Walled Gardens in Advertising Explained

What are walled gardens in advertising?

In digital marketing, “walled gardens” refer to any closed platform or ecosystem that manages how advertising is bought, sold, tracked, and reported. This could be a social media platform, retail media network, search ecosystem, music or ride-sharing app, travel booking site, and other online marketplaces. On mobile, EMARKETER estimates that consumers spend nearly 90% of their online time within apps, providing rich insights to walled gardens and their advertisers.

Typically, walled gardens are operated by large technology companies, which may choose to limit access to first-party data, revealing only aggregate-level insights. They also often require the use of proprietary, vertically integrated adtech solutions.

Walled gardens stand in contrast to the “open web” of publisher websites and apps that monetise through independent adtech companies, including ad networks, exchanges and servers; demand- and supply-side platforms (DSP and SSPs); ad quality, identity resolution, data management platforms, and much more.

Why do walled gardens exist?

Marketers spend nearly 60% of their digital media budgets on a relatively few walled garden platforms. There are a few reasons for this disproportionate spend. Massive user bases increase in value as the media landscape becomes more fragmented. These platforms also capture high-value moments of intent in the customer journey, from discovery and search to purchase, for unique claims to consumer engagement.

The walled garden strategy began as a response to data privacy concerns. When the General Data Protection Regulation went into effect in 2018, tech platforms phased out its use of external adtech vendors and third-party cookies. Now, as the open web also sees the last deprecation of third-party cookies, walled gardens – and the troves of first-party data they preside over – will only become more valuable.

What are some examples of a walled garden?

The most common walled gardens are the popular digital products that consumers use every day.

Not every platform runs its advertising operations the same way. Some are relatively open in partnering with small and large adtech firms on industry standards for delivery and measurement, whereas others keep their digital “hedges” high and formidable, requiring manual work to extract limited datasets and insights.

Search

Search engines were among the first walled garden platforms, popularising text and product ads alongside high-value query results. By engaging with consumers at targeted moments of evaluation and purchase, search ads quickly became a highly effective advertising channel, now earning over $220 billion in estimated annual spending. In recent years, search platforms have evolved into super-apps, spanning additional content types such as video, maps, email, and more.

Social

While search engines attempt to wrangle all the web’s information, social media platforms have created a universe of user-generated content and many of the largest user bases in history.

Several of the largest social media networks rival the population of the world’s biggest countries. These platforms’ community-driven content carries some brand safety and quality risks, but the scale and unparalleled user profiles are too valuable for advertisers to ignore.

Retail

As consumer shopping moves from brick-and-mortar stores to online marketplaces, retail companies are quickly getting into the advertising business. Commerce media networks allow brand advertisers to pay for promotion or placement within online retail platforms and services. Retail brands are also using their troves of unique shopper first-party data to help brands reach, retarget, and convert consumers across the open web.

Online video

As TV viewing migrates to new screens and digital channels, new players have emerged in the ad supply chain. Connected TV (CTV) manufacturers, over-the-top (OTT) channel bundles, and ad-supported video-on-demand (AVOD) services are just a few of the new providers developing their own ad networks and audience data products. This explosion of services has also increased the complexity and demand for cross-screen measurement analytics.

On-demand

With every new delivery or sharing-economy app – from car transportation and home repair to clothing resale – there’s an opportunity to match consumers with hyper-relevant, context-specific offers. As these apps scale in size, many are developing advertising offerings to drive performance marketing for brands. Common formats include in-app banner ads, post-checkout item promotions, and sponsored product listings.

What are the benefits of walled gardens in advertising?

In a fragmented media landscape, the scale of walled gardens offer a wide range of benefits for advertisers. Here are several key advantages that can help brands maximise the impact of their media spend.

Enhanced targeting

Walled gardens’ massive reach and large number of unique data points on each user make them gold mines for advertisers. Whether it’s search queries, purchase histories, or social profiles of likes and community interests, these platforms’ rich data sets enable unparalleled levels of targeting and personalisation.

Improved ad performance

If scale wasn’t already a big advantage, these platforms also have the benefit of controlling key moments in the customer journey, from product discovery and education (through social and search) to comparison and purchase (across major e-commerce and retail platforms). Each walled garden has the benefit of authenticated users that can be identified across devices and properties.

Consistent user experience

Unlike a distracting pop-up ad or scrolling video player, walled gardens control every aspect of their user experience, ensuring ads don’t detract from overall dwell time. Typically, ads are delivered in native formats that match the surrounding content, whether that’s a paid search result or a sponsored product listing. This synergy naturally leads to improved user engagement, ad completion rates, and overall campaign performance.

Stronger data privacy

The silver lining of stricter data policies is lower business risk and higher consumer trust. Walled gardens’ built-in frameworks restrict user-level data from being shared between companies without consent, helping protect personally identifiable information (PII) and minimising the risk of data leakage, unauthorised misuse, or fraudulent activity. While this is a massive benefit for consumer data protection, it also serves to protect and amplify each platform’s competitive edge.

Advanced analytics

Every walled garden provides advertisers with access to native, automated reporting. While these templated insights are specific to each platform, they provide valuable data around campaign delivery, demographics, ad performance, and conversion tracking that buyers can use to optimise campaigns. Major tech companies have also recently unveiled data clean room solutions that help advertisers compare walled garden data across partners and first-party audience segments, while keeping user data protected.

Cost efficiency

Walled gardens may come with higher ad prices (compared to open web placements), but these campaigns can also be much more efficient. The abundance of users and advanced data profiles helps advertisers test and optimise their creative rotation and average cost per acquisition, even if it requires extra resources to get these campaigns up and running. Over time, the combination of precise targeting, qualified audiences, and a seamless UX lead to higher return on ad spend for marketers.

Learn how Omni Hotels & Resorts improved advertising effectiveness by 4x through data collaboration.

Simplified campaign management

With campaigns managed in one place, the ad process is often simpler in a walled garden. Integrated ad managers, servers, and reporting reduce the need for advertisers to juggle multiple tools or platforms, saving time and resources that can be dedicated to more strategic tasks. While some platforms may have clunky versions like any software, most offer a modern buyer UX that matches the slickness of their popular consumer products.

What are the disadvantages of walled gardens in advertising?

For all the benefits offered by walled gardens, they also come with a list of challenges and drawbacks that advertisers must consider before investing. Whether a brand or agency, advertisers need to plan for these limitations to ensure a smooth campaign, and make the most of the premium rates these platforms command.

Limited measurement transparency

When spending in walled gardens, brands only get access to the numbers and analytics that the platforms choose to share. Even some of today’s most popular consumer apps largely operate with limited visibility into how ads are served, which audiences are seeing them, and how the algorithm decides delivery. Media buyers have little ability to negotiate for better transparency, since few can afford to pull out completely from these channels and still meet revenue goals.

Data ownership concerns

Data generated from walled garden campaigns are owned by the tech platform, and often hard for brands to collect let alone leverage. Platforms maintain restrictions around which data can be ingested or exported. Even for the limited data sets that can be moved, the process to merge and analyse that data against your own segments takes significant time, and requires support from technical resources including data scientists, engineers, or analysts.

Higher costs

With minimal bargaining power, brands are typically at the mercy of the advertising rates and auction dynamics established by the walled garden. Given the scale and premium nature of these platforms, brands often have to pay higher cost-per-click and cost-per-impression rates, sometimes with additional platform fees on top. Limited access to platform ad data also effectively creates an execution “tax,” as advertisers struggle to deduplicate audiences and scale campaigns, leading to increased overlap and waste.

Potential for data silos

The inevitable outcome of a walled garden media landscape is a patchwork approach to analytics. Advertisers are restricted in their ability to export and/or combine user data from platforms with their own first-party data or other data sources. Data sets within each platform are often blocked off entirely, requiring data collaboration to extract, merge, cleanse, standardise, and analyse this data.

Cross-platform measurement challenges

On a similar note, the data silos of walled gardens make it difficult for advertisers to optimise campaigns across platforms. With insights stuck in their respective domains, it can be difficult to create a cohesive, omnichannel advertising strategy, let alone identify the best times and places to reach audiences. Building lookalike models is one alternative, but requires advanced technical skills or data solutions to develop and transport these segments efficiently.

Explore how to unlock data across all forms of advertising, mitigate signal loss, and reveal the hidden insights that fuel growth.

Dependence on platform algorithms

Lastly, advertisers have no control over the decisions and algorithms that fuel engagement across walled gardens. In many cases, these are closely-guarded trade secrets that are constantly being changed or optimised, making it hard for marketers to keep up. Walled garden operators also use these algorithms to prioritise their own products, as seen in the preferential rankings given to private label brands.

How to enable data collaboration across walled gardens

With increased pressure from brands for greater transparency, walled gardens are finally starting to open up. Many have launched their own data clean rooms with LiveRamp and other partners to share more user insights with advertisers, in a privacy-focused way that keeps personal data pseudonymous. These solutions include Google Ads Data Hub, Amazon Marketing Cloud, and Facebook Advanced Analytics.

Managing insights across dozens of platform-specific clean rooms can be tedious and time-consuming. That’s why LiveRamp is joining forces with platforms to power enhanced data collaboration solutions that are interoperable across walled gardens as well as cloud providers, simplifying insights management in one place. This technology enables a CPG giant like Mondelēz International, for example, to safely merge data from social platforms and retail networks, generating a 16% sales lift from greater targeting of in-market buyers.

In addition to walled garden fragmentation, the deprecation of third-party cookies is increasing signal loss for brands. Alternative identity resolution solutions offer a cookie-free, future-ready way to match users across platforms and devices, using a mix of hashed characteristics rather than invasive tracking pixels.

While digital advertising will continue to evolve in unpredictable ways, the sheer scale and data value of  walled gardens means that advertisers won’t be leaving these manicured grounds any time soon. If anything, these platforms are solidifying their place in marketers’ budgets. Now is the time for advertisers and adtech partners to forge partnerships for better activation and campaign measurement across the most popular customer channels.