Walmart Gambles On Youth And Ad Revenue With TikTok Bid

Walmart, Microsoft and TikTok. At the beginning of the year it was an unthinkable combination. As the pandemic set in, anything digital seemed like a good and potentially doable idea, including the aforementioned alliance. Now that Walmart is officially enjoined in a bid for TikTok with the Redmond, Washington-based software giant, the jury is not out on whether the deal can actually happen, the jury is out on whether Walmart can make TikTok fit into its digital retailing needs.

Those needs are a viable social media to grab younger consumers and an expansion of its eCommerce capacity. According to Kantar research, the average American Walmart shopper is 46 years old, white and has an annual household income of about $76,000.

According to the HubSpot blog, with 800 million monthly active global users, TikTok is gaining on Instagram, WeChat, Facebook Messenger, Facebook and WhatsApp. It  already has more global users than LinkedIn, Reddit, Snapchat, Twitter and Pinterest. The United States represents 5 percent of TikTok’s global audience. But the stat is misleading. According to Sensor Tower, TikTok was the top non-game app downloaded in the U.S. in February 2019. App Annie reports it saw 375 percent growth in the U.S., year over year, per Ad Age. Even the 40 million audience in the U.S. is a huge addition to Walmart’s total audience.

TikTok gives Walmart automatic youth. Twenty-seven percent of its users are between 13 and 17 years old. But internal data from March 2019 shows its largest age demographic (42 percent) is the 18- to 24-year-old cohort. Combined, the 13- to 24-year-old segment represents 69 percent of the app’s user base.

Audience reach is enviable. But in the context of a potential $20 billion bid, it’s not enough to justify the Walmart initiative here. Will the under-24 crowd buy enough goods via the nascent area of social commerce? Walmart and Microsoft would need to apply some market muscle to make that happen. TikTok’s U.S.  interim head Vanessa Pappas told CNBC it could happen.

“For us, we’ve been really focused recently on rolling out some eCommerce features. We’ve been providing that for our creator community as another way for them to earn a livelihood,” Pappas said in an interview on CNBC’s “Squawk Box” Friday (Aug. 28). “I think there’s a lot of different synergies there.”

TikTok began testing new social commerce features last year. Levi’s was among the first retail brands to use its “Shop Now” feature to direct users to merchandise, and reported high engagement and traffic to its website in early tests as of April, according to TechCrunch.

Then there’s ad revenue. Here Walmart is aiming directly at Amazon. Both companies have serious leverage when selling advertising. For example “how could your ad not be seen at the point of purchase” is a compelling sales proposition. In June, eMarketer said Amazon should generate $12.75 billion in ad revenue for all of 2020, which would give the company a 9.5 percent market share. “With its ad business generating $8.1 billion through the first half of 2020, and it generated $8.4 billion in ad revenue in the second half of 2019, it’s going to blow through eMarketer’s estimate,” InvestorPlace predicted in early August.

“Walmart is going to see a very quick rise in ad spend” if its bid does succeed, Scott Smigler, president of Massachusetts-based eCommerce marketing agency Exclusive Concepts, said in a Reuters report. “From a brand standpoint, it’s a no brainer because of the reach Walmart has and the huge shift we’re seeing right now from offline to online (spending). … For all of our brands and retailers that are eligible, we’re going to want them on Walmart for sure.”