Recently, foreign media reported that Wal Mart, a retail giant, was negotiating to acquire Vizio, a TV company. It is reported that the acquisition price is approximately $2 billion (approximately RMB 14.387 billion), which is consistent with the amount when LeEco acquired Vizio in 2016.
According to insiders, "the focus of this acquisition is not to obtain hardware, but to obtain access to the operating system of Vizio Smart TV, which stores valuable viewing data and advertising locations." In this regard, some insiders said that if the acquisition is successful, Wal Mart will become a significant player in the online TV advertising business in North America, facing Roku Companies such as Amazon and Google/YouTube will also be more competitive.
A reporter from Nandouwan Finance News noticed that after the news was released, Vizio's stock price has risen by 25% in the past five days, from $7.42 per share to the current $9.53 per share, with a total market value of $1.879 billion.
According to public information, Vizio was founded in 2002 and its main business is selling cost-effective smart TVs and smart TV systems. It also includes selling its own advertising space to brand owners, which users will see when opening VIZIO TVs and using free audiovisual services. In 2021, the company landed on the New York Stock Exchange with the stock code VZIO.
Vizio has defeated well-known brands such as Samsung and Sony, and climbed to the top spot in North America. According to market research firm Ovum, Vizio ranked ninth in the global color TV market with a shipment volume of 4.8 million units in 2023, and currently ranks third in North America with a market share of approximately 12% -15%.
In July 2016, LeEco announced that it would acquire Vizio for $2 billion and use it to enter the US market. But in April 2017, LeEco suddenly announced its abandonment of the acquisition, and Vizio sued him, claiming that LeEco wanted to create a false impression of financial health and actively expand its business by acquiring Vizio, and attempted to induce Vizio to provide confidential customer information. In addition, the contract between the two parties had agreed on a termination fee of $100 million, but after the acquisition failed, Vizio only received $40 million. The lawsuit was later settled by the two companies on undisclosed terms in November 2018.
According to public information, Wal Mart has always been Vizio's largest customer. According to Omdia's data, in the third quarter of 2023, Samsung's share in the North American color TV market was 22.5%, while Hisense (including Toshiba) and TCL's shares were 13.3% and 12.4%, respectively. Wal Mart's own TV brand Onn and Vizio's smart TV both compete in the middle and low end markets. If the acquisition is successful, the two TV brands are expected to integrate resources to occupy a larger market share, bringing new challenges to Chinese TV manufacturers Hisense and TCL, which occupy an important position in the middle and low end markets of color TV in North America, and may also catch up with Samsung in terms of market share.
However, according to insiders, "the focus of this acquisition is not to obtain hardware, but to obtain access to the operating system of Vizio Smart TV, which stores valuable viewing data and advertising positions." By acquiring Vizio, Wal Mart has not only the opportunity to control 20% to 30% of the U.S. color TV market, but also to increase the sales of its own brand from 5 million to nearly 10 million each year, It can also increase the advertising revenue of TV operations and help Wal Mart and e-commerce leader Amazon compete in advertising business.
At present, the competition in the North American color TV market is shifting towards the advertising business of smart TVs. As more and more people reduce cable TV subscriptions and shift towards streaming, CTV (all ads displayed on TV screens, including ads displayed on smart TVs or various streaming services) is becoming an important component of the advertising ecosystem.
Insider Intelligence, a data analysis company, predicts that CTV advertising spending will reach $29.3 billion in 2024, a year-on-year increase of 17%. At the same time, American retail giants are also joining the fray, including electronics retailer Best Buy, supermarket giant Kroger, and grocery delivery company Instaart, among others, as the competition for advertising revenue becomes more intense.
In this context, Wal Mart also chose to shift its resources to departments with higher profit margins, such as the retail media advertising department Walmart Connect. The platform enables brands to deliver targeted advertisements to Wal Mart shoppers through various channels, including company websites, in store displays, online TV and radio.
According to foreign media reports, since the launch of Walmart Connect in 2021, Wal Mart's advertising business has continued to achieve double-digit growth, with sales of about $3 billion (about 35.73 billion yuan) in 2023. If the transaction is successful, Wal Mart will gain a huge user base of Vizio with nearly 18 million people.
Vizio's latest financial report shows that the company's main business is divided into equipment and platform+, with the latter referring to its smart TV platform SmartCast. As of September 30, 2023, the company's operating revenue was $1.177 billion, a year-on-year decrease of 11.43%; Net profit of 15 million US dollars, a year-on-year turnaround from a net loss of 6.7 million US dollars in the same period last year; The company has cash and cash equivalents of 216 million US dollars. In terms of user data, there were 17.9 million active accounts on the SmartCast platform during the period, with an average income of $31.55 per user, a year-on-year increase of 14%.
In addition, according to industry analysts, the acquisition of Vizio will further unleash the potential of its software platform business, which has a profit margin of up to 60% and an annual advertising revenue growth rate of 27%. In addition to the great increase in advertising revenue, if Wal Mart succeeds in acquiring Vizio, it will also have a certain impact on the color TV market in North America.