5 lessons from Walmart Q2 2021 earning call

Here are 5 insights from Walmart Q2 earning call regarding their Sponsored Product Ads:

(1) More advertisers = More ad revenue

“Our advertising business in the U.S., Walmart Connect, nearly doubled during the quarter versus last year, with active advertisers up more than 170%. And this isn’t confined to the U.S. We’re growing ad businesses in Mexico, India, Canada and most recently in Chile.

We also saw nearly triple-digit growth in advertising sales through Walmart Connect and added thousands of new sellers on our eCommerce marketplace during the quarter…

Walmart Connect sales roughly doubled in Q2 versus last year as we ramp up new advertisers.”

Scaling up your ad business can be done in 2 main ways: (a) Get more budget from your existing advertisers (b) Get more advertisers!

If you are running a marketplace then B becomes more important and your goal should be to quickly engage as many sellers as possible with Sponsored Product Ads and keep them running.

How do you do that?

Intuitive self service UI, Easy on-boarding, Reporting and monitoring, Communication, Promotional tools etc…

We will talk about it in our next webinar coming in September and in the meantime you can read about it in our blog.

(2) Scaling is caring

“The phrase, “Serving customers”, has traditionally meant one thing at Walmart, but today, it includes serving marketplace sellers, our advertising partners and those that want to use our fulfillment services or proprietary software.”

Indeed, When you are selling ads on your ecommerce site the shoppers are not the only customers that you are serving. The sellers/advertisers are very important customers. To make your ad business a successful one there must be 3 wins – For the shoppers, for the advertisers/sellers and for you – The marketplace owners.

(3) Across the board

In the Q&A Walmart was asked: “with regards to the advertisers you’re signing up, is it really across the board in terms of your vendor base? Or is it mostly in grocery? “

Walmart CEO answered :

“There is strength among the advertisers across the board and an expansion of our marketplace and fulfillment services will only enable future growth of the advertising business.”

Scale = expansion (more advertisers and more verticals)

(4) The new benchmark is 5%-10%

In the Q&A Walmart was asked: “Really good advertising businesses in the eCommerce space, represents 5% to 10% of GMV. Is it fair to think that you’re still in the nascent stages, maybe 1% to 2%? And where can your penetration go?”

Walmart answer: “We certainly would say that we’re in a good position for growth now, but continued growth in the future, being able to double in the most recent quarter is exciting. And then the strength of the eCommerce business, including the Marketplace, is what enables that growth over the long term. We rebranded the business from Walmart Media Group to Walmart Connect last year, and that was just to make sure that it was very clear that this opportunity is going to help us connect buyers, sellers, suppliers and customers altogether in a way that’s accretive to the customer experience. And as long as we do that, I will remain very, very bullish on the growth potential in this business.”

Write it down: The benchmark for a successful ecommerce ad business is now no longer one or two percent of the GMV. It’s 5% to 10%!

(5) The future is wide open

“We’re also rapidly expanding higher-margin businesses like advertising, data monetization and eCommerce marketplace, which gives us flexibility to invest aggressively for the future while growing profit near term. These businesses are in different places along the maturity curve, but we’re scaling them.

For example, Walmart Connect U.S. advertising sales nearly doubled in Q2, and we expect the rapid growth to continue. “

For a brighter, higher-margin future invest in your ecommerce media today!

Read the full transcript here: https://www.fool.com/earnings/call-transcripts/2021/08/17/wal-mart-inc-wmt-q2-2022-earnings-call-transcript/