Ad Tech & Ad Ops

What Do ‘Walled Gardens’ Mean in Ad Tech?

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The term ‘walled garden’ was first coined by John Malone, the founder of Tele-Communication Inc., later acquired by AT&T. It has since being used by various industries, mainly to describe a closed platform.

In ad tech, walled gardens are companies like Facebook and Google that own and manage a huge database of users. This duopoly has the largest market share of online ad spend and therefore directly affects independent ad tech. Let’s take a deeper look at these walled gardens and how their businesses affect the overall digital advertising market.

So, What is a Walled Garden?

A walled garden is an organization which keeps its technology, information, and user data to itself, with no intention of sharing it. In simpler words, a walled garden is a closed ecosystem, operated by people within the ecosystem, without the involvement of an outside organization.

In ad tech, the exchange of user data via cookie syncing between parties is necessary in order to show relevant ads and maximize revenue. However, walled garden practices hinder this exchange.

Google, Facebook, and Amazon are three ad tech giants, who pocket more than half of all the digital ad spend. While Google partners up with other firms (small or large), Facebook and Amazon like to keep their walls as high as possible when it comes to data sharing.

Let’s Talk About Google/Facebook Duopoly

Google and Facebook, together, will claim 60% of the online advertising market this year. This duopoly squeezes resources out of the ad tech markets, which require the exchange of user data to operate efficiently.

However, advertisers continue to be drawn to these walled gardens. This can be because of accuracy offered by them when it comes to user targeting, basis the pool of unique first-party data that they sit on. Also, for publishers, platforms like Facebook are able to drive good referral traffic.

These facts will help you understand the success of this duopoly:

Can Publishers Have Their Own Walled Garden?

Yes. Big publishers, such as the New York Times, have their own walled garden. These publishers charge readers a fee in order to access their content. This is to make sure that a reader/user only gets the information via their site and not social shares.

In general, this can generate more revenue for publishers (depending on monthly visitors). However, a walled garden publisher is usually a brand with influence and reputation. Also, this brand should have enough control over the market that other companies and customers agree to deal with them, even with their restrictions.

A walled garden can be a challenge for new and small businesses (publishers). If you don’t share your data, then nobody (other DSP’s, SSP’s and exchanges) will share their data with you. This can be challenging especially in ad tech. However, most publishers don’t really need much data from outside. They have their own content driving traffic. It’s the advertisers and marketers who are in constant need of user data to make their advertising and marketing campaigns successful.

The key to running a business in a walled garden setting is to manage all the tasks and expertise within the organization, without the need for any third-party firms and their data.

Pros and Cons of Walled Garden

Walled gardens choke the market of data and resources. But at the same time, they also keep user data secure. Which brings us to its pros and cons.

Pros:

  • Accuracy: Consider Facebook, for instance, it has an advantage to accurately track its users and know about their likes and dislikes drilled down to the level of even their life events. Advertisers can use this information about the users to show relevant ads and increase conversions.
  • Cross-device tracking: A user can access his/her account using multiple devices. While accessing their accounts, users might change devices but profiles remain the same. Hence, walled gardens with user accounts have the benefit of cross-device targeting.
  • Security: Walled gardens (generally) maintain the privacy of their users. Let’s take Facebook in consideration again, it allows advertisers to run targeted campaigns. However, it doesn’t share the data with advertisers about where their ads are appearing. Marked with the recent Cambridge Analytica Scandal and with better data practices, unless a user clicks on the ad campaign, the advertiser will not know which user viewed the ads.

Cons:

  • Difficult to Manage: Managing everything, from employees and users to software and tools, can be troublesome. Imagine the number of tools you use for your business—CRM, CMS, DMP, and more. Now imagine, building this software in-house, while constantly updating and debugging it. Sounds hectic, right? Most walled gardens have their in-house management teams, designers, and developers. And all of this costs a lot.
  • Competing with similar businesses: The competition to provide the best services to the user while competing with other similar service providers can be tricky. The brand needs to keep coming up with new and innovative ideas (targeting, ad types, reporting functionality) to keep users happy and engaged, without users being distracted by others targeting the same users. This becomes more difficult in a walled garden because it needs to maintain a private-ness, while still needing information about competitors.

In Closing

In ad tech, walled gardens have a monopoly over the market, ruling over data and resources. Independent companies are stuck dealing with the little what they have in terms of users, control, and money.

Walled gardens like Google and Facebook are earning higher margins year-on-year while maintaining a firm grip on the market. These companies offer incomparable digital advertising scale and targeting and those in the independent ecosystem might feel choked out of the information and spend coming their way. Considering the influence of these businesses, it’s hard to expect equality in advertising market for independent businesses, for now.

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