Four reasons Walmart wants to buy smart TV maker Vizio

Walmart is doing some shopping of its own.

The retail giant announced last week that it plans to buy smart TV maker Vizio in a $2.3 billion deal. If the acquisition goes through, the discounter will own a consumer electronics company that already sells many flat-screen TVs and soundbars through Walmart's website and stores.

Yet the heart of the acquisition is the value of getting in front of millions of people while they stream their favorite TV shows and movies, and being able to link that leisure time to the Walmart purchases they make later.

"It's not really about the televisions," Jefferies retail analyst Corey Tarlowe said. "It's about advertising."

Here's a closer look at the major reasons Walmart wants to buy Vizio.

When shoppers think of Vizio, they likely envision store aisles filled with giant TVs. But the growing, and increasingly lucrative, part of the company's business is a little harder to see.

In the past few years, the company, based in Irvine, California, has reinvented itself to become more of a software company. Its TVs come with the SmartCast operating system, which allows viewers to pull up and watch streaming apps, such as Netflix and Hulu, without a "plug-in" device such as an Amazon Fire TV stick or Apple TV. It also allows Vizio to sell ads.

Vizio can make money from advertising in three ways using the SmartCast system, said Dan Day, an equity research analyst who covers digital advertising for B. Riley Securities. It can sell ads on SmartCast's home screen. It can sell them in WatchFree+, Vizio's own free, ad-supported streaming app. And it gets a small inventory of ads that it can sell as part of agreements with third-party streaming companies.

Vizio's SmartCast system has 18 million active accounts,