Is Retail Media the New Walled Garden and is that a Bad Thing?

With the proliferation of retail media properties, it’s beginning to feel like the digital economy is producing walled gardens faster than baby rabbits. This is actually a healthy development. These walled gardens don’t necessarily carry the baggage of the big original ones, and even when they do, it’s a net positive to the broader marketing ecosystem.

To frame this, let’s level-set on what retail and commerce media properties are delivering. If well built, they provide advertisers with a channel to engage with consumers for both near-term return on ad spend (a.k.a. performance) campaigns and broader brand building and storytelling campaigns. Both are well suited for these use cases, but for different reasons.

Performance requires user event data streams — including purchase, search, browse and add to cart — to train the machine learning models that are needed for predictions and optimization. Brand spend needs logged-in users to leverage data (e.g. demographic, purchase, intent) and to understand reach and frequency. Both of these models are done in a way that protects consumer data and privacy.

It’s no wonder that so many commerce operators are building advertising businesses and that ad spend is gravitating toward them. This is not limited to the traditional retail verticals (apparel, mass market, beauty, furniture, consumer electronics, home improvement, etc.), but all commerce marketplaces. Food and grocery delivery apps are a perfect fit, with strong user bases that engage in search and discovery and thousands of merchants looking to grow their businesses. We are also seeing healthy ads businesses develop in online travel, home services, digital goods and used goods. Marketplaces are incredible business models, and with so many verticals and niches, we expect to see many more launch ad businesses.


But are these new ad platforms walled gardens? That is, do they block third-party access to buy ads inventory? Many of them do not. Instead, they allow third parties to buy on their inventory. Whether it’s providing access to a buy-side DSP (demand-side platform) or an ad network that does both buy- and sell-side, there are several partnerships throughout the ecosystem. 

Where they do differ in “openness” is that these are not necessarily integrated through standard SSP (supply-side platform) pipes, where supply is passed into the open exchange for several demand sources to access. When SSPs are used, it’s typically more protected with PMP (private marketplace) or deal ID mechanics. But it’s safe to say these properties are more open than a big walled garden.

There is some downside to this approach, since there can be multiple sellers representing the inventory: the property itself and the third parties. These are issues that have been navigated before with traditional publishers, and they are getting worked out in retail too.

Another definition of walled gardens suggests that they leverage their own first-party data for ML-driven, automated campaigns and share only performance and aggregated user data. In this way, the more sophisticated platforms do resemble walled gardens, since they leverage advanced machine learning to enable thousands (in some cases, millions) of advertisers to run ROAS campaigns. This is a good thing! We want a world where there are multiple options for advertisers to direct their performance spend, not just two or three.

Further, these commerce marketplaces are selling their own inventory and may be providing only aggregate user data and not exposure files, and they may be doing their conversion analysis themselves. Platforms don’t want to share access to every user event in an open-ended way, but without it no third-party buyer is going to have the capability to make machine-learned buying decisions.

So the performance buying and reporting on retail platforms is closer to a walled garden approach, and that is driving concern. But is it so bad having more choices for advertisers? Sure there can be difficulties tracking spend across several places, but software is good at solving these types of problems. At a macro level, the digital economy benefits from advertisers having spend optionality and not just a couple of platforms that can deliver high ROAS and vacuum up all of the spend.

We also want an ecosystem where many companies can participate in the fantastic economics of digital marketing. With machine learning capabilities and user data tied up in just a few places, most of the dollars were accruing there.

Commerce and retail ad platforms are just beginning, and spend will gravitate toward them because of their valuable attributes. Yes, there are aspects of these platforms that resemble walled gardens, but we shouldn’t get too hung up on semantics. Advertisers are getting new ways to allocate their spend and more companies are able to capture some of it.

Nature finds a way.

Bill Michels is responsible for Moloco’s Retail Media Platform, where he oversees both product and business development functions. Michels brings more than two decades of successful leadership across product management, data strategy and business development at some of the definitive companies in advertising and search. He was previously EVP of Product at The Trade Desk where he touched multiple product areas, from identity to connected TV. Prior to that he was Chief Data Officer at Foursquare after its merger with Factual, where he was COO responsible for product, engineering and data partnerships. Before that he was Senior Director of Product Management at Yahoo! working on search, where he launched and led Yahoo! BOSS and international search monetization. He also worked at UBS in equity research covering technology and telecom.

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