Dive Brief:

• Walmart Connect, the retailer's advertising business in the U.S., grew 95% year-over-year in Q2, per the company's latest earnings call.
• Active advertisers were up more than 170% in the quarter, and the retailer is growing ad businesses in Mexico, India, Canada and Chile.
• Walmart is working to expand higher-margin businesses like advertising, data monetization and its e-commerce marketplace, per the call. E-commerce growth, however, slowed after nearly doubling in Q2 2020 as the pandemic shifted shopping online.

Dive Insight:

The nearly triple-digit growth of Walmart Connect is an encouraging sign for the retailer, which is looking to expand higher-margin digital businesses as it seeks to balance investing for the future and growing profits in the near term. The ad sales growth was higher among active advertisers, suggesting that Walmart's improvements to its digital offerings are attracting marketers. Walmart remains "very bullish" on the growth potential of the ad business, president and CEO of Walmart U.S. John Furner said on the call.

"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," Furner said.

While the company added thousands of new sellers to its e-commerce marketplace during the quarter, e-commerce growth has slowed to 6% YoY after nearly doubling during Q2 2020, when the pandemic first accelerated the shift to online shopping. Still, the company is on track to hit $75 billion in global e-commerce sales this year, with $100 billion possible in the near term.

The retailer has continued to beef up Walmart Connect this year, which it rebranded from Walmart Media Group in January. Walmart Connect focuses on leveraging the company's owned properties, building in-store experiences and using its extensive first-party data to improve ad performance elsewhere.

As part of the rebrand, Walmart teamed with The Trade Desk to create a new demand-side platform (DSP) that it hopes to launch in time for the 2021 holiday season. It also acquired Thunder, an ad tech solution focused on creative automation, and expanded its approved partners program to include HarvestGroup, Stackline and Tinuit to help advertisers run more efficient campaigns.

Along with investments in its advertising and e-commerce businesses, Walmart recently announced plans to offer pickup and delivery capabilities to thousands of small and mid-sized businesses as part of a strategic partnership with Adobe. On the earnings call, president and CEO Doug McMillon described these initiatives as ways to scale new businesses and build new revenue streams.

"Our tech and product teams have made a lot of progress modernizing our technology and way of working. We're starting to see the fruit generated by their efforts as we build innovative solutions that have utility across the enterprise," McMillon said.