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According to eMarketer, almost 70% of all U.S. digital ad spend goes to Google, Facebook and Amazon. If we take that literally, that means brands assume consumers spend 70% of their time exclusively on those three platforms. Is the remaining 30% really supposed to represent the rest of the internet?
The walled gardens conversation is an ongoing issue of more and less. Marketers are spending more on these closed-ecosystem “walled garden” platforms, whose prices keep rising. In an AdExchanger article, adtech consultancy Jounce Media says the non-walled garden share of real-time bidding has decreased by about $1 billion per year for each of the last three years. That advertising money has, instead, gone to the walled gardens.
At the same time, brands are getting less—compared to display outside of walled gardens advertising—on these platforms. Jounce expects that marketers will experience continued ROI declines in what it called “over-monetized walled gardens” throughout 2020.
With Google’s announcement that it will phase out third-party cookies by 2022, it’s clear that those walls, which keep so much of the data inside, are about to get even higher.
Advertising spend on the web overall is getting higher as well. According to the Interactive Advertising Bureau (IAB), internet advertising revenues in the U.S. surpassed $100 billion for the first time in 2018. That was 21.8% higher than the previous fiscal year. Growth continued in the first half of 2019, when internet ad revenues totaled $57.9 billion.
While the COVID-19 pandemic has had an unprecedented impact on ad revenues, the extent of which remains to be seen, it doesn’t change the fact that walled gardens continue to take an inordinately large percentage of the spend. That fact, coupled with a lack of transparency on how the campaign performs, is hard to stomach.
As marketers spend more on these platforms, they understand less about their customers because walled garden campaigns and interactions can’t be tied back to the brand’s CRM database. Brands typically receive an aggregate view of how their campaign performed rather than an individualized view that provides clarity into the campaign’s performance. This leaves a brand with an incomplete view of its own customers and how they have interacted with them across platforms. Marketers identified extracting audience insights from walled gardens as their greatest challenge when it comes to identity, according to an August 2018 study by Winterberry Group (see chart, page 28). Yet marketers continue to spend more and get less.
“Marketers don’t get a good understanding of what parts of their media worked,” says Loch Rose, chief analytics officer at Epsilon. “There’s no way to verify it. You simply have to take it on faith. As a marketer, you know the chief financial officer and the chief marketing officer are going to ask about it, and you’re just going to have to say, ‘Well, I trust walled gardens to do the right thing.’”
Trust is not enough. CMOs are under more pressure than ever to provide data-driven results. We’re seeing an evolution of the CMO role today—one that requires them to be the dot-connector across the organization. CMOs are having to change not just how they market, but also how they talk about marketing impact. In turn, this requires marketers to understand and assess their spend on walled gardens platforms—but is that even possible?
In some ways, a walled garden provides an alternative to the cookie-less future that concerns advertisers and marketers. Walled gardens are built on a foundation of logged-in users, which allows them to track each person across devices. Third-party cookies aren’t needed when you’re in a first-party platform.
While the walled gardens know a lot about the users in their logged-in environment, they—by necessity— can’t share their data with advertisers without running into privacy concerns. Facebook, for instance, lets advertisers run targeted campaigns, but doesn’t share information about where the ads appear, as evidenced by the organized boycott of Facebook by some of the world’s largest advertisers in July this year. And unless a user clicks on the ad campaign, the advertiser doesn’t know who actually viewed the ad.
In a world where marketers have the potential to make every consumer interaction hyper-relevant, brands— and their respective marketing partners—have to assess consumer mindset, motivation and need state in milliseconds, and then tailor each message individually to reflect that in real time.
“Walled gardens want to do a lot of that work for you in a black box,” says Lou Paskalis, senior vice president of customer engagement and media investment at Bank of America. “The major problems with that are the inability to audit those decisions and those algorithms. At the end of the day, we have a fiduciary responsibility to understand how our customers are being treated and ensure that a protected class data isn’t being used in that orchestration.”
The lack of transparency within each platform is challenging enough for many marketers, and then there’s an added issue of how each platform operates—potentially causing brand safety and image issues.
“My first boss taught me, ‘Don’t expect what you don’t inspect,’ and that’s very hard to do today with walled gardens in general,” Paskalis says. “If I see a platform or platforms that consistently have accounting errors, governance outages and lawsuits from every quarter about how they do business, that is probably a platform I can’t invest in right now because it doesn’t reflect how we run our business.”
Paskalis’ views, though appropriately inquisitive of how these platforms operate, are unfortunately not often shared freely across brand marketers today. Marc Pritchard, chief brand officer at Procter & Gamble, has been a notable critic of walled gardens and ad transparency in recent years; but not all marketers command $6.75 billion in advertising each year. For many, “good” is also “good enough” on these platforms.
"My first boss taught me, 'Don’t expect what you don’t inspect,' and that’s very hard to do today with walled gardens in general."
—Lou Paskalis, senior vice president of community engagement and media investment, Bank of America
Rose equates the current spend with walled gardens to a herd mentality. “There’s a lot of truth in that everybody else is doing it, so you’ve got the herd going for you,” he says. “But, at the same time, that only works until something goes wrong. At that point, everybody looks bad, but there’s still safety in numbers.”
With so many marketers buying in to this concept, Rose says we, as an industry, naturally experience an imbalance of power with too much control centralized in one area. “To the extent the ecosystem can build out viable alternatives to walled gardens—alternatives that actually work for marketers—I see them being something marketers will actively support,” he says.
The way forward, Rose says, is for marketers to demand and also seek out approaches that offer more performance transparency and pinpointed data than they can get from walled gardens advertising alone. “Marketers spend a lot of their time trying to decide which parts of their programs are underperforming so they can move their investments into the higher investing parts,” Rose says. “The lack of insight from walled gardens makes that very hard to do.”
The Association of National Advertisers (ANA) has long been pressing for walled gardens marketing to be more transparent so that advertisers are better able to assess what is happening with their ads.
“We’ve had many of the walled gardens come in to speak to us at our board meetings specifically about these transparency issues,” says Dan Jaffe, group executive vice president of government relations at the ANA. “We believe we’re making progress in that area, which will assist companies in better knowing whether they’re getting what they hope to get and what they are paying for.”
A January 2020 survey from The Harris Poll, commissioned by OpenX, found a misalignment between where consumers spend their online time and where advertisers spend their digital dollars. It found that while American consumers spend about 66% of their time on the “open web” (which they define as any online property, website or app not owned by a major tech company such as Facebook, Amazon or Google), those sites only receive about 40% of digital ad budgets.
There is certainly a place for spending with the walled gardens, but they can’t be a brand’s only solution. “The challenge that we have to navigate for our clients is generally that consumers aren’t complacent,” says Sean Peters, chief strategy officer at Publicis Media. “Consumers are always looking for the next thing. So our ability to scale audiences with any single partner and expect that we’re connecting with them throughout their entire journey—or all the way from the top to the bottom of the funnel and purchase—would be shortsighted if we only looked at one particular partner.”
The larger problem Peters points to is essentially putting all of your eggs in one basket. An over-reliance on one walled garden, or a few of them, is ultimately a disservice to your brand. “If you disproportionately rely on walled gardens instead of a balanced and healthy mix, and those platforms don’t perform the way they have historically, then you’re leaving your business and your clients exposed,” Peters says. “If people are spending time in walled gardens, we’ll make sure we’re there. But there’s never going to be a time when the only way someone is consuming media is within a walled garden. So why would we put all of our investment and spend only into inventory that’s owned or controlled by a walled garden?”
So how do marketers balance their open-internet programmatic advertising and walled gardens spending? In the wake of Google’s announcement on deprecating third-party cookies, any real answer to that question becomes more problematic the closer we get to 2022 (the intended deprecation date for Chrome).
The key problem here is the vast majority of open internet advertising is based on the third-party cookie—and walled gardens don’t need third-party cookies for user tracking. On Google’s announcement, Forrester analyst Joanna O’Connell said, “The third-party cookie is— for all of its faults—the underlying mechanism by which really the whole digital advertising ecosystem transacts and communicates.”
With Google removing that mechanism, many brands will seemingly need to play more in Google’s Sandbox as the only option.
And many in the non-walled gardens sector of the digital media industry were already struggling. Criteo, a long-time leader in digital display and retargeting, already had a shaky financial outlook for 2020 prior to the COVID-19 crisis. According to a February 2020 Digiday article, “The company is still reeling from recent browser changes to throttle web tracking—and that’s before Google makes its planned move to kill off third-party cookies in Chrome in two years.”
The majority of the adtech industry is not equipped to handle a cookie-less world. In the same Digiday piece, O’Connell noted that Criteo has good investments in AI and machine learning and a strong data footprint with retailers, but still, the company’s considerable goals are “easier said than done.”
If a more equitable advertising ecosystem—one that matches where consumers spend their time and attention—is the goal, the question becomes: How must the industry pivot to meet it?
Effective marketing starts with knowing your customer. That means knowing each customer and each prospect across their various digital and in-store contexts, devices and channels. This is no simple task, but it becomes even more complex when looking at advertising within and outside of walled gardens.
“Building, establishing and maintaining a relationship with customers—not just for a single conversion but throughout their lifetime with a brand—is increasing in importance for every contemporary marketer I’ve worked with,” Peters says. “When a brand understands the customer and every part of their journey and owns the data attached to that, walled gardens will not exist as they do now.”
Today, advertisers are spending a significant portion of their advertising budgets with walled gardens, but data isn’t portable outside of each platform. A marketer cannot take what they learn with a Google Display Network campaign, for example, and apply it to Facebook ads, publisher media buys or outbound email campaigns.
This forces brands to make cross-platform decisions blindly— never knowing the true customer journey. “It means I’ve got a different lens on ‘walled garden one’ about what this customer’s intention is. Then I see her again in ‘walled garden two’ or on ‘non-walled garden environment three.’ And, let’s not forget that 30% of the universe outside of walled gardens are actually transparent with regard to this,” Paskalis says.
For Paskalis, a more equitable value exchange has to do with standardizing taxonomy and identifiers across all of these platforms to see and understand the customer journey.
“We will need to agree on a common set of taxonomies,” Paskalis says. “Taxonomies need to be much more extensive than they are today around what this environment entails so I can deploy a machine-learning solution and start to understand what contexts are more important to a particular individual in a privacy-compliant, anonymized way.”
In the July 2019 Gartner report, How to Minimize Your Marketing Data Dependence on Amazon, Facebook and Google, Benjamin Bloom, an analyst at Gartner, writes, “As walled gardens remove or restrict the ability to extract impression-level data from their platforms, an agency’s ability to repackage first-party data into meaningful third-party insights can help marketers verify customer walled garden interactions, strengthen loyalty initiatives and bolster data-driven marketing programs. These more targeted insights drive more relevant interactions, where prospects and customers are more willing to opt in to branded engagements.”
Simplified, what Bloom describes boils down to a simple equation for modern marketing: identity plus context equals intention, which may be not just the future of walled gardens, but also the future of all programmatic advertising and marketing. In Paskalis’ view, if walled gardens understood that this equation is probably the best way forward for their customers, they would likely start to evolve organically.
"If people are spending time in walled gardens, we’ll make sure we’re there. But there’s never going to be a time when the only way someone is consuming media is within a walled garden."
—Sean Peters, Chief Strategy Officer, Publicis Media
“If I know who I’m talking to in a privacy policy-compliant, anonymized, GDPR-friendly way,” Paskalis says, “I can actually leverage some first-party context about that individual, I can append it to some third-party context, and I might be able to, through good segmentation and good predictive analytics, start to define intention.”
There is hope, Paskalis adds. “I think, for the most part, we’re heading in that direction.”
The question is not whether or not brands should spend on these platforms—they offer virtually unrivaled, unique solutions. Although Bing and Yahoo are technically competitors, Google search ads reign supreme because it’s the most-used search engine. Naturally, the ad dollars can (and should) flow in that direction.
But Rose brings this back to a price versus value concept that is grounded in measurement. “Let’s acknowledge that, first of all, they’re very capable platforms in terms of the ability to execute, and they do have unique capabilities,” he says. “But Google could make it possible to measure their performance perfectly. It’s impossible for anybody else to measure them because of the way they’ve set it up. So what they know is that it’s in their best interests that they not be measurable, and that tells me that they’re overpriced.”
Peters echoes these thoughts. As a marketer who has made decisions on behalf of clients to spend or not to spend on many of these platforms, he’s seen how the audiences and their associated costs have changed over time. “If these platforms themselves aren’t showing audience growth,” he says, “then they’re going to be in a position where the reliance on them will continue to get more expensive, but the outcome delivered by those partners will continue to get less effective.”
Which brings us back to the more and less issue with walled gardens.
“You want the advertising ecosystem to be efficient,” Rose says. “I’d rather that our clients spend their advertising money where it creates the most value and spend the rest of their money making their products better. When you lack transparency, marketing is less efficient, and that’s a net loss to the economy as a whole.”
Image credit: Illustrations by Mark Allen Miller
