The Watchtower provides your city with an area of influence, that primarily allows you to interact with global map objects (outposts and bastions, for example) without having to march to them, if they're within your area of influence. If two cities find themselves within one another's area of influence, the one with lower Power rating will be forced to teleport away.
If your city is located within the borders of your alliance, your Watchtower contributes its points of influence to the total alliance area of influence.
Upgrading the Watchtower increases the amount of influence points provided, which can be further increased with Alliance Patron subscriptions, certain city skins and so on. Additionally, upgrading the Watchtower requires Lanterns that can be obtained in the store, events, quest rewards and more.
Requirements: Wall, Barracks, House