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Why the balance of power will shift from walled gardens to the open internet

A phone balancing on a cursor between users on their phones and a walled garden.

Illustration by Reagan Hicks/ Shutterstock / The Current

For more than a decade, walled gardens have existed as the most powerful performance advertising engines on the internet. They know exactly who their logged-in users are and can identify them across devices. They have a wealth of intimate knowledge about each user and closely control all aspects of the ad experience. Consequently, they’ve built their advertising value propositions around effective targeting, frequency capping, and robust measurement and attribution models. Walled gardens hit early on this winning combination, leading to the current competitive imbalance wherein they suck up the lion’s share of digital ad spend.

Times are changing though.

In the near future, we’re going to see the strengths of the walled gardens manifest on the open internet. A new breed of performance engines will solve for challenges that have always existed but were largely ignored within walled gardens — namely, the advantage of professionally created content. The winning combination of high-quality content now coupled with addressability, reach, and frequency management, along with the measurement and attribution increasingly possible on the open internet, has profound implications for the future of performance advertising. Allow me to elaborate.

A turning point for digital advertising

For years, walled gardens have been synonymous with performance advertising, while the open internet has been primarily about brand advertising. Now, as new solutions emerge amid massive digital-ecosystem disruptions, that dichotomy is breaking down.

The forces that have a hand in this breakdown are many, with the move to a cookie-free digital landscape and Google’s rollout of its Privacy Sandbox representing only pieces of the larger picture. From the loss of legacy identifiers to the rising tide of privacy regulations globally, moves toward a privacy-first reality are sparking innovation across the digital landscape.

The impressive rise of connected TV and commerce media channels, in partnership with publishers’ drive to capture stronger first-party user signals, are yielding valuable audience data to enrich open internet buys. Together, these forces are contributing to the emergence of new, privacy-conscious approaches that can deliver more-relevant and highly controlled ad experiences outside of the walled gardens.

Emerging open internet innovations that will soon flourish include:

  • Alternative identifiers: Alternative identifiers — including LiveRamp’s RampID, The Trade Desk’s Unified ID 2.0 and dozens of others — are proving beneficial for advertisers, publishers and consumers alike by enabling the delivery of more-relevant, higher-ROI ads. Based on an analysis across more than 600 billion ad impressions processed daily by PubMatic, we see that when alternative IDs are present, publisher revenue increases by 16%. Ad tech partners that take an ID-agnostic approach by integrating all major identifiers into their solutions can offer robust open internet addressability for performance-driven campaigns.
  • Modeled cohorts: Advances in AI and machine learning (ML) are being leveraged to extrapolate consented first-party data to the larger online population with great accuracy, providing granular segmentation at scale for the open internet. This further extends the value of first-party data and has opened a new segment of the industry focused on creating custom probabilistic algorithms that allow brands to carve out a competitive advantage.
  • Contextual solutions: The AI revolution is also supercharging tried-and-true strategies like contextual targeting. Natural language processing engines and intelligent categorization technology are enabling marketers and media companies to drive incremental reach and performance at scale, without IDs, around premium content on the open internet, including video content.
  • Extensions of publisher first-party data: In a world of signal deprecation, leading publishers have invested tremendous resources in refining their value propositions and amplifying the value of the data derived from their direct audience relationships.

Across all the above innovations, one trend has proven most impactful in driving the power dynamic shift: the migration of targeting from the buy side to the sell side. This makes infinite sense. Sellers have a trusted relationship with their audiences and are in a position to gain consumer consent, particularly within the context of third-party cookie deprecation. When this decisioning occurs closer to the publisher — and therefore closer to the user — all the cookie-free solutions mentioned above can deliver campaigns with greater scale, optimization and ROI than ever before. This shift in power enables quality content providers across the open internet to deliver advertiser outcomes that rival the walled gardens.

The content-quality differentiator

Walled gardens have long differentiated their ad opportunities from those on the open internet by virtue of their large addressable audiences and closed-loop optimization and attribution capabilities. Historically, those elements were powerful enough for advertisers to ignore the well-documented content-quality and brand-safety challenges associated with advertising in these environments.

That’s not going to be the case anymore.

As the open internet scales up the use of alternative identifiers and other privacy-conscious technologies, it will become structurally more attractive to advertisers. It will offer performance-advertising opportunities on par with those of the walled gardens — and it will do so around professionally created, brand-safe content. That’s something the walled gardens, built on user-generated content, simply don’t and can’t provide.

When the open internet offers the same performance opportunities as walled gardens, marketers will begin making their decisions based on content value rather than audience targeting capabilities. Furthermore, as the contextual signals around open internet content become more mature, the ability of marketers to dial in their media buys based on brand suitability — not just safety — will continue to grow.

That said, as this power shift continues, we are going to see a new class of platforms emerge among what our industry has traditionally considered to be “walled gardens.” This new powerful hybrid will boast the highly loyal logged-in user bases of walled gardens, but they will differentiate themselves by enabling premium, brand-safe programmatic media-buying on their platforms through highly integrated sell-side partnerships. In doing so, they will offer the best of both worlds: premium experiences for their users, supported by premium ad experiences from leading brands.

The changing dynamics of the industry and the evolving digital advertising supply chain are ushering in a new era for the open internet. Driven by the increase in first-party and identity data, further fueled by the rise of CTV and commerce media, as well as buyers’ ongoing focus on efficiency, advertising on the open internet holds a tremendous long-term opportunity to drive ROI and outcomes. This evolution will spark a massive power shift within the advertising landscape, one that improves experiences for consumers and advertisers alike.

When marketers can achieve their marketing and business goals while underwriting quality, professional content, everyone wins.


This op-ed represents the views and opinions of the author and not of The Current, a division of The Trade Desk, or The Trade Desk. The appearance of the op-ed on The Current does not constitute an endorsement by The Current or The Trade Desk.