has been quietly building up its online advertising business, opening up a new revenue channel for the retail giant.
According to KeyBanc's Ed Yruma, Wal-Mart's website has started to show banner ads by third-party sellers more frequently, with links to product pages or vendor websites. Historically, Wal-Mart's online ads have highlighted its own products or discounts, Yruma said.
On top of that, Wal-Mart has recently started linking its in-store and online shopping data, giving more in-depth data that advertisers could play with, he said. Wal-Mart already offers plenty of online ad options, including display media, native ads and programmatic buying programs.
"We believe Walmart recently began intensifying focus on its advertising business," Yruma wrote in a note published this week.
Wal-Mart's push into the online advertising space is another sign of growth for the company's e-commerce business. It also signifies a new potential battleground against its rival Amazon, which has been drawing a lot of attention for its own advertising business.
Wal-Mart's e-commerce business has grown robustly in recent quarters, more than 60 percent year over year. Although online sales are estimated to account for only a tiny fraction of its total revenue, Wal-Mart has made it clear that it plans to build its online business, and the company has a number of e-commerce startups in recent months as well.
Given Wal-Mart's online sales and traffic is much smaller than Amazon's, it's unlikely Wal-Mart's advertising business is generating significant revenue yet. Amazon advertising is one of the company's fastest-growing businesses, estimated to be growing more than 50 percent annually, and analysts expect it to generate more than $3 billion in revenue this year.
But Yruma says Wal-Mart's ability to merge its massive in-store data with its growing online shopping data could make it a more attractive advertising option going forward. Not many companies have the mix of data Wal-Mart can offer.
"There's a lot happening within physical stores, so being able to merge those two data sets will be incredibly important going forward," Yruma said.