Walmart plans to buy Smart TV maker Vizio for two billion, three hundred million dollars, aiming to boost its advertising business and compete with Amazon.

Vizio's Acquisition to Enhance Walmart's Ad Business

Walmart and its Sam's Club stores have been selling Vizio devices for a while. By acquiring Vizio, Walmart sees an opportunity to enhance its ad business using its SmartCast Operating System, which lets users stream free content with ads on their TVs.

Walmart is focusing on growing its media business called Walmart Connect, which brings in higher profits than selling groceries or clothing, increasing advertising sales by 22% in the fourth quarter.

Seth Dallaire, Walmart Executive Vice President and chief revenue officer, sees VIZIO's customer-friendly operating system as offering excellent viewing experiences at appealing prices, facilitating a profitable advertising business that quickly expands.

Walmart Connect: The Retailer's Current Media and Ads Business 

Walmart has been strengthening its media and advertising business through Walmart Connect, which allows advertisers to reach a large customer base. Walmart announced in its recent earnings report that its global advertising business grew by about 28% to three billion, four hundred million dollars last year.

The acquisition plan comes as Amazon recently revealed plans to charge its existing Prime members an additional $2.99 monthly fee to access ad-free movies and TV shows, in addition to the existing Prime membership fee of $14.99 per month or $139 per year.

READ ALSO: Amazon Misleading Subscribers with a New Ad-Tier, Faces $5 Million Lawsuit for Unfair, False Advertising

A Promising Vizio's Cast SmartCast System

Vizio's SmartCast system boasts 18 million active accounts, experiencing a remarkable 400% growth since 2018. With over 500 direct advertisers, ads make up most of Vizio's gross profit.

After acquiring the TV maker, the retailer mentioned providing innovative television and in-home entertainment and media experiences. 

Streaming hardware manufacturers like Roku and Vizio have prioritized ad revenue more recently. Vizio started its Vizio Ads business unit in 2019, claiming it is "one of the few connected TV companies with the device penetration, consumer opt-in, and infrastructure to deliver meaningful scale."

Walmart saw the growing popularity of Vizio and saw an opportunity to enhance its Walmart Connect business. Seth Dallaire, Walmart U.S.'s executive vice president and chief revenue officer, expressed excitement about combining the two businesses to reshape how retail and entertainment intersect.

Other Big Streamers Adopting a Two-Tier Model Strategy to Earn Revenue

Among other big streamers, Netflix and Disney have adopted a two-tier model, letting them earn revenue from ads while allowing subscribers to pay more to avoid ads. Still, it remains unclear if people will pay extra to avoid ads on top of their subscription fees in the fast-changing streaming industry, where many have switched from cable TV because of rising costs.

Vizio's stock surged by 15%, reaching $10.96 per share in the afternoon, while Walmart's stock climbed by 3.1% to $175.66 per share after reporting sales and profit that exceeded Wall Street's expectations on Tuesday.

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