The Mart Gets Smart
Walmart had a rocky second quarter, with lower gross margins than investors expected, per its earnings report on Thursday.
However, ad revenue was a bright spot, up 50% from Q2 2024, including Vizio’s data and ads business, which was added this year. Meanwhile, the Walmart Connect business in the US grew 31%. Considering Walmart earned $4 billion in ad revenue in 2024, it’s showing growth on a large base.
Still, investors pressed executives on the call as to whether Walmart merits its unusually high multiple compared to other retailers – and Walmart execs pointed right back to its ads business as a critical component of its unique value prop.
CFO John David Rainey, for example, noted that Walmart’s advertising, third-party marketplace and membership subscription businesses contributed 50% of incremental profit. Sure, they total far below the hundreds of billions of dollars worth of literal stuff sold in Walmart stores every year, but those data-driven online business lines contribute half the profit growth.
“We are more than just a standard brick-and-mortar retail business,” Rainey told investors. “We have a much more diversified set of profit streams now that are both higher growing as well as higher margin – and I think that is reflected in our multiple.”
No Click, High Reward
Cost per clicks are on the rise, and in a somewhat novel turn of events, it’s not just thanks to AI Overviews.
For one, search engine results pages today are visually cluttered, not to mention the fact that Amazon has withdrawn its investment from Google Shopping ads, cutting a reliable source of demand.
Although, of course, AI Overviews don’t help.
“The working thesis is that falling organic and paid search clicks, prompted by increased zero-click behavior, are exerting upward pressure on CPCs,” Brooke Hess, VP of paid media at digital marketing agency NP Digital, tells Digiday.
So what’s a brand to do?
According to Rachel Klein, SVP of owned-and-earned media at Wpromote, succeeding in the AI search market requires brands to develop new strategies that “focus on building authority, not exchanging organic tactics for paid.”
So far, spend on paid search has remained steady as have conversion rates. All hope is not lost (yet).
Don’t Put Me In A (Black) Box
You’d think TikTok wouldn’t want to rock the boat right now, but you’d be wrong.
The social media platform faces backlash from advertisers over its new mandatory AI tool for TikTok Shops, reports Business Insider. Called GMV Max, the tool allows shop owners to pick products and set budgets. The algorithm then handles campaign optimizations.
Although GMV Max is similar to popular tools on offer from Meta and Google – Meta’s got Advantage+, and Google has PMax, of course – ad buyers are upset with the fact that GMV Max isn’t being introduced as an optional feature.
For TikTok Shops, it’s use it or lose it.
And although some smaller DTC retailers have embraced the new tool, larger household name brands are reticent, telling Business Insider that GMV Max lacks the key measurement capabilities they’ve come to expect.
Also, TikTok apparently takes credit for all purchases made via Shops while a GMV Max campaign is actively running, regardless of whether the user saw an ad.
The frustration conjures up similar criticisms being lobbed against consumer-facing AI tools. If artificial intelligence is truly so superior, why does it feel like so many companies are forcing it on unwilling users without a finished product?
But Wait! There’s More!
Both Wired and Business Insider recently took down AI-written articles that were submitted by the same “freelancer.” [Press Gazette]
Wikipedia’s volunteer editors are at odds with its founder about using AI. [404 Media]
Meta is now freezing its AI hires altogether. [WSJ]
Do new sports-focused streaming services from Fox and Disney signal the final death knell for broadcast TV? [Variety]
Meanwhile, Yahoo launches its own 24/7 FAST channel dedicated to sports. [Adweek]
And Apple TV+ hikes up its price to $13 a month. [CNet]
You’re Hired!
Dave Bernath will replace Ron Gutman as the CEO of AppLovin-owned CTV ad platform Wurl. [blog]
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