Walmart wants to expand its advertising business

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On Thursday, the retailer bought Polymorph Labs, a Silicon Valley startup specializing in digital advertising management for brands. The terms of the deal have not been revealed, but Walmart said the addition of start-up technology would allow current and potential advertisers to reach consumers more effectively .

"Our data has never been monetized and our advertising activity is tiny," Walmart General Manager Doug McMillon said last year. "He could be bigger."

Walmart hopes his talk with mainstream brands will remain the same. This highlights the fact that he has an extensive network of physical stores that he can use to recruit brands. Walmart says it has a wealth of buyer data as 90% of US stores are at Walmart each year and its website and stores attract nearly 160 million visitors a week.

"We can help brands understand if someone sees their ad on the Walmart platform or across the [internet]then bought the product in-store or online, "said Stefanie Jay, vice president and general manager of Walmart Media Group.

The scale and data of Walmart could give it a unique opportunity to expand its advertising business, said UBS analyst Michael Lasser in a research report released last month.

Walmart wants more dollars in digital advertising because its earnings are under pressure.

The company sold $ 184 billion worth of groceries to the United States last year, more than a third of its sales of more than $ 500 billion. But shopping has thin margins. Walmart has also sacrificed its profits in recent years by investing billions of dollars to expand its digital business, lower prices and increase online pickup in thousands of stores.

The profit fell three years in a row.

But Walmart believes that creating new sources of revenue, such as advertising, health care and financial services, can help offset its heavy expenses and increase profits.

"Retailers will have to innovate and find new pools of profits," said Lasser. "Traditional pivotal retail business models will not be easy, but they will be needed over time."

The retailer, however, faces challenges. Walmart Chief Financial Officer Brent Biggs told analysts at a conference last month that Walmart should be careful not to have its website "cluttered" with advertising.

Grocery stores and competing retailers who want to expand their digital advertising business are also a barrier for Walmart. Last year, Kroger (KR)Albertsons and Ahold Delhaize all contributed significantly to the advertising.
Kroger, for example, thinks he has the opportunity to sell brand ads on his store shelves. Microsoft (MSFT) help. The two companies entered into a partnership in January to fly two stores in Ohio and Washington State. Instead of the paper tags for the prices and promotions on the shelves of both stores, they will be digital. This gives Kroger the opportunity to sell advertising space to brands.

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