What is a Walled Garden? And why it is the strategy of Google, Facebook and Amazon Ads platform?
Google, Facebook and Amazon are leading the Digital Market by taking over 65% of the total Ad Spent and representing up to 90% of the industry annual growth in 2016 (source). Meanwhile, the rest of the industry is shrinking of about -3% (source).
Some might wonder how can those companies take such a big share in the market while others are left on the side of the road, slowly suffocating in a very competitive market, such as traditional Publishers/media groups.
There is no single reason, but one of the key success factor of those companies relies in how they are packaging their marketing services and offering access to their Data through a Walled Garden approach.
What is a Walled Garden?
A Walled Garden is a closed ecosystem in which all the operations are controlled by the ecosystem operator.
A great example, from history, is the telecommunication industry during its maturing days in the 70s. At some point, only phones devices manufactured by the telecoms operator themselves could connect to their network. For example, in the USA, Bell System was owning all of the phone hardware that its customers were using. Buying our own phone wasn’t possible but things have significantly changed since then :-) …
So, even if history is showing us that the Walled Gardens are disappearing on the long term and replaced by open ecosystems that are eventually bringing more value, this is often the best way to have the most profitable business in the maturing days of any industry.
More recently, we can also cite Apple that is controlling the whole iOS ecosystem by having an overall control over iOS applications. Their motivation is to be included in all the most profitable value chains built on their platform (payments / ads / data / video / music / etc.).
In the Digital Marketing field, you have reached the “Walled Garden” level when you can force your clients to use your whole marketing stack to run their campaigns:
- Your DMP for Audience Targeting based on your Data
- Your DSP to push Ads on selected inventory (yours and/or selected 3rd Party inventory)
- Your DCO to handle the Ads personalization / Ads hosting
And then, the magic part is that even if you give all the proper features needed to manage campaigns, you don’t allow your customers to export any data. You only give them aggregated metrics that you measured. This is the key to stop Data leakage.
As we’ll see later, this approach is currently the best one to take the best business share with the current market if your are a Publisher / Media group. Of course, this isn’t easy to do and it requires a lot of Business and Technical effort to get there. But the GAFAs have already managed to do it, and it’s about time to catch up.
Let’s analyze the Facebook Walled Garden with a Case study to see how they manage to make such a difference in the market. We’ll see the pros of this strategy at each step.
Case study: Running a retargeting campaign on the Facebook Walled Garden
In general, there are 3 simple steps during a retargeting campaign:
- Track users that will be retargeted later.
- Expose them (retarget) with a marketing message.
- Monitor the performance of the campaign to ensure that it is worth it.
1. How to track users
To track a user, an Advertiser can either:
- Use their own DMP / DSP tags/pixels on their website.
- Use an external DMP / DSP tags/pixels on their website. E.g. use a technology that they don’t control (hint: bad idea).
With option 1., the Advertiser is the single one to know about their Users behavior on its own website. He can then decide whether he wants to share this data, how, which Data exactly and to whom.
With option 2., the partner (e.g. Trading Desk / Retargeting platform / Walled Garden provider / etc.) is the one possessing information of users actions and can reuse it later for his own segments/recommendation engine/look-alike/data reselling activities/etc.
As Facebook is a Wall Garden, the only option supported is the option 2. as they do not provide any DMP or DSP integration capability (e.g. no cookie matching).
And, as we are talking about Facebook, one of the major tech company of the world, it’s hard to think that it is a “technical difficulty” that is preventing them from following option 1. This seems to be a deliberate choice to force Advertisers & Publishers to embed Facebook tracking pixels on their website so that they can gather even more data that what their social media is tracking by looking at the User navigation on various websites.
This is the first benefit of the Walled Garden: they are always gathering new data each time someone is using them. No exception.
Expose them with a marketing message
To diffuse an Ad on Facebook, you now must use their own in-house DSP system. There is currently no other option. A few months/years ago, it was possible to buy Ad Slots on Facebook inventory using 3rd Party DSP but this time is over (source). Again, it’s not a technical issue that made them close their inventory.
For Advertisers, it means that they have to take another tool in their marketing stack, which can be troublesome. But for Facebook, it is making a huge difference:
- Facebook is on both side of its Inventory selling process, representing itself as the seller of its own inventory and representing the demand side, including the charge of spending “in the most effective way” the Advertiser budget, meaning that they have the full control of the price of their Ad Slots. It’s like having all the cards in hand when playing poker.
- Facebook can take his share on the Advertiser budget as a “DSP-like” provider for all the Ad Slot auction happening on its own inventory.
This is the second benefit of the Walled Garden: the full ad slot auction process is controlled directly by the owner of the Walled Garden, giving him the ability to optimize his revenue.
Monitor the performance of the campaign
While it is the area on which Facebook is being the most open, being the main reporting tool to track the performance of the campaign on its own network is giving them a lot of opportunities.
Firstly, it is very difficult to compare the results of a campaign performance between Facebook and other marketing network/tool as the indicators of the different system are always slightly different in their definition and method of calculation. This means that their Walled Garden is less put in competition with others marketing services providers.
Secondly, it is giving much less transparency about what it is really happening and can lead to some mistakes not being detected in time. For example, it is well known that Facebook miscalculated their video average viewing time for 2 years without having being challenged by any other reporting tool (source).
And last but not least, it isn’t possible to get the detailed export campaign logs from Facebook. If Advertisers want to calculate their campaigns attribution (e.g. the true impact of the campaign in terms of generated business), they have to give to Facebook the list of all the buyers so that Facebook can calculate the ROI of the campaign. This is giving them, again, more data about Advertisers’s customers.
This is the third benefit of the Wall Garden: hosting themselves all of the performance reporting tools, the Walled Garden restrain Advertisers from challenging the performance of the network.
Ok, looks great. So, how can I build my own Walled Garden?
If you are a Publisher and/or if you have interesting data through your business (websites/apps/services), the Walled Garden approach is the best one to monetize your inventory and data as explained earlier with the Case Study.
Business wise, building a Walled Garden is a challenge. It means that you have the size and the power of negotiation needed to sell a new private Advertising Network to Advertisers. This was “doable” for Google, Facebook and Amazon but this is way more difficult for a smaller company / Publisher. Even Twitter has some issue with its own Walled Garden (source).
To reach the proper size needed, the current market trend that we are seeing at mediarithmics is going through “Data Alliance” of Publishers / data collector companies to put together their Data and Inventory. This may allow to reach the necessary size for a market entrance. We are helping the French “Gravity” Alliance (>100+ French Publishers sites/apps) which is building its own Walled Garden using our technology (source).
Technically speaking, it means that you have to build / source your own marketing stack (DMP / DSP / DCO) so that you can offer to Advertisers what the others Wall Garden providers are offering (tracking people, exposing them, monitoring the whole performance of campaigns).
The key here is to be able to offer the complete range of services that Advertisers are requiring. If you have to integrate with 3rd Parties provider (DMPs / DSPs / DCOs), you’ll have some breaches in your Wall Garden.
As the AdTech/MarTech market is still very fragmented, it can be a nightmare to assemble all of these pieces together (integrating different solutions together, sourcing or developing part of them in-house, etc.).