“Walled Gardens”—Automatic Trading Needs an Independent Player

May 16, 2016 — by Viktor Zawadzki    

This byline originally appeared in German in the publication absatzwirtschaft. The below is a translated version.

The marketing ecosystem currently suffers from two developments that can fall under the heading, “conflict of interest.” Firstly, closed systems like Google’s, also known as “walled gardens,” limit the effective use of a marketer’s own first-part data outside of that platform. Secondly, some companies dabble in representing both the sell side and the buy side and thus increasingly fall in the crossfire between the two. A similar conflict happens when companies that operate media-buying software also sell inventory, as this muddies the waters for advertisers who want to use that platform to buy impressions on other sites.

Walled gardens: competition at the expense of advertisers

The latest trend in online marketing is towards closed systems. Advertisers can bring their critical and proprietary data into the platform and often get great scale which begets good performance. But they cannot export data from current campaigns operated within these systems and use them in campaigns executed across other media-buying platforms. For example, information gathered by advertisers on potential and known customers within campaigns on Google’s platform is useless for Condé Nast or Hearst. This example illustrates the conflict of interest inherent in walled gardens: Each consumer is treated in a disjointed manner across devices, campaigns and offers, preventing the inherent power of programmatic to address consumers across devices and contexts in a holistic and relevant manner.

The basic principle in the optimization of campaigns is that no conflicting objectives must be defined. Surprisingly, however, there are still companies in programmatic who represent both the sell side and the buy side. This cannot work, since the publisher is trying to achieve the highest possible price for their inventory, while the buy side has the aim to purchase relevant advertising in placements as favorable as possible for reaching their desired audience. Which of the two objectives does a service provider who wants to represent both sides prioritize?

Conflict of interest: sell and buy side from one source

The devil is also elsewhere in the detail: The purchase of impressions by an independent third-party is less likely to be undermined by competing interests than shopping on a platform that offers self-owned and operated inventory. Independent marketing operating systems purchase from a wide range of a range of publishers as needed to meet the advertisers’ priorities. By contrast, using Google’s software to buy impressions on Facebook or other sites presents a conflict as Google might show a preference for its own inventory.

In the long-term, the advertiser will vote on walled gardens and the various providers of marketing technology by how they allocate their budgets to each platform. Call on providers that avoid such conflicts to invest in a reliable basis for marketing strategies in the next five years.