Why advertisers find it so hard to quit the walled gardens

Pressure to comply with the General Data Protection Regulation has driven advertisers to keep spending with Google and Facebook, against their better judgment.

Many advertisers have played it safe, spending more with companies that own large pools of first-party data they can use to target people online. However, as much as advertisers see performance from Google and Facebook, it’s at the cost of being able to independently assess it. That paradox has intensified over the last 12 months as the efforts from Google and Facebook to comply with the GDPR has seen them both limit the amount of data they share with independent attribution and measurement firms. Without that independent view, advertisers have to trust that ads bought on platforms like Google and Facebook are as effective as they say they are.

“The platforms are efficient and effective in theory, but in practice, it’s difficult to test the validity of the measurement they offer,” said David Wheldon, CMO at the Royal Bank of Scotland at the Digiday Brand Summit Europe. “They’re machines that have been good at engaging at the highest levels of organizations. Most boards have been on the Silicon Valley tour and have come back wowed by what they’ve been told. As a senior marketer, you have to have the confidence to challenge these businesses.”

Senior marketers like Wheldon have railed against the walled gardens for years, to limited effect. They don’t want to depend on those platforms that grade their own performance but find it hard to ditch them due to the incredible value they bring in terms of the number of users. The consolidation of even more data into the closed ecosystems of Google and Facebook since the arrival of GDPR, however, seems to have been a step too far for some marketers.

When Google prohibited advertisers from tracking or measuring its audiences with external technology before the arrival of the GDPR last May, it raised alarm bells at one global advertiser. The marketers there started to think how exposed their own programmatic ad plans were to any future restrictions imposed by Google, said its head of media who spoke on condition of anonymity. Three big concerns emerged: If Google decided to merge its ad server with its demand-side platform, then how would that affect prices? Would the advertiser be able to use the ad server alone? And if so, would the advertiser then have to pay the same ad serving rates it already does, or would it have to pay an additional DSP fee?

“Looking at Google’s behavior I would assume that any customer of its DSP gets the ad server free of charge enticing more advertisers to take the ‘sweet poison,’” said the media director. “It’s a risk I have flagged to our business as we need to be able to live with the consequences of such a move.”

It’s a similar conundrum for a European-focused advertiser.

Several scenarios were modeled last year to see what would happen were the advertiser to stop buying ads from Google and Facebook, said the head of marketing on condition of anonymity. Buying around a walled garden like Google is as straightforward as moving over to an independent ad tech vendor and whitelisting domains with publishers and networks that are outside their own ad tech. Making that call, however, can be a logistical and political quagmire as the head of marketing at the European advertiser found out.

“We wanted to do the ultimate test and learn, and then everyone got nervous because of the revenue generation they felt could be directly attributed to the platforms,” said the marketer. Instead, the marketer was able to convince both Google and Facebook to share more data. Both platforms are known to be amenable to sharing more data with deep-pocketed advertisers.

There are signs that the GDPR is impacting Facebook’s ad business. The number of people who have opted out on using context from the apps and websites they visit for ad targeting has continued to increase since the adoption of GDPR, said the social network’s CFO Dave Wehner on its earnings call last month. “We’ve seen that come up both in Europe and around the world,” said Wehner. “That means those people are seeing less relevant ads, and that’s an ad targeting headwind for our business.”

But for every British Gas that has hedged against Google and switched to an independent ad tech vendor it can control as Adexchanger reported, there’s another like GlaxoSmithKline that has consolidated all its ad tech into Google, per AdAge. For those advertisers, the limitations of other vendors when it comes to scale and innovation makes spending more money with the largest walled gardens an easy choice. “The walled gardens can be challenging to work with, and yet they have the best technology that allows our ads to be as efficient and effective as they can be,” said the head of programmatic media at a CPG advertiser on condition of anonymity.

Viewpoints like this are arguably what kills competition and further concentrates market power into the duopoly, which means higher prices and less choice for marketers in the long term, said Dataxu CEO Mike Baker.

The very mechanism that makes the walled gardens so appealing to advertisers happens to be considered monopoly evidence by antitrust authorities. The so-called ‘network effects’ of tech giants have been a hot topic for lawmakers and politicians across the globe over the past few years. It remains to be seen how they will respond to the increasing pressure on their shoulders, said Alexandra Radulescu, competition and antitrust specialist at Digital Decisions.


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