In a move that could reshape the connected-TV advertising landscape, retail giant Walmart is reportedly in talks to acquire Vizio, a leading provider of value-priced smart TVs. According to the Wall Street Journal, the deal could be valued at over $2 billion. While both Walmart and Vizio have remained tight-lipped about the potential acquisition, the impact of such a move is already being felt in the market.
Vizio's popular line of smart TVs, which includes an ad-supported free streaming service, has been gaining traction among consumers. With this acquisition, Walmart aims to become a prominent player in the connected-TV advertising business, directly competing with the likes of Roku, Amazon, and Google/YouTube.
The news of Walmart's interest in Vizio sent shockwaves through the market, causing Vizio's shares to surge by 25% in a single day. This boosted the company's market cap to over $1.9 billion. Meanwhile, Roku, a major competitor to Vizio in the ad-supported streaming market, saw its stock price plummet by 8.8%.
Walmart's foray into the connected-TV advertising industry is strategically aligned with its current focus on low-end retail sales for connected TVs. The company already sells its own private-label brand, Onn TV, which is powered by Roku's operating system. Acquiring Vizio would allow Walmart to prioritize its products over competing low-end sets, potentially disrupting the market for brands like TCL or Hisense.
This potential acquisition poses a significant challenge for Roku, as Walmart accounted for a substantial portion (40%) of Roku's device revenues in the first nine months of 2023. The industry as a whole is already in a state of flux, and the addition of Walmart as a competitor further underscores the tremendous changes ahead.
However, despite this competition, analysts believe that Roku is still best positioned to capture ad dollars in the connected-TV industry. With a 25% market share of CTV operating systems, Roku remains an attractive partner for e-commerce companies that may not want to advertise on competitor platforms such as Walmart, Amazon, or Google.
The prospect of Walmart acquiring Vizio also highlights the massive opportunity for the entire connected-TV industry to redirect ad dollars away from traditional linear television toward CTV. Alicia Reese, an analyst at Wedbush Securities, emphasized this point in a recent research note. She stated that '2024 is shaping up to be a year of tremendous change' and that Roku, despite the competition, is still poised for success due to its expanding market share.
Vizio, founded in 2002 and headquartered in Irvine, California, has carved out its niche by delivering immersive entertainment and lifestyle enhancements in the connected home space. Last week, the company announced a significant expansion of its WatchFree+ streaming service, introducing more than 300 channels and 15,000 on-demand titles. Vizio has also secured expanded studio content partnerships with major players like Warner Bros. Discovery, Electric Entertainment, Sony, and Lionsgate. Notably, Vizio's internal data reveals that WatchFree+ viewing hours have more than doubled over the past year.
This potential acquisition by Walmart follows a tumultuous history for Vizio. In 2016, a deal for Chinese tech company LeEco to acquire Vizio for $2 billion fell through after China blocked the transaction as part of broader restrictions on overseas acquisitions. In the aftermath of the failed deal, Vizio filed a lawsuit against LeEco, citing the non-payment of a breakup fee. The two companies later settled the dispute for undisclosed terms in 2017.
As the negotiations between Walmart and Vizio progress, the connected-TV advertising industry eagerly awaits further developments. If the deal comes to fruition, Walmart's entry into the market could cause significant disruptions and shape the future of advertising in the connected-TV space.
