The Walled Garden is a hard-to-miss advertising and marketing jargon. In simple terms, it can be called a closed platform built by publications, creators, and brands of all scales. Apple is a prime example of a Walled Garden. Over the decades it has become a tech giant, one of the most valuable companies in the world that has complete control over the technology and software of its devices which also makes it one of the biggest walled gardens in the ad tech industry. Let’s break this down and unfold it in depth. 

What is a Walled Garden in advertising?

A Walled Garden or a paywall is a closed ecosystem in which only a limited set of users have access to their software or hardware technology. It also means that the Walled Garden or the service provider has complete control over the published content, applications, and other additional services. 

Let’s bring back the example of Apple to understand this better. Apple’s ecosystem, or its Walled Garden, harbors many products with different vertices.

• Devices: Mac, iPhone, iPad, Apple Watch, Apple TV
• Operating systems: macOS, iOS, watchOS, tvOS
• Web browser: Safari
• Apps: Apple Music, iTunes, Apple Store

Aside from Apple, Google is another remarkable example of a Walled Garden in advertising. Google is the most used search engine platform in the world and naturally, has a large user base. It also acquires most of the ad revenue in the entire industry. This is possible because Google has ample data and advanced technology to manage it. Access to such a huge database of its users is what makes giants like Google and Apple the Walled Gardens of the ad-tech industry. 

In 2021, Google generated $209.5 billion in terms of ad revenue. It is only fair to say that it dominates online advertising. Google and Facebook hold a duopoly in the advertising domain, as the latter is the second giant in the ad tech industry. It generated $114.93 billion in ad revenue in 2021. 

Soon, this duopoly is expected to turn into a triopoly as Amazon is catching up. It generated $37.79 billion in ad revenue in 2022 and is expected to grow up to $64.29 billion by 2026. Google, Amazon, Facebook, and Apple are the top four Walled Gardens currently that together make up the term GAFA or FAGA or the Big Four.

The key to their success is nothing but data management. They have successfully created an ecosystem that caters to the largest audience across the globe which makes them an ideal choice for advertisers. 

History of Walled Garden

The inception of Walled Garden in advertising can be traced back to the 70s. The Bell System had a vertical monopoly over all the telecommunications services across the United States of America and Canada. They even had control over the information exchanged over their platforms. However, this Walled Garden was brought down by Hush-a-phone, a device that was connected to the phone to maintain privacy. Bell Systems tried to oppose this by stating that it hampers their network service. However, the court passed a judgment in favor of Hush-a-phone, which led to the end of the Bell System’s monopoly and the advent of third-party businesses in the telecommunications sector. 

Coming back to the Walled Gardens of ad tech

GAFA may have control over mass data and exclusive services for their users but that does not conclude that Walled Gardens can only be formed by tech giants. Any publisher or content creator can create a Walled Garden with their database.

Outside of Walled Gardens, the exchange of data between third-party ad networks takes place through cookies. But now with the rise in first-party cookies, brands are more focused on first-party data collection methods which is crucial to building a Walled Garden in advertising.

The Walled Garden of Publishers

Publishers such as the New York Times and the Washington Post have emerged as Walled Gardens through first-party data. The most common and successful first-party data collection method used by them is the subscription funnel. These Walled Gardens provide quality content in return for paid subscriptions from their users. The subscribers are actively involved in the publisher’s content as they pay for their services or intently read their content. This marks the user base of these platforms as a relevant target audience for many advertisers. 

The subscription funnel is adopted by tech giants, content creators, publishers, SMEs, and businesses of all niches and scales. More and more small businesses are turning to this strategy to build an audience for their niche and carry out operations like surveys and research, using that data to further grow their audience. 

While this is a lucrative strategy in the long term, the core of a Walled Garden is that data remains within the walls. It also means that they may have minimal to zero access to outside data or data from other platforms. Hence, it can be difficult for small businesses to build a Walled Garden as they won’t have enough data. However, they can always rely on demand-side platforms and supply-side platforms for data. 

Independent ad networks

Walled Gardens are not the only ad platforms that businesses can rely on. They also have access to open internet advertising entities like: 

• Ad networks: Platforms that connect advertisers with publishers to display ads on various websites or apps.

• Ad exchanges: Digital marketplaces where publishers sell ad inventory to advertisers through real-time auctions.

• Ad servers: Technology that delivers and manages online ads, tracking impressions, clicks, and other metrics.

• Supply-side platforms (SSPs): Tools that help publishers manage and optimize their ad inventory, connecting with multiple ad networks and exchanges.

• Demand-side platforms (DSPs): Platforms used by advertisers and agencies to manage and optimize their ad campaigns across various ad exchanges and networks.

• Consent management platforms (CMPs): Tools that enable websites and apps to obtain and manage user consent for data collection and targeted advertising in compliance with privacy regulations.

• Data management platforms (DMPs): Platforms that collect, organize, and analyze user data to create audience segments for more targeted ad campaigns.

• Identity resolution vendors: Companies that provide solutions to connect and consolidate user data from various sources to create a unified and accurate view of an individual’s identity for targeting and personalization purposes.

What are the pros and cons of the Walled Garden for publishers?

Benefits of Walled Garden for Publishers

1. Retargeting

The advanced technology of Walled Gardens makes it possible to carry out retargeting. This helps the publishers to retain customers and generate valuable conversions. They can tap into this data to deliver more targeted and relevant ads to their audience, increasing the chances of engagement and conversions. Retargeting allows publishers to re-engage users who have previously shown interest in their content or products. Since Walled Gardens excel in data management, retargeting is one of its prime advantages.

2. Accuracy

How do these Walled Gardens manage to retain customers? Accuracy. First-party data targeting, self-serve advertiser portals, and control over auction pricing make it possible for them to segregate their data effectively and deliver accurate information or ads to their users. The accuracy and relevancy offered by the Walled Gardens help publishers and advertisers increase their conversions. 

3. Cross-device tracking

This feature was not available in the beginning, but now it has become one of the most promising advertising strategies. Users frequently encounter mobile ads related to their desktop search queries, creating a seamless connection between their search activities across devices. This is possible because platforms use the same profile and share the data internally. 

Despite this benefit of Walled Garden for publishers, its capability in cross-device tracking has limitations that can be overcome by leveraging Google Analytics 4. With its advanced tracking features, including cross-device tracking, GA 4 provides a comprehensive solution that extends beyond the confines of Walled Gardens.

4. Security

When it comes to Walled Gardens, offer a certain level of security due to their closed and controlled environments.  These platforms have strict measures in place to protect user data and ensure compliance with privacy regulations. By controlling access to their platforms, walled gardens can implement robust security measures, including encryption, authentication protocols, and data access restrictions. 

In the wake of the cookieless future, publishers need alternative methods to reach and engage their audiences. Walled gardens provide an ecosystem where publishers can tap into first-party data and leverage the platforms’ own user insights and targeting capabilities.

Challenges of the Walled Gardens

1. Less transparency

One of the disadvantages of Walled Gardens for publishers is the limited transparency they can provide to their users. This lack of transparency may hinder advertisers and publishers from achieving optimal performance. When it comes to analytics and reporting, Walled Gardens may fall short of delivering sufficient transparency.

2. Automated services

For large-scale publishers or Walled Gardens such as Facebook, Google, Amazon, and Apple, the huge database and mass operations are carried out on a real-time basis. It becomes challenging for them to offer personalized or tailored services to individual users. As a result, many of the services within Walled Gardens are automated, lacking the level of customization that some advertisers or publishers may require.

3. Lack of Interoperability

In the absence of third-party cookies in a Walled Garden, cross-platform targeting is not possible. For example, when a brand runs a campaign on Facebook, it can track the user that has interacted with that ad. However, they cannot use that data of the audience and retarget them on any other platform like YouTube. 

This limitation results in a fragmented view of the audience and hinders advertisers’ ability to effectively extend their reach and engagement across different platforms. Without the ability to retarget users across platforms, brands may experience wasted ad spends and reduced eCPM for advertisers. 

Independent ad networks can cover these cons

Compared to the Walled Gardens, independent ad networks offer more transparency to their users. They also have in-house support teams to guide advertisers and publishers. Some of the other benefits of independent ad networks also include data exchange with third parties, data owned by the clients, advanced customization options, and account managers for clients. 

Small brands are using various strategies to compete with the duopoly and a possible triopoly of the ad-tech giants. But one of the most effective ways to compete with these Walled Gardens has been partnerships between smaller Walled Gardens. 

Impact of Walled Gardens on Advertising 

The rise of tech giants like Google, Amazon, Apple, and Facebook transforming into Walled Gardens has led to a concentration of power in the advertising industry. These platforms have amassed vast amounts of data and possess advanced technologies that make them dominant players in the advertising domain. Advertisers are drawn to these walled gardens primarily due to their massive user bases and extensive reach. However, this concentration of power also brings forth certain limitations.

Transparency and control, which are both fundamental aspects of Walled Gardens, present a double-edged sword. They can lead to a fragmented advertising landscape. Each platform operates with its own set of rules, ad formats, and targeting options, making it challenging for marketers to implement cohesive cross-platform strategies. This fragmentation can result in siloed data, inefficient campaign management, and missed opportunities for integrated advertising campaigns.

Future of Walled Gardens in Ad Tech

Despite the aforementioned obstacles of Walled Gardens and the steadfast competition of industry giants, they remain one of the most effective monetization strategies for publishers. With the imminent decline of cookies, they offer an ideal avenue for collecting first-party data through subscription funnels. Although challenging to compete with dominant walled gardens, small publishers possess distinct advantages such as flexibility, expertise in niche areas, and a personalized touch. By harnessing these strengths and employing strategic methodologies, small publishers can establish their presence in the publishing arena.

Online advertising is divided between Walled Gardens and the open web. Each brand has distinct website monetization objectives and key performance indicators (KPIs) to track progress. Both the Walled Gardens and the open web can cater to these goals. So, it’s ultimately the preference of the publishers and advertisers to make their pick according to their target audience and adapt to the changing environment of the ad tech industry.