Walmart’s ad business is starting to click. The company generated $4.4 billion in global ad revenue in 2024, up 27% year-over-year, the company disclosed in its latest earnings report on Thursday.
Walmart only reports advertising revenue once per year, so the company tends to get into its data-driven online ecommerce and advertising system at the beginning of the calendar year.
The ad biz boost
“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 Walmart CEO Doug McMillon.
He’s referring to the fact that Walmart’s total sales grew by 4% in 2024, while its operating income was up by more than 8%.
Ecommerce is gradually accumulating a larger slice of Walmart’s total business. It’s grown by 11% of total pie since 2020, said CFO John David Rainey. But any given ecommerce sale is less profitable for Walmart. There are most costs in warehousing and delivery, so Walmart’s margin is thinner. (Those are the headwinds McMillon was referring to above.)
Still, despite the built-in costs, memberships, data analytics services and advertising have much higher default profit margins than, say, grocery or general merchandise in a store.
Advertising “is expected to be one of the largest drivers of operating income growing faster than sales,” McMillon said. “These new profit streams allow us to fund investments in our core business while also expanding our operating margins.”
Room for improvement
Walmart is leading with its advertising, memberships and marketplace offerings – which are the triumvirate that makes up its new revenue segments. Walmart hasn’t actually achieved overall profitability on its ecommerce business, though, Rainey said.
But there are promising examples of the costs coming down and how the advertising and data flywheel will start to spin profitably.
For instance, the company has mitigated some of the built-in costs of ecommerce, like when merchandise is lost or stolen, either snatched from a doorstep or curbside outside a store. Those incidents were down 80% last year, as Walmart improved its operation and stores were redesigned to accommodate ecommerce orders.
Walmart also benefits from the “densification” of its delivery network, according to McMillon. As more orders come for one- or three-hour delivery, Walmart is more effective at getting many houses or buildings in an area with one trip, he said, rather than couriering a single item to a door and then back.
And the ad platform is still young. Walmart Connect grew its total sellers by about 50% last year, McMillon said. (Though Chinese sellers, à la Temu, are largely behind that surprising jump.)
And that doesn’t even get to Vizio, the smart TV manufacturer Walmart closed on in December.
McMillon is unabashed about the actual purpose of its new TV and smart TV operating system.
“The addition of Vizio and its Smartcast OS to our portfolio of advertising capabilities will help us serve customers in new ways,” he said. “While also creating new opportunities for advertisers to connect with customers and boost product discovery, empowering brands to realize greater impact from their advertising spend with Walmart.”
