Walmart said earlier this year that it wants to buy the U.S. TV maker Vizio and it has now completed that acquisition, paying a reported $2.3 billion for the privilege.
With the deal now done, Walmart is likely to expand its presence in the affordable TV segment in the U.S., where it already competes with its own, Onn-branded televisions.
The advantage of Vizio is that it’s a much bigger brand, that not only knocks out cheaper models but also quite a few high-end ones fitted with premium OLED and Mini-LED displays.
However, the real incentive for Walmart is not just making more and better TVs, but rather, the SmartCast operating system that powers all of Vizio’s televisions.
That’s because Vizio makes more money from the sale of ads, subscriptions and viewer data than it does from its actual TV sales. According to recent financial results, it actually generates about twice the revenue from that business, as it does from selling its hardware. So that’s what’s likely to have gotten the attention of Walmart.
By owning Vizio, Walmart will be able to track more American viewers than ever before. The SmartCast operating system collects data on users via a system called Automated Content Recognition, or ACR, which records what users are watching so it can target them with more suitable ads.
Walmart admits that SmartCast is a big deal, saying that the acquisition will enable it to “bring to market new and differentiated ways for advertisers to meaningfully connect with customers at scale and boost product discovery, helping brands achieve greater impact from their advertising investments with Walmart Connect".
There is one possible positive for U.S. consumers, in that Walmart is obviously going to be keen to sell as many Vizio TVs as it can to expand the reach of the SmartCast platform. Because of that, Walmart has every incentive to make Vizio’s TVs more appealing, perhaps by lowering the price or through various promotions. In addition, there will be no haggling between retailer and manufacturer over how the sales prices are split, which could enable Walmart to be more aggressive in terms of pricing.
Lower prices are already a clear trend in the U.S. TV market, where companies are shifting to embrace ad revenues at the expense of profits on hardware sales. The strategy benefits from U.S. audiences’ willingness to tolerate more ads than consumers in other markets, and it has been very successful – to the point where some companies, including Vizio, have been willing to sell some TV models at a loss, just to be able to get their hands on that recurring ad revenue.
Of course the danger is that SmartCast will eventually become so saturated with ads that the experience becomes miserable for consumers. One aspect of this model we’ve seen is that companies are willing to reduce the ad load – if viewers pay for a subscription, and we could likely see more TV brands head in that direction.
