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Walmart's advertising business doubled as the retailer continues its mission to morph into an ad giant

Aug 18, 2021, 00:06 IST
Business Insider
Mike Segar/Reuters
  • Walmart is seeing major growth in its advertising business.
  • The company's number of active advertisers jumped 175% year over year.
  • Overall ad spend is also up by 95%.
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Walmart reported major growth in its advertising business as the company seeks to compete with rivals like Amazon and other retailers like Target and Walgreens.

CEO Doug McMillon and CFO Brett Biggs said that retailer's ad business "nearly doubled" in the US during the company's Tuesday earnings call. They added that the number of advertisers running campaigns are up 175% over last year, while advertising-driven sales enjoyed a 95% spike.

The company has also been expanding its digital advertising capabilities lately, in a bid to compete with Amazon and a growing number of retailers turned ad platforms like Target, Instacart, Walgreens, and Gopuff. Earlier this year, the retailer overhauled its ad business and dubbed it Walmart Connect. Walmart Connect is largely based on the idea that advertisers will pay a retailer for data on whether or not consumers were influenced to purchase an item after seeing an ad.

"The phrase 'serving customers' has traditionally meant one thing at Walmart, but today it includes serving marketplace sellers, our advertising partners, and those that want to use our fulfillment services or proprietary software," McMillon told analysts.

Biggs said that Walmart Connect is a "rapidly expanding" and "higher margin" business that "gives us flexibility to invest aggressively for the future." He added that the company expects the rapid growth to continue.

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Read more: JOIN US ON SEPTEMBER 16: The future of Amazon, Instacart, and Walmart advertising

The company's exact sales numbers are still too small to include in its earnings. Advertising made up less than 1% of Walmart's annual net sales last year, according to its 2020 annual report. But Biggs said that the numbers bolstered Walmart's overall business. He said that Walmart US saw its gross profit rate improve thanks in part to "strong advertising revenue."

And Walmart's push into advertising isn't limited to the US.

"We're seeing a strong response to the launch of Walmart Connect in Mexico, with the number of advertisers and campaigns growing rapidly," Biggs said.

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