Walmart May Be Disrupting its $4 billion Retail Media Cash Cow
Also, new ways to measure hit shows for brands, and the crazy world of teen influencer makeup
Amidst what was a somewhat shaky quarter, Walmart’s ad business jumped a whopping 46% in Q2. And CEO Doug McMillon has raved repeatedly about the importance of advertising’s fat profit margins to the retail giant.
“Our evolving business model with more diversified and durable sources of profit like advertising and membership has enabled us to grow operating income faster than sales despite headwinds,” said McMillon earlier this year.
So is the company about to put all that hefty margin at risk with its new deal with ChatGPT?
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I’ve written previously that agentic shopping, if it ever becomes real, could seriously disrupt the boom in retail media ad spending. Except I have serious doubts about whether agentic shopping will ever be a thing.
But as for shopping within AI search interfaces - well - that’s a whole other thing.
Earlier this week, Walmart said it had a deal with OpenAI to allow people to make purchases right within ChatGPT. Here’s how McMillon framed the move, according to CNBC.
“For many years now, eCommerce shopping experiences have consisted of a search bar and a long list of item responses,” Walmart CEO Doug McMillon said in a news release. “That is about to change.”
Going forward, shopping can become “multi-media, personalized and contextual,” he added.
Here are some questions I have:
The thing is, what makes advertising work so well in retail media is that ads can be presented alongside other products as one of those ‘long list’ of possible responses (“are you sure you don’t want to buy this instead?”) If you are more inclined to look for specific answer, will you be less inclined to consider alternative products? Will you even see any alternatives, or will a Walmart product ‘be’ the answer?
Then again, sometimes you are going to a ChatGPT or a Gemini for some shopping research (or really, advice), such as “what do I buy my 30-year old cousin for her birthday?” - in that case, how do these platforms balance the best answers with their paid partnership with Walmart?
Maybe instead of ads atop search results, Walmart advertisers will be able to “buy” being the answer?
How many retailers can a Chatgpt accommodate? How do you keep all of them happy, when the same products will surely be available on Amazon, Walmart and Target, for example? Will it be all about deferring to the highest bidder (which consumers may not love)?
Are we sure lots of people plan to shop this way? It’s surely becoming habitual for a sub-segment, per Digiday. Though in my view, the jury is still way out. The coming holiday season will be very revealing.
Here’s Andrew Lipsman’s, author of the Substack Media, Ads + Commerce, take: “This isn’t agentic commerce, it’s just next-gen search, and search has co-existed with retail media for a long time. We shouldn’t expect otherwise. "If the tides reversed, it could eat into retail media growth on the margins. But it could just as easily drive retail media growth if AI search leads to more ecommerce activity overall…all that said, I think most of this discussion is moot until we see evidence of consumer behavior shifts.”
Regardless, the Walmarts of the world have to experiment here, and make sure they capture the maximum value of the next potential huge retail channel. Even if that puts their new favorite profit center at risk.
Antennas Raised
The measurement startup Antenna has become the default source of tracking winners and losers in the “Streaming Wars,” over the past few years, particularly given its unique insight into subscription gains and losses. While to date the company has mostly focused on helping to keep score on who’s up or down in paying subs, its new product, Antenna Subscriber Views, is geared toward revealing which specific shows not only drive subscriptions, but help prevent churn by keeping people around.
This new intelligence data is mostly aimed at studios and media executives looking for ways to prove the value of their shows, to examine why people might be ditching subs at a given moment, and even to help them figure out what else to make.
But I could see this becoming a new tactic in ad sales, and media companies could look to tout, and perhaps sell packages, around specific shows that people sign up specifically to watch, and watch right away. A new version of a hit -and must stream TV.
Conversely, Antenna can also identify what shows people who churn out end up watching on other services - which could be used to help brands figure out how to reach the audiences in a cheaper, more sustainable fashion.
Media companies have been hesitant to allow buyers to cherry pick certain shows to advertise alongside in streaming. But if the price is right….
Matter Mania
Lastly, check out my bonus podcast episode this week with Jordan Matter, who boasts of 32.7 million subscribers on YouTube. While Matter started his channel initially to showcase dance photography, his tween-now-teen daughter Salish became a runaway star. Today, the duo regularly produce viral hits on dance, competitions and teen dating.
But what’s really wild is how Salish and Jordan basically shut down a New Jersey Mall (the one Mr. Beast put on the map) with the launch of her new skincare line with Sephora- causing a scene reminiscent of those old clips of girls crying when they first saw the Beatles. You’ll want to hear the full story. Check out the episode here.