Walled garden is a term used to describe a closed ecosystem or platform that restricts access to outside sources, while offering its own products and services.
In other words, it is a controlled environment where a company, organization or entity can curate content and services, control access, and maintain a monopoly over a particular market or industry. Walled garden is typically found in the digital realm, with tech giants such as Apple, Facebook, and Google being some of the most well-known examples.
Source: Statista. (March 22, 2022). Share of walled gardens versus the open internet in digital advertising revenue worldwide from 2017 to 2026 [Graph]. In Statista.
“An advantage of walled gardens is that they can be very profitable for the companies that control them”
Examples of Walled Gardens
Facebook is perhaps the most famous example of a walled garden. The social media giant has created an ecosystem that includes not only its flagship platform, but also Instagram, and WhatsApp. By acquiring these other platforms, Facebook has created a network of products and services that keep users within its own closed ecosystems, making it harder for competitors to gain a foothold.
Google is also a notable example of a walled garden. The company dominates the search engine market with Google Search, and also controls the distribution of Android, the world’s most popular mobile operating system. Google’s suite of services, such as Gmail, Google Drive, and Google Docs, further entrenches its hold on users.
Advantages of Walled Gardens
One of the biggest advantages of walled gardens is that they allow companies to maintain control over their ecosystem, ensuring a consistent user experience and high quality standards. By controlling the hardware, software, and services that users access, companies can ensure that everything works seamlessly together, reducing the risk of compatibility issues or technical problems.
Source: OpenX. (March 11, 2020). Effectiveness of ads on the open internet versus within walled gardens according to consumers in the United States as of January 2020 [Graph]. In Statista.
Another advantage of walled gardens is that they can be very profitable for the companies that control them. By maintaining a monopoly over a particular market or industry, companies can charge premium prices for their products and services, knowing that users have no other viable alternatives.
Disadvantages of Walled Gardens
Despite their advantages, walled gardens are not without their drawbacks. One of the biggest criticisms of walled gardens is that they stifle innovation and competition. By creating a closed ecosystem, companies limit the ability of third-party developers to create new products and services that could compete with their own offerings.
Walled gardens can also lead to a lack of choice for users. By tightly controlling access to content and services, companies can limit the ability of users to access alternative options or to migrate their data to another walled garden. This can lead to a feeling of being trapped or locked-in, which can be frustrating for users.
Another disadvantage of walled gardens is that they can be exclusionary, particularly for smaller or emerging companies. By creating high barriers to entry, walled gardens can make it difficult for new players to break into a particular market or industry, even if they have innovative or compelling products or services.
The impact of Walled Gardens on advertisers
The rise of walled gardens has significant implications for advertisers, particularly those who rely heavily on online advertising to reach their target audience. These ecosystems have been both praised and criticized by advertisers for their unique characteristics, which provide both advantages and disadvantages.
Source: RTB House. (August 12, 2021). Distribution of time spent and advertising spending in the United States as of January 2020, by online property type [Graph]. In Statista.
“One of the primary advantages of walled gardens for advertisers is the high level of audience targeting and engagement that they offer”
One of the primary advantages of walled gardens for advertisers is the high level of audience targeting and engagement that they offer. These platforms have a wealth of user data, which allows them to provide advertisers with detailed targeting capabilities. This means that advertisers can reach specific audiences with relevant and personalized messaging. This results in higher engagement rates and more effective ad campaigns.
Additionally, walled gardens often provide advertisers with valuable analytics and reporting tools, allowing them to measure the success of their campaigns more accurately. This allows advertisers to optimize their campaigns for better performance and ROI.
Advertisers’ concerns about Walled Garden
However, walled gardens also have several disadvantages for advertisers. One major concern is the lack of transparency in how these platforms operate. Advertisers often have limited visibility into the data and algorithms used by walled gardens to determine ad placement and pricing. This lack of transparency can make it challenging for advertisers to evaluate the effectiveness of their campaigns and determine whether they are getting a fair deal.
Another concern for advertisers is the lack of being capable of analyzing campaigns across the different walled gardens, making it impossible to orchestrate for example a frequency cap for a given user across all the websites.
Source: ANA. (January 31, 2023). Challenges of retail media advertising according to marketers in the United States as of summer 2022 [Graph]. In Statista.
Advertisers must understand the unique characteristics of these ecosystems and adapt their strategies to take advantage of their benefits while mitigating the risks.
Walled gardens offer a range of benefits and drawbacks for advertisers. While they provide powerful audience targeting and engagement capabilities, they also have limited transparency and potential lock-in concerns. Advertisers must carefully consider these factors and adapt their advertising strategies to take advantage of the opportunities presented by walled gardens while minimizing the risks. Ultimately, walled gardens will continue to shape the advertising industry, and advertisers must stay informed and adaptable to succeed in this evolving landscape.
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