Understanding walled gardens and their impact on advertisers Share via

Who controls the majority of digital ad spending across the globe? It’s the big three, namely, Google, Facebook, and Amazon. Market research company eMarketer estimates that around 65 percent of all digital spending goes to these three technology giants, while the rest of the share goes to the rest of the organizations operating in this cut-throat space. Did you ever wonder what could be the reason why almost all advertisers invest their ad spending on these three platforms in such a significant way? Because of the massive amount of user data they have access to and the walled garden approach these giants undertake.

That brings us to the question, what is a walled garden in the ad tech space, and why do we hear this term more often than not. A walled garden is defined as a closed ecosystem where the platform owner has complete control over the content, applications, and media and can restrict access to all these details to any advertiser as it seems fit. In other words, it is a closed ecosystem on the internet where all operations and intelligence stay within the system, and the owner keeps all data and technology to itself.

To give our readers a context of how Google, Facebook, and Amazon have benefitted by creating their walled gardens, we showcase some numbers from previous years. In 2020, the digital ad spending in the United States was around $165 billion, out of which the top six walled gardens, including the big three and Twitter, Snapchat, and Pinterest, pocketed more than 70 percent of the investments. What makes these walled gardens tick with advertisers is how they have built their consumer base from scratch, got tons of first-party data at their disposal, and employed self-serve dashboards. For example, with over 2.9 billion monthly active users at the start of 2022, Facebook offers the most considerable reach to any advertiser across multiple segments. In addition, with its various platforms like Google AdSense, Google Ad Manager, and Google AdX, Google is positioned as almost the sole controller of the digital advertising industry. Moreover, it is estimated that Amazon, quickly rising through the ranks, will account for more than 13 percent of total digital spending in 2022.

Now, since these top technology players possess considerable control over digital ad spending, how does that impact the advertisers globally? There is no doubt that the brands and marketers will keep on investing a massive amount of their ad budgets in the walled gardens in the time to come. But what makes it strange is that even after spending so much on these ad platforms, marketers have no transparency on how their ad campaigns have performed. Marketers cannot understand their customers because what happened inside the walled garden cannot be traced to the brand’s CRM database. As a result, brands have to do away with an incomplete view of their consumers without even understanding how did the consumer interact with them across various platforms.

Another reason that will keep the popularity of the walled gardens intact in times to come is Google’s directive of phasing out the third-party cookie tracking mechanism from the Chrome browser in 2023. This means that brands who were earlier heavily dependent on third-party cookies to design their marketing campaigns will have to increase their reliance on these walled gardens to efficiently target potential consumers, although at the risk of never knowing their customer’s behavior. Moreover, walled gardens provide advertisers with a brand-safe and reliable environment, but it becomes challenging for the marketers to decipher how these platforms measure and interpret the advertisement’s performance, making it impossible to compare campaigns outside these ecosystems.

We now have a fair understanding of what a walled garden is and what are its pros and cons for advertisers. Of course, not everyone can make their closed ecosystems because it entails much time, investment, and other resources. But brands and marketers should start focusing more on strengthening their first-party data so that they can design their marketing outreach without being dependent solely on these technology platforms.