Why TikTok deal could mean big growth for Walmart’s ads business

KEY POINTS

• Walmart confirmed over the weekend it had tentatively agreed to purchase a 7.5% stake of TikTok in the U.S.
• It could be a boon for the retailer’s tiny but growing advertising business. 

Walmart confirmed over the weekend it had tentatively agreed to purchase a 7.5% stake of TikTok in the U.S., alongside Oracle’s larger 12.5% stake.

That deal could be a boon for the retailer’s tiny but growing advertising business. 

Although it’s known for its big-box stores, Walmart has an advertising business that resembles Amazon’s, albeit on a much smaller scale. On Walmart’s own website, advertisers can sponsor their products to appear prominently in search or on product detail pages. It also has a display advertising network, which lets advertisers reach Walmart customers both on the retailer’s own digital properties and off-site, whether that’s on other websites or on social channels like Instagram or Pinterest. 

Walmart Media Group boasts about its “massive scale” and “massive reach” to advertisers, saying 160 million customers visit its stores or its website every month, and claims 90% of households have shopped at Walmart at least once in the prior 12 months, attributing 2020 data.

But in its 2020 annual report, the company said Walmart Media Group along with “fuel and financial services and related products” make up less than 1% of annual net sales.

By way of comparison, in Q2, Amazon’s “Other” business segment, which “primarily includes sales of advertising services,” accounted for $4.2 billion in net sales, a bit less than 5% of the company’s total. It’s consistently growing around 40% on an annualized basis.

A young, engaged userbase

In general, analysts point to TikTok’s large and engaged userbase as an opportunity for Walmart’s ads business. In particular the retailer is wildly popular with young consumers seeking inexpensive wares they can doll up with DIY projects, which they then show off on TikTok. 

Read more: cnbc