Why Walmart spent $2.3 billion to buy Vizio
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Illustration: Shoshana Gordon/Axios
Walmart spent $2.3 billion last week to buy Vizio, a manufacturer of televisions. Not because it wants to manufacture televisions, but because it wants to sell advertising.
Why it matters: Vizio is at heart a media company masquerading as a manufacturer. By owning Vizio, Walmart can continue to monetize the TVs it sells long after they've left its Supercenters.
- On Wall Street, an income stream stretching far into the future is always preferable to a single profit on a single sale.
The big picture: The world of advertising has changed out of all recognition since the days when TVs were dumb boxes and broadcasters kept all the revenue from ad sales.
- If you want to watch shows on a Vizio TV, you don't need to connect it to anything other than your WiFi network. At that point, the TV will offer you both free and paid streaming services you can watch.
- In return for being featured in the Vizio operating system, those services have to share their revenues — or their ad slots — with the manufacturer.
Between the lines: Once it's part of Walmart, Vizio can add more value still.
- Smart TVs know what people are watching — even if they're watching old-fashioned cable TV or are using a third-party box from Apple or Roku.
- The TVs will then send that data back to Bentonville HQ — which already knows what people are buying.
- That allows Walmart to know which TV ad campaigns are reaching its shoppers, and whether those campaigns are driving sales. It's a data loop that promises to be very powerful in terms of selling and delivering effective advertisements.
By the numbers: The price paid for Vizio is roughly eight times the market value of Gannett, a 118-year-old media company that owns household-name brands including USA Today, the Detroit Free Press, and hundreds more.
The bottom line: Most media companies, from NPR to Netflix, put huge amounts of effort into building a trusted brand.
- Vizio proves that it's possible to fashion a multibillion-dollar media company out of little more than a connected screen with barely any branding.
