Walled gardens are rising, literally. Google, Facebook, Amazon, and others see billions in revenue from their homegrown walled ad gardens. These high-margin platforms all share similar attributes: they were built in-house from scratch, harness first-party data, employ self-serve dashboards, and more.
For context, in 2020 US digital ad spend was around $165B. The six largest walled gardens (Google, Facebook, Amazon, Twitter, Snapchat, and Pinterest) accounted for 71% of the spend. Every other publisher — most focused on programmatic ad revenue using Google Ad Manager — fought for the remaining 29%.
What’s worse -- in 2017, the “Open Internet” bucket (a.k.a. non walled-gardens) accounted for 47% of total ad spend. Just three years later, it was 29%, a stark decrease in such a short period.
Indeed - the future of ad monetization is walled gardens. Ad programs built on standard ad servers are delivering stagnant returns, while full-featured walled gardens are proving to be competitive differentiators.
In this article, we define walled gardens, discuss how they are the future of digital advertising, and identify solutions for building your own.
A walled garden is an ad platform where the publisher handles all the buying, serving, tracking, and reporting. This typically accompanies first-party data targeting, self-serve advertiser portals, auction pricing, and more. Essentially, it’s a closed system where publishers own their entire ad platform.
There are two key differences between walled ad gardens and traditional ad monetization:
Historically, the phrase “walled garden” was synonymous with big ad tech like Facebook and Google. Because of this, the term has garnered a negative connotation, especially given the many controversies around their blackbox reporting.
But at its core, “walled garden” refers to any ad program in which the publisher owns the entire ad tech stack, which gives them final say in how data is used, how ads look, and who advertises. It’s not inherently a negative term.
Understanding walled gardens entails discussing the biggest players in the industry: Google, Amazon, and Facebook. These companies captured 64.4% of ad revenue in 2020. Their walled gardens are working.
First, they built their ad platforms themselves from scratch. This enabled them to build what they wanted, on their terms, such as native ads that don’t disrupt the user experience (promoted posts, sponsored listings, etc) and targeting options that are unique to their product.
Second, they used their proprietary first-party data to deliver impressive results for direct-response advertisers, while also providing valuable targeting options for branding advertisers.
Third, these companies scaled with self-serve dashboards so they could reach long-tail advertisers, who manage their ads themselves and can set up campaigns targeting their ideal audience.
Finally, these companies are unique in size and resources: Google, Facebook, and Amazon are three of the most visited platforms in the world (and more traffic enables more ad revenue). Still, you don’t have to match their size to build a million — or even billion — dollar ad platform.
If your goal is driving ad revenue, using a standard ad server and plugging into ad exchanges is tempting — to a point. But this approach is limited and means trade-offs like slow load times, obtrusive banner ads, low CPMs, and more.
Creating your own walled garden, however, addresses many of these issues, allowing you to:
Building a walled garden means your ad revenue is not contingent on decisions made by big ad tech. With the upcoming death of third-party cookies, for example, publishers serving programmatic ads will see their eCPMs drop, which will lead to substantial declines in monthly ad revenue.
Walled gardens like Facebook’s, however, won’t be hurt by the change as much, as they mainly rely on first-party data for targeting. Owning your own walled garden, therefore, ensures you are free from the whims of big ad tech and have full control over your revenue destiny.
While there are clear benefits to building a walled garden, there are real challenges too.
For one, it’s not easy to do. Building a full-featured ad platform can take 12-16+ months and 10+ engineers. This is a sizable upfront investment for an unproven revenue stream.
Maintaining this ad server, moreover, requires even more time and resources. Between server costs, engineering resources, certification fees, refunds for bugs, and so on, the costs involved can scale greatly over time.
Instead of building your walled garden entirely from scratch, Kevel offers an alternative: ad APIs that make it easy to launch a full-featured ad platform in just weeks.
By building with APIs, you can design your own walled garden that mirrors that of Google’s and Amazon’s, in a fraction of the time and cost it took them. Many brands - such as Klarna, Ticketmaster, Slickdeals, and Imgur - have already used Kevel to build their own high-margin walled gardens.
For more information, contact us today.
