Closed ecosystems are now the structure of modern media

In the annals of advertising, the phenomenon of closed ecosystems or 'walled gardens,' was a distinct, often contentious outlier in the realm of the omnichannel mix

The trifecta of internet behemoths – Google, Facebook, and Amazon – ascended the media hierarchy by integrating identity data with lucrative inventory. Their platforms became fortresses of logged-in, engaged users, paving the way for a dominant, advertising presence. These tech giants not only dictated their measurement criteria but also held the reins on the flow of data back to advertisers.

In the face of this unorthodox structure, major brands sounded the alarm, penning critiques and publicly decrying the opaque operations within these walled gardens. However, the terrain of the media industry has dramatically transformed. Closed ecosystems are no longer the idiosyncratic fortresses of yesteryear; they are the predominant structure underpinning modern media.

Everyone’s doing it

The progression from the unique to the standard can be traced across various sectors, presenting a seismic shift in the media ecosystem. Connected television (CTV), for instance, is a domain where this transformation is starkly visible. With the surge in CTV viewership and the monetization opportunities presented by advertising-based video on demand (AVOD), CTV channels have rapidly evolved into formidable walled gardens. Industry leaders like Netflix, Disney, Amazon, NBCU, and Paramount have all strategically pursued a vertical integration approach, intertwining their supply with ad tech and measurement protocols.

Retail media offers another intriguing perspective on this evolution. Giants such as Walmart, Target, and Amazon have capitalized on their existing customer bases, spawning the launch of hundreds of retail media offerings. Those with the resources and capabilities have invariably preferred a walled garden structure, underpinning their advertising operations with data-rich environments under their control.

And it doesn’t stop there. From Uber to Instacart to Target to Walgreens, brands with engaged audiences are turning to advertising for monetization and closed ecosystems for ad tech. As Eric Seufert likes to say, “Everything is an ad network.”

Notably, even the so-called 'open' web has not been immune to this trend. The drive for supply path optimization (SPO) and the flight to quality within private marketplaces indicate a marked shift towards the closed ecosystem model. In an ironic twist, the very programmatic infrastructure that once symbolized a free and open exchange of information is now embracing a paradigm of enclosures.

Driving forces: The dominance of first-party data

Unraveling the reasons behind this industry-wide shift towards walled gardens, one quickly uncovers the role of first-party data. The tightening of privacy regulations, along with the deprecation of cookies and mobile identifiers, there has been a clear movement towards treating first-party data as a vital proprietary asset. These data sets now form the backbone of targeting and measurement, serving as a form of currency in the digital advertising marketplace. However, its proprietary nature also necessitates careful management.

The exchange of this sensitive, valuable data between parties is fraught with legal and ethical risks, requiring the intervention of tools such as clean rooms to anonymize it. These platforms serve as safe environments for data handling, allowing companies to maintain control over their data while ensuring compliance with privacy regulations.

Navigating the terrain of fragmentation and complexity

For advertisers, the paradigm shift towards closed ecosystems has precipitated an environment of fragmentation and complexity. The modern consumer navigates multiple channels, making marketing today inherently omnichannel. The execution of campaigns across these numerous walled gardens, however, poses a substantial challenge. Without universal metrics, independent ad serving, and comprehensive reporting, advertisers are frequently left grappling with incomplete or incompatible data.

In this complex landscape, advertisers must turn to an evolved buy-side infrastructure that enables seamless interoperability across the fragmented ecosystem. Such an infrastructure facilitates effective omnichannel marketing, negotiating the intricacies of each walled garden without compromising on strategic objectives. It also bridges open and closed systems to enable creative personalization so brands can meet consumers in the moment, seamlessly and effectively.

We have seen a tectonic shift in the advertising industry – a departure from the era of open ecosystems and freely exchanged data. Advertisers must now navigate a maze of walled gardens, each with its proprietary data, rules, and measurement criteria. This shift doesn't signal a regression but a new era demanding greater adaptability and nuanced strategies. As the landscape evolves, so too must the tools and tactics used by advertisers. In this new world of proprietary data management and enclosed ecosystems, sophistication and agility will define the successful advertisers of tomorrow.