Walmart’s Ad Revenue Is Low But Soaring
Advertising may only be a fraction of Walmart’s overall revenue, but it’s a nerve center for growth.
Walmart, which released its quarterly report on Tuesday, generated total revenue of $153 billion in the second quarter alone, the vast majority of which came from in-store sales.
But while Walmart didn’t disclose its ad revenue for the second quarter, it said its ad business grew 30% year-over-year. For reference, Walmart’s advertising business, which is primarily the Walmart Connect advertising platform, brought in $2.1 billion in 2021.
A 30% year-over-year increase in the second quarter means that Walmart’s ad revenue last quarter was likely in the mid to high $100 million range.
One might then wonder why advertising and other activities that seem marginal to Walmart’s current revenue mix, such as third-party online marketplace sellers and subscriptions, are at the center of the business right now. ?
“We continue to advance our flywheel strategy and diversify our revenue streams,” said John Rainey, Walmart’s chief financial officer, pointing to the company’s advertising business, the 240 million SKUs that are now available on Walmart.com and Walmart+, which does not disclose its subscriber count.
Online businesses are also very synergistic, he said.
For example, Walmart just announced that the ad-supported Paramount+ tier, which costs $5 per month as a standalone subscription, will be bundled into Walmart+ subscriptions for free. And, just as importantly, Walmart Connect will secure a guaranteed portion of the premium CTV inventory it can aggregate on its advertising platform.
However, advertising isn’t just a low hanging fruit, said Doug McMillon, president and CEO of Walmart.
“Even more encouraging than the numbers,” McMillon said, referring to Walmart’s ad revenue growth and shopper data graph, is that ad activity has helped improve the customer experience on the site. by offering better offers and the right products.
But there’s another big reason why Walmart is investing more in its Walmart Connect advertising platform, and that’s because it’s the highest fringe revenue Walmart can earn.
“The relationship between digital growth, market growth and advertising is something we try to capitalize on,” McMillon told an investor.
(This investor had specifically asked Rainey what he thought of the ad platform opportunity, having overseen a similar category expansion at PayPal, where Rainey was chief financial officer and executive vice president of global client operations until in May, when he joined Walmart.)
And advertising activity also generates valuable customer information.
“Knowing more about customers and how they buy is important,” said John Furner, CEO of US group Walmart.
Walmart+, Walmart’s third-party merchant marketplace, and e-commerce ordering “all help us to be able to identify the right sellers and suppliers that we can connect with,” Furner said. “Hence the name: Walmart Connect.”
But Rainey, on his first call about Walmart’s earnings, was able to sum up the appeal of advertising for Walmart in one line: “I don’t recall a company with the margin structure of the advertising business here at Walmart – and having 30% growth for the neighborhood.”