Walmart is opening a new front in its fight against Amazon: The retailer announced Tuesday morning that it has struck a deal to acquire budget TV maker Vizio for $2.3 billion in cash. The transaction, provided it is approved by regulators, will give Walmart a foothold in the burgeoning smart-TV advertising business, allowing it to more directly compete with the likes of Amazon, Roku, and Google. It will also be a test for Walmart’s ability to meaningfully expand into services, and revitalize a TV manufacturer whose growth has slowed considerably in recent years.
“This is a good move by Walmart,” says Elizabeth Parks, president of the market research firm Parks Associates. “It sets the company in a position to compete with Amazon in new ways.”
For Vizio, the deal represents a new chapter in an otherwise tumultuous corporate history. Founded in 2002, the company quickly became North America’s biggest TV brand, thanks to aggressive prices that undercut established rivals including Samsung and LG. Vizio did this by outsourcing its entire production and operation with razor-thin margins: When the company first filed to go public in 2015, its gross profit margin on TV sales was just 7%.
Vizio scrapped plans for the IPO after the company received a $2 billion acquisition offer from the Chinese consumer electronics company LeEco in 2016. That deal fell apart after LeEco ran into financing issues, and Vizio gave the stock market another chance in 2021. But by then, Chinese manufacturers like Hisense and TCL had begun making cheap TVs of their own, dealing a blow to Vizio’s title as the cheap TV king. With the pandemic further pressuring the company’s business, Vizio saw its hardware profit margins completely evaporate: Over the first nine months of 2023, Vizio lost roughly $0.45 on every TV it sold to consumers.
The company has been making up for those losses with a growing advertising and services business. In addition to running ads on its own free-streaming service, Vizio also gets a percentage of advertising from third-party services running on its smart TVs. Over the same nine months, ads and services generated close to $260 million in gross profits for Vizio. Those ad dollars, and not the hardware sales, is what Walmart is really after with this deal.
“Walmart isn’t buying a TV hardware company, it’s buying a platform,” says Parks.
As TV prices keep declining, Vizio is not alone in betting on advertising as a profit driver. Competitors including Roku, Samsung, and Amazon all have made streaming ads a centerpiece of their TV business—and they’ve arguably been more successful with that strategy than Vizio. Roku’s ads and services revenue alone was $3 billion last year.
Vizio’s problem: The company’s hardware business hasn’t grown nearly enough to turn its ad business into an equally impressive success story. Back in 2014, Vizio sold 7.1 million smart TVs to consumers. Sales fell significantly in subsequent years, and only rebounded briefly in 2020, fueled by consumers spending their stimulus checks on anything that would make those long lockdown days more bearable.
In 2021 and 2022, Vizio TV sales receded again to 5.5 million and 5.2 million units, respectively. Vizio had just shy of 18 million active accounts at the end of its most recent reported quarter. For comparison: Roku reached 80 million accounts at the end of 2023, while Amazon surpassed 200 million Fire TV-device sales a year ago.
Vizio has had plans to further grow its hardware footprint by licensing its smart-TV operating system to third-party manufacturers. However, that market is already crowded, with TV makers LG and Samsung, as well as platform operators Google, Amazon, and Roku, and even pay-TV operators Comcast and Charter all offering their smart TV operating systems to other hardware makers.
In a recent interview with The Information, Vizio CEO William Wang also suggested that he was ready to give up on Vizio’s outsourcing-heavy business model to further accelerate growth. “I don’t see vertical deintegration work forever,” he said, suggesting that Vizio might take some manufacturing in-house to more aggressively compete with low-cost brands like TCL. To do that, Vizio had to partner up, as the company simply didn’t have enough capital to establish its own manufacturing capabilities.
Walmart wants to operate Vizio as a fully owned brand, and closely integrate with its Walmart Connect advertising business. That strategy is modeled after Amazon, whose ad business generated close to $47 billion in revenue in 2023 with a mixture of ads running on Amazon’s own shopping site, video ads running on the company’s Fire TV devices, and more.
It remains to be seen whether Walmart can replicate that success with Vizio, but the big box giant doesn’t have a sterling record when it comes to operating its own media businesses. Walmart acquired the video-streaming service Vudu in 2010 with big ambitions that at one point or another even included a custom-streaming stick and original content that was supposed to kickstart Vudu’s ad sales. Just a year after unveiling Vudu’s first originals, Walmart unceremoniously sold the service to NBCUniversal subsidiary Fandango.
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