Internet Walled Gardens: What It Means For Advertisers?

Advertising has been changing and evolving over the years, although it is still essential to any successful business strategy.

With the rise of digital media and technology becoming such a big part of our lives, brands have never been able to target audiences more precisely than they can target them today.

However, the online advertising landscape is not looking flat these days, as it’s highly influenced by large tech companies that are growing their “walled gardens” and transforming the whole industry. These tech giants control vast amounts of user data and provide advertisers unparalleled access to target audiences – but this comes with a cost.

In this blog post, we’ll explore the concept of walled gardens in advertising, their impact on the advertising industry, and their potential benefits and risks.

What is a walled garden?

For ages, a walled garden was just what it sounds like – a garden enclosed by high walls, which was usually done for security purposes or to shelter plants from external factors, like wind or frost.

On the internet, the purpose of a walled garden is very similar, just focused on a different area. 

An internet walled garden is defined as a closed ecosystem created by a large company that is operated without the involvement of outside people and organizations. In advertising, it’s an ecosystem where publishers own the entire advertising process.

Typically, in these closed ecosystems, users stay within the platform to perform various digital activities like interacting with other users, consuming content, shopping, and similar, creating a pool of data that the walled garden companies can use to target ads.

So the term “walled garden” refers to the fact that these ecosystems are closed from the wider internet (also called open internet), with limited access to data and functionality outside the created platform. 

Advertising walled garden examples

From the definition, you can probably guess what “large tech companies” we refer to when discussing advertising walled gardens.

The best examples are brands like Alphabet (the parent company of Google), Meta, Amazon, Linkedin, Pinterest, Snapchat, TikTok, and Spotify. In fact, the total global digital advertising revenue of these companies was estimated at 77% in 2022 (vs. 23% of the open internet) and is projected to grow even further, accounting for 82% in 2026.

If you took a closer look at all these companies, you might notice that they share some common aspects that make them so-called walled gardens, for example:

• Owning the entire advertising process: Previously mentioned platforms create a closed environment for advertisers, building their ad platforms from scratch and on their terms, providing services within their boundaries.
• Data ownership: These walled gardens have and primarily use first-party data of their users, including demographic information, behavioral data, interests, purchase data, etc., that they use to provide advanced targeting options for advertisers.
• Direct selling: While most publishers in the open internet use ad exchanges and networks to monetize their websites, walled gardens sell ad placements to advertisers directly.
• Control over user experience: Mentioned tech giants have complete control over how ads are presented to users, including ad placements and the content itself. 
• Self-service: Walled gardens typically offer self-service platforms, enabling advertisers to manage their ads and set up campaigns themselves.
• Scale: They also have enormous audiences that make them an attractive option for advertisers seeking broader reach.

But this also doesn’t mean that only large tech companies can fall under the definition of walled gardens. Essentially, a walled garden can be called any platform that “locks an advertiser” inside its ecosystem, leaving them no other choice but to use only internal functionalities.

For example, if an advertiser who’s decided to embrace programmatic advertising and run programmatic ads has no choice but to use:

• Advertising platform’s demand-side platform (DSP)
• Rely on their data management platform (DMP)
• Use their dynamic creative optimization (DCO), etc.

We can still call such a platform a walled garden, as the ad technology provider has significant control over the platforms, processes, data, etc.

Building a walled garden: benefits and drawbacks

The idea to build walled gardens didn’t just come out of nowhere or some companies’ desire to prevent their clients from using competitor services (well, who knows, really). 

Essentially, walled gardens were born because of challenges leveraging user data.

With the walls up and elimination of third-party data, it has become easier for tech giants to ensure compliance with GDPR and similar regulations. As a result, some of the tech giants now take advantage of this strategy which, in many cases, made them the only option for their clients.

Like all things in life (and advertising), walled gardens have their advantages and disadvantages, so let’s quickly go through some of them to get a better overall image of this controlled advertising ecosystem.

Benefits of walled gardens

• One-stop-shop. Although the level of control within the walled gardens may appear odd, they can also benefit advertisers as they don’t need to maneuver between platforms and channels to fulfill their advertising needs.
• Highly targeted campaigns. Walled gardens are swimming in constantly updated, valuable first-party data, which they use to provide advertisers with sophisticated targeting options across different devices.
• User security. Walled gardens don’t allow their collected data outside their own digital ecosystems and are strict about sharing more sensitive data with advertisers. In many cases, user consent might be required to give advertisers access to some tracking options.
• Better experience for customers. Access to such vast amounts of user data allows for creating more personalized and tailored ad content, increasing relevancy and meeting particular audiences’ needs.

Drawbacks of walled gardens

Even though the benefits above sound pretty good, there are some disadvantages that anyone needs to know before choosing walled gardens as one of their advertising options (or even the only one).

• Lack of transparency. Although the data staying within walled gardens can also be considered an advantage, this also means that advertisers are not entirely in control of their campaign measuring. Since walled gardens need to protect the privacy of users’ data, advertisers often get just an aggregated view of how their ads perform.
• Hard to advertise cross-platform. Running ads across different platforms is complicated since each walled garden forces advertisers to create a new account within its borders.
• Limited control over data and ad placements. This can be a result of a closed ecosystem built and operating on the platform’s terms.
• Limited reach. Although walled gardens have a lot of users, the audience is limited to walled gardens’ boundaries, which can also limit overall reach.
• Dependence on the platform. Walled gardens can make it difficult for users to switch to other platforms, leading to a risk of lock-in. This can reduce user choices and competition, which can be harmful to innovation and creativity.

How limitations within walled gardens can impact advertising strategies?

The choice of the advertising platform and, in this case, the overall ecosystem highly depends on your advertising goals. For some brands, advertising within, for instance, Meta’s boundaries might be enough, while others might find it challenging to tap into their target audience.

Let’s take reach, for example. Since you can only reach users within walled gardens, it can make it harder to achieve your goals, such as increasing brand awareness or generating leads. 

Similarly, a lack of transparency in reporting can make it challenging to optimize your campaigns, measure success, and make the right decisions in the future.

Another important thing is a narrow variety of ad formats that may or may not align with your advertising goals. This can not only limit the creativity of advertisers but also lower engagement rates and the chances of grabbing ideal customers’ attention.

Overall, mentioned limitations can make a negative impact on the effectiveness of your advertising strategy, but it’s also something that you can think through in advance and make sure everything fits your needs before investing in the platform.

Therefore, it’s essential to consider alternative platforms and channels that can at least be used in conjunction and help diversify your advertising efforts.

Walled gardens vs. open internet: side-by-side comparison

Now that we’ve covered the nature of walled gardens, it’s time to see what’s on the other side of the boxing ring.

The easiest way to describe open internet is to say that those are all remaining companies and platforms outside walled gardens. It’s a more decentralized and democratic ecosystem where everyone can access and publish content without facing such a challenging environment.

Some examples of independent players in advertising are DSPs, SSPs, data management platforms, ad networks and ad exchanges, and similar that allow wider access to multiple channels, more creative opportunities, or better support.

"Publishers and advertisers, although enjoying the quality of products delivered by the walled garden companies, are increasingly looking for alternatives. One of the reasons for this is a technical strategy and dependency reduction; another and very important one – often, smaller companies outside walled gardens are much better at servicing," said Vytautas Paukštys, CEO at Eskimi.

Let’s put walled gardens vs. open web side-by-side to better understand the difference.

Wrap up

Regardless of the platform you choose for advertising, the key is to always keep an eye on emerging trends and tools that let you stay ahead of the curve and create more effective advertising campaigns.

Although posing several challenges, walled gardens can offer significant advantages for advertisers that can find the right balance between leveraging their strengths and mitigating their limitations.

For others, diving into the waters of the open internet can be just the right decision for achieving their goals.

If you need help deciding, contact the Eskimi team or book a demo.