Why do brands and advertisers rely heavily on walled gardens?

Google, Facebook, and Amazon control over 65 percent of all digital ad spending globally. 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 first-party data they have access to and the walled garden approach these giants undertake. A walled garden is 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.

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. Moreover, 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 the consumer interacted with them across various platforms.

So let’s try to understand, after facing such challenges with these advertising platforms, what still motivates brands to rely heavily on them?

Popular Walled Gardens

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 along with Twitter, Snapchat, and Pinterest, pocketed more than 70 percent of the investments. These walled gardens tick with advertisers because 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. The e-commerce giant generated over $31 billion in revenue from its advertising business alone in 2021.

According to Statista, in 2021, Google accounted for an estimated 28.6 percent of the total digital advertising revenue generated in the United States and was the largest digital ad publisher in the country. Facebook and Amazon followed, with 23.8 and 11.3 percent, respectively.

Why do brands continue to invest in these walled gardens?

Third-Party Cookies Phase Out

The popularity of the walled gardens will remain intact in times to come primarily because of Google’s directive to phase out the third-party cookie tracking mechanism from the Chrome browser in 2023. This means that brands that were 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. Walled gardens are an alternative to advertising without third-party cookies. 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.

Brands Not Prepared to Handle Cookie-Less World

For most brands that rely on retail distribution, leaning on walled gardens for advertisement becomes vital in the absence of third-party cookie tracking because of the minuscule scale of first-party data they can generate themselves. As for others, most of them cannot effectively use their data set, as their data are siloed away in places like their company’s CRM or website analytics. As a result, only a tiny fraction of available data is ever used. In other words, many brands are still not equipped to manage their advertising needs outside these big walled gardens; hence, the whole exercise becomes more complex when advertising outside.

As we have discussed the drawbacks of the walled gardens for brands and advertisers and the solutions they provide, one thing is certain brands and marketers should start focusing more on strengthening their first-party data. This will enable them to design their marketing outreach without being dependent solely on these technology platforms to have clear visibility of their customers.