Why Walmart is buying Vizio

New York (CNN) — Walmart doesn’t want to just sell groceries and t-shirts. It wants to be a media and advertising giant like Amazon.

Posted 12:22 p.m. Feb 20 — Updated 1:17 p.m. Feb 20

Nathaniel Meyersohn

, CNN

CNN — New York (CNN) — Walmart doesn’t want to just sell groceries and t-shirts. It wants to be a media and advertising giant like Amazon.

Walmart announced Tuesday that it’s buying TV maker Vizio for $2.3 billion to shore up its advertising business and create a more potent rival to Amazon’s booming ad business.

The company believes it can add revenue by offering brands the opportunity to advertise on Vizio televisions. Vizio’s Smart TV operating system, SmartCast, has more than 18 million active accounts. The deal would give Walmart more ways to offer ads through Vizio televisions, as well as create entertainment options exclusively for customers with Vizio TVs.

“We also believe it enables a profitable advertising business that is rapidly scaling,” Walmart US chief revenue officer Seth Dallaire said in a news release Tuesday.

Roku, a streaming competitor, last week noted that television advertisers are increasing the amount they spend on streaming ads as customers continue to cut the cable cord. Roku and Amazon sell advertising space on their various streaming channels and home screens, and they sell licensing arrangements for companies to put their brand on certain shows. They also sell space to apps and media channels to advertise their movies and shows on customers’ screens.

Walmart wants to move into the lucrative advertising space to supplement its low-margin retail business. The company believes that building new revenue streams, such as advertising, health care and financial services, can help offset Walmart’s heavy spending and boost profit.

Walmart has been pitching advertisers in recent years on its ability to reach customers. It has a trove of shopper data because 90% of America shops at Walmart every year, and its website and stores attract some 160 million visitors a week.

Its advertising business reached $3.4 billion last year, but makes up less than 1% of its total sales.

Other retailers are also building their advertising businesses, such as Kroger and Target.

These retailers are following Amazon, which has become the third largest advertising company behind Google and Facebook. Amazon’s ad services business grew 27% last quarter, and made up around 15% of its total sales.

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