Walmart agreed to acquire smart TV maker Vizio for $2.3 billion, in a deal aimed to boost the retail giant's ad business.

Why it matters: The agreement is a big bet on streaming revenue and customer data, and will make Walmart a major player in connected TV advertising, putting it in competition with Roku, Amazon and YouTube.

Between the lines: The relationships between streaming media companies and retailers are growing closer as both sectors find themselves increasingly dependent on access to each other's ad networks and consumer data.

• First-party data on customers' shopping habits is becoming more valuable to media networks amid increased competition in advertising.

Driving the news: Walmart has agreed to pay $11.50 per share in cash, the company announced on Tuesday as part of its fourth quarter earnings report.

• The 21% premium comes after investors moved the stock higher last week when news of the deal leaked. Vizio's stock traded in the $7 range late last month.

Of note: Advertising is a higher-margin business for Walmart than grocery sales, which is why executives have said the company will soon make more profit from selling ad space across its digital and retail channels than its brick-and-mortar sales.

• The Vizio deal will help fuel Walmart's ad business, which grew 28% to $3.4 billion last year.

Be smart: Walmart is already one of the largest sellers of Vizio televisions, as previously reported by the Wall Street Journal. But owning the company would give it crucial access to the data from Vizio's smart TV operating system, which can expand its ad-targeting capabilities to connected television.

• "Walmart [can] leverage their footprint and first-party data to significantly improve the effectiveness of their CTV advertising," said Nikhil Raj, chief business officer of retail media at ad tech firm Moloco. Raj previously helped launch Walmart's retail media business.
• "It also collapses the CTV ads value chain, enabling Walmart to place the demand from retail media on its own supply, no different than Amazon with its Prime Video inventory," he added.

Zoom in: While Amazon and Walmart battle for e-commerce sales, the former has a strong lead in retail media and other ad channels.

• Amazon controlled 75.2% of the $45.15 billion U.S. retail media ad market in 2023, Insider Intelligence estimated. It's invested in growing its demand-side ad platform, which includes streaming TV ads in Prime Video and Freevee.
• "Walmart and Amazon both have the ability (and assets) along with Alphabet's YouTube to be highly disruptive to CTV incumbents," MoffettNathanson wrote in a research note last week.

The big picture: Retail media is one of the fastest growing ad segments globally, according to GroupM's 2023 end-of-year forecast.

• The ad agency estimated the channel will surpass TV ad revenue, including linear and CTV, by 2028.

What to watch: Other non-traditional media businesses have also created their own ad networks.

• Retailers like Target and Kroger and delivery apps like Uber and Instacart have captured ad dollars through their direct access to customer data and to consumers.

Our thought bubble, via Axios' Hope King: Vizio strengthens Walmart's physical and digital ecosystem because it extends the retailer's reach further into consumer homes.

• When I visited stores in Bentonville, Arkansas last year, Walmart execs were eager to point out in-store CPG ads pumping through their speakers, product promotions on digital deli screens and strategically designed sample carts.
• In owning potentially the biggest screen in the house, Walmart can get creative in replicating some of the in-store experience in living rooms, offices and beyond.
• Amazon should also be worried because its own smart TV platform, Fire TV, helps drive its ad business and will now face greater competition.

Editor's note: This story was updated with additional analysis and detail.