What Are Walled Gardens?

In advertising, a ‘walled garden’ describes a closed advertising ecosystem; where a platform has a large, signed-in audience base, control over the content in that environment, and extensive first-party data that (when shared compliantly) can help advertisers shape their campaigns, find lookalike audiences and more.

Platforms such as Google, Facebook, and Amazon, are examples of ‘walled gardens’; and with sizable user bases, those three organizations alone accounted for 64% of US digital ad spend in 2021 . The walls are high, and there’s clearly growth in the garden!

However, despite their high share of global ad spend, are these closed systems – or walled gardens – the right choice for the future of advertising?

Why consider this now?

Put simply, the advertising landscape is changing! Today, advertisers must keep pace with:

• Huge digital advertising disruption. From CCPA, to GDPR, global governments are updating digital privacy regulations, and ‘walled garden’ industry platforms are equally tightening the reins, particularly with Google’s phase out of third-party cookies.
• The ‘cookiepocalypse’. Any advertiser who’s unaware that 2023 means the end of cookies on Google Chrome must be living in their own personal walled garden! However, the change is unavoidable. Expanding on Safari’s cookie phase out, advertisers without a plan for first-party data and identity in place of third-party cookies will soon struggle to reach, identify and personalize to their audiences.
• Industry change. It’s not just the ‘cookiepocalpse’ that’s impacting advertising; initiatives to protect privacy – from Apple’s introduction of ITP (Intelligent Tracking Prevention) in 2017, to default third-party cookie blocking, and opt-in-only app tracking on Safari in 2020 – it’s harder than ever for big ad platforms (such as Facebook) and advertisers to understand audience behavior and create relevant customer experiences on Apple devices.
• Growing desires for data privacy. Regulations and industry giants aren’t moving toward privacy just because they feel like it. In part, privacy shifts are occurring due to public desire for control, transparency and privacy, as well as insight into how their data is used.

“The GDMA Global Privacy report (2022) found that the majority of people (82%) are willing to exchange their data online as long as there is a clear benefit to doing so. At the same time, a majority (71%) also still state a degree of concern with the issue of online privacy.”

Put simply, regulations are shifting, processes are evolving, and audiences now expect more from the brands who advertise to them. Remember – your audiences aren’t comprised of “targets” – they’re multi-dimensional people, with evolving priorities, who expect you to treat them as such!

To meet those expectations, it’s on advertisers to improve their practices, respect privacy, offer an attractive value exchange, and to move towards responsible, respectful marketing.

So what does that mean in terms of advertising strategy?

Walled gardens are one of many options that advertisers can follow, in order to adapt to change and continue to reach a wide audience. Approaches include:

• Using owned, first party-data to build a rich, behavior-based picture of people, tailor the ad experience, and optimize spend through relevance.
• Prioritizing identity solutions / using emerging identifiers (universal and shared IDs) to identify and reach people holistically across digital touchpoints.
• Using walled garden platforms, whose large, authenticated user bases and extensive first-party data can help advertisers reach audiences and shape campaigns.
• Using Google’s Privacy Sandbox to reach groups of people with similar interests rather than individuals.
• Using contextual targeting to serve advertising that’s based on the content being consumed, rather than personalized to individuals.

The options a brand chooses will depend on their goals, and the advertising ecosystem that’s needed to support them. For many, trying multiple options is the most logical way to create a connected ecosystem that’s not overly-dependent on one platform, provider, or solution.

With that in mind, let’s explore how walled gardens fit in today’s landscape, and whether they enable the clarity, flexibility, and customer connectivity that advertisers need.

The Walled Garden AdTech Giants

Walled garden AdTech giants have vast audiences of signed-in, known or authenticated users on their platforms, who often remain logged in (think Apple ID’s, Google logins, or using Facebook credentials) across the web and their connected devices.

This gives walled garden platforms (and the advertisers who use them) the first-party, deterministic certainty to scale, reach and resonate with people across touchpoints.

In today’s AdTech landscape, the walled garden ecosystem is comprised of a few key platforms:

• Google. Over 80% of Google’s revenue comes from advertising alone . In 2021, that ad revenue amounted to $209.49 billion USD . And as the owner of some of the largest global display ad platforms, ad servers and ad exchanges (AdSense, Google Ad Manager (GAM) and Google AdX), Google’s network covers over two million websites, and reaches 90% of online individuals .
• Facebook / Meta. As of the first quarter of 2022, Facebook has roughly 2.93 billion monthly active users , making it the most used online social network. As users often sign in to Facebook across multiple devices, and use Facebook credentials across the web, Facebook presents substantial opportunities for deterministic reach.
• Apple. From Apple devices to payments, streaming, Safari, video, music and beyond, Apple’s iOS ecosystem is vast, presenting advertisers with deterministic opportunities anywhere a user signs in with an Apple ID.
• Amazon. Presenting a $31 billion per year advertising business, Amazon is expected to account for 13.3% of total digital ad spend in 2022.

Each of these walled gardens has control over the environment it maintains, and for the advertisers who use their platforms they present benefits such as:

• Scale. With large user bases, walled garden AdTech giants present advertisers with the chance for huge reach and scale, as well as additional first-party insight into interests and behaviors.
• Lookalike relevance. Offering the chance to improve customer acquisition, advertisers on walled garden platforms can often create similar lookalike audiences, and reach a wider, relevant pool of people.

Of course, there are also challenges:

Dependency. Becoming overly reliant on an AdTech giant who can easily shift and change how advertisers can use and succeed on that platform presents an element of risk.

A closed system. Walled gardens are exactly that – walled! Advertisers who use them will only be able to reach the people who use that service, and will not be able to port data out of that solution to enable true closed-loop reporting. This can make true measurement, attribution, and reporting more complex.

A Solution to the Impending

Cookiepocalypse?

Third-party cookies and identifiers have played a core role in helping brands reach and personalize their messaging to audiences at scale, and have been a consistent solution in what is an increasingly complex space.

And, facing the loss of cookies, walled gardens present an attractive and accurate advertising option for continuing to reach a wide audience.

However, while walled gardens present an effective way to reach the audiences who use those platforms (and remember, that’s already 65% of US total ad spend! ), not all is golden in the gardens.
Increased cost and competition?
Post-third party, walled gardens will likely see further increases in advertiser use and competition, which in turn drive pricing and visibility challenges.

Remember, walled garden platforms have full control over their ad visibility and pricing models. And, according to AdExchanger, marketers are already spending more with them; as the walled gardens “eat open programmatic.”Global programmatic ad spend on the open internet (outside of the walled gardens) has lost c.$1 billion a year, for the last three years, to the gardens.

Audiences outside of the gardens

For advertisers who do include walled gardens in their post-third party strategies, there will still be questions about how to reach audiences when they are outside walled platforms.

The answer is to expand your digital advertising approach. Innovate, try new and holistic solutions, get the buy-in to act now, and include options such as first-party identity into your strategies.

Walled gardens do present one option to reach people post-cookiepocalpse. But they aren’t the full answer. To succeed, advertisers should take a proactive, connected, and conscious approach, exploring multiple options in the ecosystem to engage with partners, brands and audiences in a respectful way.

The Transparency Issue

With vast amounts of deterministic first and third-party data, the accuracy that walled gardens offer to advertisers is attractive.

However a lack of transparency, and no data portability out of the gardens presents a challenge in assessing campaign performance.

And as an advertiser, when you can’t tie audience interactions back into your wider customer data or CRM, that makes it harder to build a complete picture of their interactions with you across all platforms.

In short, it’s harder to understand your audience’s full experience with your brand, or interact with them in the way they expect, across all touchpoints.

The solution? Prioritize your approach towards first-party identity, and use alternative identifiers (identity graphs, first-party cookies, publisher IDs, or universal IDs) to ensure you have a digital ad strategy outside of the walled gardens, that can scale across the open web, and provide the ability to recognize individuals in a privacy-compliant, connected way.

Walled Gardens vs The Open Web

It’s not only the transparency issue that’s driving advertisers to diversify beyond walled gardens.

Let’s return to the question ‘how can advertisers reach audiences who are outside of the walled gardens?’. According to OpenX and The Harris Poll’s 2020 study, “consumers spend more time on the open web, trust what they see and read more, and find the advertising more effective and impactful as compared to Facebook, Instagram, YouTube and Amazon” .

So, while advertisers might be spending their budgets within the walled gardens – and there are clear benefits of being active on those platforms – the people that advertisers want to reach are moving freely beyond the gardens, and may only be spending 34% of their time within those walled environments .

“Despite capturing more than 60 percent of all digital ad spend, reports from comScore have found that the duopoly of Facebook and Google account for only 34 percent of consumer time spent online.”

Finding a balance between walled garden spend and open programmatic advertising remains the answer; relying disproportionately on one platform or solution, especially in an ecosystem that’s set to shift rapidly in the next few years, can be a risky, sheltered and costly approach.

Navigating the Cookieless Future

With cookie deprecation approaching fast, where should advertisers go from here?

It’s time to look at cookieless as an opportunity, not a threat!

There will be challenges in changing tack, but with 68% of marketers already agreeing that alternatives to third-party cookies will result in better outcomes in the future , things are looking bright. After all, although cookies have long been an industry standard, they’re not always the best option to reach and identify people in a considerate, respectful manner.

And today, choosing strategies that build customer relationships, that connect with and respect people as individuals, at every stage of the customer journey, will be the answer to improving trust and seeing success in the advertising industry.

Finding the right data partners and platforms who can support a connected, agile and flexible advertising strategy and ecosystem, pre- and post-third party, is a solid first step for brands who are ready to better connect with their customers.

The options that are right for your brand will of course depend on your goals – and walled gardens may be a part of that! But for true success within and outside of those walls, it’s time to prepare for change, test and invest in a balanced and connected ecosystem of first-party, identity and beyond, and prioritize innovation and flexibility to remain agile as advertising – and customer understanding – shift.