Walmart revealed advertising revenue for the first time on Thursday, saying that it generated $2.1 billion last year, a strong sign that its retail media ad strategy is starting to click.

Walmart disclosed the advertising money pile during its fourth-quarter earnings announcement. Walmart has been building a retail media network, which serves search ads for brands that sell products on its website, just like Amazon. Walmart also runs a demand-side platform, an online ad buying network that it built with The Trade Desk, an internet media buying and ad technology firm.

Walmart Connect is the name for the advertising side of Walmart’s business. Last year, Walmart launched the demand-side platform as a way for brands to tap into Walmart’s shopping data to target ads around the internet.

Walmart did not disclose all the details about the strength of its ad business. For instance, there was no comparison to revenue in the prior quarter or the year before. In its call with Wall Street analysts, Walmart said that half the advertising revenue came through automated channels. Brian Wieser, global president of business intelligence at GroupM, said that was an indication of the size of programmatic digital advertising coursing through Walmart's platform. Walmart also has direct relationships with brands that buy marketing and advertising services like physical promotions in the stores.

Still, no matter how it is sliced, Walmart is approaching the size of Pinterest's ad business, Wieser said. Pinterest generated $2.6 billion in revenue last year. "It shows tremendous advertiser interest in retail media," Wieser said. "Not just CPG brands, but marketers in other industries, as well."

Earlier this month, Amazon reported $9.7 billion in fourth-quarter ad sales, an increase of 32% from a year earlier. It was the first time Amazon specifically carved out advertising revenue.

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Industry growth

Andrew Lipsman, principal analyst at eMarketer Insider Intelligence, said that Walmart is in a strong position to compete with Amazon in advertising, because it has some strengths that the online retailer can’t match. Walmart has 10,500 stores, which generate shopping data in the real world. Walmart can “use it to target ads on-site, and to target ads, through The Trade Desk, across the web,” Lipsman said.

Lipsman also said that connected TV is a “huge opportunity in retail media” in 2022. “The Trade Desk is giving access to that inventory,” Lipsman said.

E-commerce and retail media networks are becoming an important spoke of the online advertising wheel. Walmart called the advertising a “flywheel,” with an increase of 136% in the number of brands using its ad tools to buy media. Meanwhile, Target, Best Buy, Kroger, CVS, Lowe's, Albertsons and Walgreens are among the traditional retailer building media networks in recent years, too.

There also are startup e-commerce and delivery players like Instacart coming into digital advertising.

Walmart’s total fourth-quarter revenue, including sales in stores and online during the important holiday shopping period, rose 0.5% to $152.9 billion. Fourth-quarter U.S. e-commerce sales rose 1%.

Profit topped analysts' expectations. The company, like others, continued to contend with issues including inflation, higher gas prices and supply chain troubles.