In the past decade, a relatively free flow of user data has been the foundation for the digital advertising revenues that most news publishers continue to rely upon.

For better or worse, this flow is increasingly challenged by new legislation (e.g. the GDPR in the European Union and the CCPA in California) and gradual increased restrictions on user tracking in the browsers used to access news on the Web. The latter is driven by tech giants such as Google and Apple that have commercial interests in controlling the flows of user data.

The developments signal a transition from a Wild West system to a new system where by particular third-party user data flows are constrained. This new system has been called the “era of walled gardens.” The transition to this new era will have important consequences for news publishers’ ability to target advertising and editorial content, and it will frame the coming years of strategic struggle between news publishers and advertising-driven tech giants such as Google, Facebook, and, increasingly, Amazon.

Customer information used to flow freely, but the world's biggest tech giants are beginning to constrain access to the data in so-called "walled gardens."
Customer information used to flow freely, but the world's biggest tech giants are beginning to constrain access to the data in so-called "walled gardens."

This is what is at stake as we progress from the Wild West to walled gardens, and here’s what I suggest what news publishers can do to position themselves in the new era.

From the Wild West to walled gardens: What’s going on?

In the past decade, a lightly regulated digital advertising system characterised by relatively free user data flows has evolved. This evolution was driven mainly by digital advertising’s desire for still more granular user targeting and retargeting.

In this process, news publishers left initiative to small and large tech firms that collected, processed, and used user data collected from news Web sites and other digital services. The outcome was a complex system of user tracking across Web sites and other digital services that has supported widespread targeting and retargeting of users via online auctions carried out in real time (RTB). Often, the third parties that collected data from the news publishers’ Web sites sold that same data back to the news publishers’ advertisers.

This Wild West system is now being transformed by increasing restrictions on the flow of user data. These restrictions stem from (A) new regulation introduced by, for example, the European Union and some American states, and from (B) limitations on the use of tracking technologies in Web browsers introduced by the tech firms that control the browsers.

The legal restrictions (A) are a consequence of (much needed) new regulation that generally only allows for data collection when explicit and specific consent has been given by a user. The exact practical interpretation of what this entails is still being worked out via a number of legal cases across Europe.

However, at this point, it is clear that the need to obtain consent limits the flow of third-party data in particular. Consent for third-party data can be difficult to achieve, and communication of that consent (when it is given) between different parties relying on different technologies can be difficult to execute in practice.

The Web browser-related restrictions (B) consist of the introduction of new standards or tools that limit data collection either automatically or by making it easier for users to control their privacy settings. They consist of Apple’s Intelligent Tracking Protocol (ITP) (in Safari), Alphabet’s Chrome Privacy Tools (in Chrome), Microsoft’s Privacy Tools (in Edge), and Mozilla’s Tracking Protection (in Firefox).

These restrictions generally effectively limit the flow of most third-party data while leaving more room for first parties to collect user data. The restrictions selectively block flows of user data and vary significantly in scope. And they appear to be driven just as much by the commercial interests in controlling user data flows of the browser owners as user privacy considerations.

Both types of restrictions have resulted in the fact that we are moving from a Wild West era to a new era of walled gardens. In this new era, user data will continue to flow within a number of walled gardens, while user data flows between these walled gardens will be increasingly weakened. This puts control over user data in the hands of the firms controlling the walled gardens.

What are the consequences of walled gardens for data and tech?

The walled gardens replacing the Wild West system are fenced in by scope of access to user data and technology. Accordingly, the strongest walled gardens have both a strong ability to collect user data and effectively activate this user data via compatible technologies.

Furthermore, the firms controlling the strongest walled gardens will be able to define their modus operandi in ways that suit their commercial interests. In particular the tech giants are well-positioned to do so, which gives them a vested interest in the transition to walled gardens.

  • Facebook’s walled garden: Facebook controls a walled garden that includes user-facing properties such as Facebook, Instagram, and WhatsApp. as well as all the underlying technology that enables the buying, targeting, and serving of advertising on these properties. Naturally, this provides Facebook with ample opportunity to collect, process, and use data within their own properties. This includes allowing advertisers to target users based on the data Facebook controls while excluding other sources of data.
  • Alphabet’s walled garden: Alphabet controls a more porous walled garden that includes user-facing properties such as Google Search, Gmail, YouTube, Google Play, and the widely used Web browser Chrome. In addition, Alphabet controls underlying tech in most sectors of digital advertising (such as analytics, ad serving, and supply side platforms) and its own advertising exchange via Google Display Network. As a consequence, Alphabet both has the ability to construct an effective walled garden around its own user-facing properties and control the flow of user data on other firms’ Web sites (including news Web sites) via the Chrome browser.
  • Amazon’s walled garden: Amazon’s walled garden contains an increasing number of user-facing properties in addition to the mail e-commerce platform at Amazon.com. They include Twitch.com, Freedive, Fire TV, Amazon Prime Video, and Echo, as well as supporting advertising technology such as Amazon DSP. Therefore, Amazon is also well-positioned to have a strong walled garden around its own properties.
  • Apple’s walled garden: Among other things, Apple controls the App Store and the Web browser Safari, which is the second most used tool to access content on the Web. However, unlike Alphabet and Facebook, Apple is not a large player in ad tech or ad networks (although Apple does have advertising activities in mobile apps). Perhaps Apple’s lack of economic interests in advertising is the reason why Apple via ITP2.2 has made Safari the most restrictive (widely used) browser with regard to user data collection.

The ability of large tech firms to construct strong walled gardens will leave them strengthened relative to other actors as the flow of third-party data weakens. On the other hand, the jungle of smaller “middle men” will be squeezed — and news publishers will be also challenged — if they do not manage to produce strong walled gardens of their own.

What can publishers do about it?

One of the original sins of news publishers was to leave data collection and the processing of their users’ data to third parties. Though not intentional, this effectively meant they lost control of the data powering their offerings and contributed to creating the Wild West system. This was neither good for publishers nor for the privacy of their users.

As we enter the era of walled gardens, news publishers relying on advertising can continue to leave data collection, processing, and use to others. However, this will mean news publishers will leave the initiative not to a jungle of middle men but to tech giants such as Google, Facebook, and Amazon. They will define the modus operandi of their walled gardens in ways that are beneficial to themselves rather than to news publishers.

The alternative is for news publishers to construct walled gardens based on their own first-party data. News publishers are uniquely positioned to do so, as their access to loyal users allows them to collect data from users with consent. However, because no individual publisher (regardless of size) comes close to matching the tech giants in reach or intensity of user interactions, collaboration is necessary.

Publisher walled gardens will be stronger when 1) many news publishers are included in the same garden allowing access to more user data and 2) when homogenous technologies are used across news publishers, allowing for effective communication of consent and fewer sell side technologies for ad buyers to consider.

In a large walled garden, news publishers might even be able to define the modus operandi in a way that is beneficial to themselves while respecting the privacy of their users.