Yesterday, Wal-Mart announced they were buying Vudu, an online service provider of movies streamed to TVs. Vudu has a number of partners including Vizio, LG, Samsung and Sharp, just to name a few, in which some TVs come “pre-loaded” with the ability to access Vudu and stream movies from their library of 16,000. It is a pretty neat service and circumvents the need to have a secondary subscription like Netflix or a secondary appliance.
This acquisition by Wal-Mart is a foray into unexplored areas for them. Wal-Mart believes they will be able to leverage their retail expertise and size to make this merger successful. It would be difficult to argue with Wal-Mart’s success in terms of logistical and operational excellence, but from a branding perspective, this acquisition makes no sense. Wal-Mart’s brand is about low prices. Vudu, though not well branded, is more about quick and easy. (If you have ever gone into my local Wal-Mart, you would know that quick and easy are not in the Wal-Mart vocabulary). I mentioned yesterday the importance of focus and it really seems like Wal-Mart has lost a bit of their focus with this acquisition.
Mergers and acquisitions need to make sense from both an operational and brand perspective. This comes from a fundamental understanding of the difference (and synergies) between the business of the business and the business of the brand. Unfortunately for Wal-Mart, this acquistion seems to fail at least in brand perspective (perhaps operationally as well). This is not to say that acquisitions can only be successful if their are business synergies between the two companies. On the contrary, two very different businesses can be very successful if their brands are similar.
Here is an example of one that we believe worked well: FedEx and Kinko’s. FedEx business is simply next day delivery. Kinko’s business, on the other hand, was about printing/mobile office. As a brand, FedEx has always been about “piece of mind.” When you have to get a package to its destination overnight and send it with FedEx, you do not have to worry about it. This merger was successful because Kinko’s brand was also about “piece of mind.” The business of their business was different, but the business of their brands was very similar. For Wal-Mart and Vudu, neither seems similar.
Perhaps what Wal-Mart is thinking is that they will have exclusivity in offering Vudu only at Wal-Mart. But if Wal-Mart is not getting TV shoppers now for their low prices, it is difficult to see how adding a service like Vudu to the mix is going to improve things, especially since there are other services like Vudu. And for some, having Wal-Mart being associated with a service such as Vudu may even be off-putting. Without some means to make sense of this acquisition from a brand perspective, Wal-Mart may struggle with it.