Emerging Ad Channels Driving Incremental Growth
As I’ve noted frequently in recent months, many media industry participants see weak results in their own numbers and incorrectly refer to the current environment as featuring an economic downturn, which then causes them to believe that the overall advertising market is negative as well.
By contrast, I observe that growth is merely slow, essentially normalizing after a period with unsustainably high levels of expansion. But one of the less appreciated factors contributing to current results from large incumbents is that competition is broadening. This morning came the latest data from Walmart, whose Walmart Connect business grew “over” 30% globally and “nearly” 40% in the US. The company posted $2.7 billion in ad revenue during its most recent fiscal year (ending January) and, with its current pace, probably ends up at around $3.5 billion during the current calendar year. This would almost certainly place the company among the top 20 sellers of advertising globally during 2023 (for reference, Pinterest generated $2.8 billion last year). Other traditional retailers have smaller media businesses – perhaps Target is the next largest – but also experiencing significant growth, despite few of them providing any tangible or specific data points. This category continues to grow quickly, capturing a significant share of packaged goods’ companies’ advertising budgets which otherwise would have gone to other media companies. While some spending might come from trade sales budgets, I have not seen much evidence to support that it’s a significant source of this type of advertising.
Retail media isn’t the only new source of growth for advertising: Uber has stated that it is aiming for $1 billion in advertising revenue during 2024, and almost certainly will exceed this goal. I estimate the business saw just under $400 million during 2022 and is probably doubling year-over-year right now. Doordash and other rapid delivery companies will also inevitably see sizeable businesses over time.
And then there are several emerging sellers of connected TV inventory worth paying attention to. I note that Vizio, for example, grew its advertising business by 24% during the most recent quarter after generating $357 million last year (up from $231 million in 2021). Samsung and LG also appear to have growing ad businesses. While neither make disclosures, LG reportedly generated $300 million in advertising revenue last year, up from $100 million in 2021.