: Walmart Connect, the retail giant’s ad tech platform, made big strides in Q4, according to a new report by Pacvue.

• Ad spend on Walmart’s various sponsored ad formats jumped 31% year-over-year (YoY).
• Return on ad spend rose 83% YoY to $6.06 from $3.32.
• Click-through rates more than doubled to 0.62% from 0.30% a year earlier.
• Cost per click (CPC) fell 25% to 65 cents from 87 cents a year earlier.

Building a sizable revenue stream: Walmart has been on a pronounced push to build up its fledgling retail media business and distinguish itself from the vast number of retail media networks competing in a growing market. For example, last year it established a second-price auction model for its ads (under which the highest bidder pays just one cent more than the second-highest bid), a move that helped reduce its average CPC and improve its return on ad spend.

• It also struck deals with several ad-tech vendors that specialize in areas such as ecommerce ads, ad optimization, and cross-channel advertising.
• The efforts helped Walmart grow its advertising revenues nearly 40% last year, per our forecast.

The big takeaway: Walmart Connect’s strong Q4 reflects several key decisions the retailer made throughout last year, most notably its introduction of the second-price auction model to reassure brands they aren’t bidding against themselves or overpaying for impressions.

• Walmart is well-positioned to gain a larger share of US digital ad spending given the deprecation of cookies and third-party identifiers, plus growing privacy legislation and regulatory constraints.
• We expect that Walmart’s US net ad revenues will account for an 8.2% share of US retail media digital ad spending by 2024.