Walmart’s latest move could spur more brands to buy display ads

The strategy: Walmart Connect launched an API that allows retail ad tech firms like Pacvue, Skai, and DataCaciques to build tools for selling display ads on Walmart’s ecommerce site and app. These firms previously sold display ads through Walmart Connect.

• The API aims to simplify the ad-buying process by enabling advertisers to purchase and manage campaigns via a self-service platform. Walmart already offers a similar API for selling search ads.
• The launch is part of Walmart Connect’s strategy to streamline the ad-buying process to spur smaller brands and marketplace sellers to advertise on its platform.

The context: Walmart is following Amazon’s lead in partnering with ad tech firms to automate retail media buying. The approach has helped Amazon build a massive advertising business that we expect will generate $47.52 billion in the US alone this year.

• Walmart, which generated $4.4 billion in global ad revenues last year (with $3.87 billion from the US, per our forecast), currently brings in most of its ad revenues from large consumer packaged goods brands.
• The new API could help Walmart capture significant growth from smaller brands and marketplace sellers by simplifying the process and removing minimum spending requirements.

Our take: As Walmart faces an uncertain retail environment, it is wisely focusing on its fast-growing, high-margin retail media business to drive growth. The move makes sense—advertising and membership alone accounted for over a quarter of Walmart’s operating income in Q4, CFO John David Rainey said on the company’s recent earnings call.