What are Walled Gardens? (EASY explained in less than 4 mins)
A Walled Garden is a closed ecosystem in which all operations are controlled by the ecosystem operator. It provides its customers with the audience, technology, and inventory and on the other hand keeps technology, information, and user data to itself. The term first appeared in the 70s in the context of the telecom giant Bell which made its hardware, especially its phones, exclusively available to its network customers. In the 90s the early internet service providers (ISP’s) like AT&T and AOL created the first walled gardens on the internet. Users could use the offered services and were restricted in accessing other external services.When it comes to advertising on walled gardens, the data generated through campaigns always remains on the closed ecosystem. Insights cannot be extracted and applied to other campaigns which leads to limited optimization opportunities for advertisers. For example, advertisers know that users who like a certain product of their brand are also most likely to be interested in a complementary product by them. However, the walled gardens do not allow the advertiser to export this data to another platform and activate it on other services, for example on the open internet. Each time users, advertisers, or publishers use walled gardens for their purposes they are gathering data - always. That is why they do not rely on third-party data. They only use first-party audience data, which is very accurate – and powerful. The numbers prove them right. Almost 70% of all U.S. digital spend goes to Google, Facebook and Amazon. They own great data and have the widest reach globally. Facebook, for example, counts more than 2.8 billion users per month and the number of Google users is nearly 4 billion worldwide. Apart from that Google serves more than 6.9 billion search queries per day. Each time a unique user profile is built Google learns more about the user’s browsing habits. As Amazon is expected to seize 50% of the entire e-commerce retail market in 2021 it holds the most extensive purchasing data on its users. Which makes it very interesting for advertisers.Although advertisers spend a lot on walled gardens, they understand less about their customers because campaigns in these closed ecosystems don’t circle back data to the advertiser’s database. Walled gardens typically provide aggregated information on the campaign’s performance rather than an individualized view of the advertiser’s customers and how they have interacted with them. Extracting audience data is one of the biggest challenges for brands when they advertise on walled gardens. Furthermore, the full ad slot auction process many times is controlled directly by the Walled Gardens themselves, giving them the ability to optimize their revenue. Facebook for example says, that they spend the advertiser’s budget “in the most effective way”, which means that they have the full control about the prices of their ad slots. Nonetheless, advertising on the walled gardens makes completely sense, even if the advertisers cannot extract any data from their campaigns to platforms outside the walled gardens. It is the other way around that the walled gardens even learn with every campaign that runs through them. They use this information to improve their database. Therefore, when it comes to data collection, brands are getting less back on these platforms - compared to display advertising outside of walled gardens.
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