Are advertisers looking past ‘walled gardens’ in India?

After commanding the digital advertising space for years, tech giant Google is now looking at smaller portions of ad budgets globally. YouTube and Search, which have long been drivers of the company’s overall performance, have started showing some weakness of late, say industry observers. The reason, they say is marketers exploring new alternatives.

In FY22, Google recorded Rs 24,000 crore as ad revenue from India. This was nearly 75% higher compared to the previous year.

Google, Meta and some other major digital advertising platforms are referred to as ‘walled gardens’. A walled garden is a closed ecosystem, in which the technology provider has total control over the content, ad inventory, ad buying and selling among others, thanks to their huge database.

Google, for instance, gets nearly 8.5 billion daily searches on its search engine, giving it a market share of 86% globally. The majority of its ad revenue comes from Search and Display.

It is being noticed that large advertisers are investing in eCommerce platforms that allow Search directs for intended consumers. This trend is clear from Flipkart and Amazon India alone pocketing Rs 7,000 crore of ad revenue.

Highlighting how the number of walled gardens has gone up from two to 2,000 over the last few years, Ashish Bhasin, Co-Founder and Chairman, RD&X Network, said: “Until a few years ago, Google and Meta enjoyed complete duopoly in the digital space. Now, their market share must be roughly 80 per cent. In the last 5-10 years, new platforms like eCommerce brands, LinkedIn and several others have started eating up their pie.”

With advertising revenues in India growing year on year, the walled gardens’ revenue has not been hit in terms of absolute numbers. However, their dominance in digital advertising is being challenged by new digital ad platforms such as Amazon and Flipkart. The trend is visible in international markets where TikTok has emerged as a potential challenge, says Sajal Gupta, Chief Executive - Kiaos Marketing.

It's noteworthy that Google and Meta’s market share in the US has dropped to 65% and TikTok is being cited as the main reason for the shrinking of the ad supply to the two walled gardens.

“Had TikTok not been banned in India, Google and Meta revenues would have suffered losses in India as well, like the US and European markets,” opines Gupta.

Marketers are generally concerned about inflation, negative market sentiment and global factors like the Russia-Ukraine war and the deceleration of Google and Meta’s growth engine. Massive layoffs at Google, Meta and many other tech platforms further indicate troubles in the tech sector in the coming days.

Hareesh Tibrewala, Joint CEO, Mirum India, shares that advertisers have tightened their purse strings in Q3, which has impacted the digital ad spend as a whole. “Major brands have reduced their digital advertising budget by about 10 per cent and are likely to reduce it further in the fourth quarter. This includes their spending on Google, Meta and other platforms.”

As for Shradha Agarwal, Co-Founder & CEO of Grapes, the impact is not going to be severe. “The industry is discussing a lot about the Google and Meta slowdown impacting the growth of the advertising sector. Well, we could see brands deducting some percentage of their overall marketing budget. But it's not going to impact the sector phenomenally.”

Some media agencies have not witnessed any significant decline in Google’s ad budget allocation. Kumar Awanish, Chief Growth Officer, Cheil India, said, “Google’s ad platform DV360 is quite robust, simple and cost-effective. Its scale and reach are phenomenal compared to any other platform. There is no question of slashing the Google budget or picking any other DSP or SSP.”

Multiple Platforms

Apart from Google’s DV360, offerings are available from multiple Demand-Side Platforms (DSPs) to bid on ad inventory. These platforms are namely Amazon, Walmart, Verizon, Mediamath and Flipkart. AdTech platforms or Supply-Side Platforms (SSPs) that manage the inventory of digital publishers’ websites and apps such as PubMatic, Magnite and Hivestack are also available, experts noted.

According to Paras Mehta, “The availability of multiple options has prompted media planners to propose 5-6 available options to advertisers apart from Google’s DV 360. Some marketers approve 3-4 of them.”

Bhasin agrees, “The entry of programmatic players like Mediamath in the market have increased the ad inventory.”

First-Party Data

Most advertisers have started investing in first-party data in anticipation of the deprecation of cookies by Google in the next few years.

“This has helped them be activation platform agonistic in their approach. Apple and Firefox have already implemented stricter rules around third-party audience tracking on browsers as well as apps,” Mehta explains.

Bhasin agrees, “Advertisers with their own first-party data are themselves becoming walled gardens. Hence, their dependence on tech giants has gradually declined to an extent.”

He stressed there is a need for a “Platform of Platforms” that breaks silos and allows integration of advertising technology and marketing technology.

It is noteworthy that Google has started the Privacy Sandbox initiative to collaborate with the ecosystem on developing privacy-preserving alternatives to third-party cookies and other forms of cross-site tracking. Trial versions of Privacy Sandbox APIs in Chrome have been released for developers to test.

Strengthening SEO

Besides, brands are strengthening their own websites with SEO strategies. This should further reduce their dependence on audiences available via walled gardens only. While some of these options are a must-have and some are good-to-have, it is important for clients to invest time and money in a solid 1P data strategy, a very robust analytics tool, and attribution models to sustain these efforts for times to come, explains Mehta.

Google’s Response Awaited

e4m has reached out to Google to get its perspective and response to the emerging market trend as pointed out by media agencies. The company had not shared its comments till the time of publishing the story.