Walmart’s widely anticipated acquisition of Vizio is still awaiting regulatory approval. Meanwhile, the smart TV maker reported Q4 profits on Tuesday but did not hold an earnings call or provide outlook owing to the pending transaction.

Its letter to shareholders praises Vizio’s progress “from a hardware company into a CTV platform.”

Even though hardware sales still account for the majority of Vizio’s total income, its earnings report indicates that Vizio’s advertising business is what keeps the company profitable – and hence an appealing acquisition target as Walmart seeks to grow its advertising operation.

READ MORE: Walmart Is Reportedly In Talks To Buy Vizio For $2 Billion

In Q4, Vizio generated $174 million in revenue and $105 million in profits from ad sales and content distribution combined (its “platform” business), representing a 28% and 27% year-on-year increase, respectively. Advertising revenue, in particular, increased 36% compared to same time last year.

The increase in advertising revenue would explain why Vizio’s average revenue per user increased by 15% year on year to $32.48.

READ MORE: VIZIO’s $3 Million Lawsuit Settlement May Owe You Money

Even with Vizio’s modest user base, ad revenue appears to be constantly rising. It added only 1.1 million active accounts in 2023, increasing the total to 18.5 million. (For comparison, Roku has 80 million monthly active accounts.)

However, advertisers have a valid reason to spend extra money on Vizio: data.

Aiming for ACR.

Vizio’s ad sales are mostly driven by automated content recognition (ACR).

Vizio’s data science company, Inscape, licenses ACR data, which detects viewing content, as a key component of TV measuring technology. (Fun fact: Vizio received an EMMY Award for this data last year.)

ACR is also a competitive advantage because it is not compatible with other smart TV manufacturers. Vizio’s ACR only applies to Vizio ad purchases, which is why more marketers are opting to buy Vizio supplies directly.

Unlike programmatic buys, direct arrangements enable advertisers to acquire home screen inventory or title sponsorships while targeting and measuring Vizio’s ACR. Buying via Vizio also allows businesses to compare how campaigns perform across different streaming applications on Vizio TVs, which they cannot do when purchasing from individual apps.

The company’s direct advertising engagements increased 32% year on year after adding 117 new marketing clients in Q4.

Over the garden walls.

But probably the most appealing aspect of ACR data is its ability to link TV ad exposures to real-world effects.

With ownership of both Vizio’s streaming inventory and its own consumer data, Walmart can utilize ACR to discover whether TV commercials helped boost online or in-store sales. The retail behemoth can also use the data to develop more targeted marketing for Walmart products directly to Vizio TV households.

The promise of closed-loop attribution should help Walmart demonstrate that TV commercials do, in fact, lead to sales, bringing more advertisers inside Walmart’s walled garden.

Assuming the deal is approved by regulators, Walmart will reap the benefits of a profitable data and advertising business, strengthening its position as a competitor to Amazon, which is also active in both the CTV and retail media markets.