Watchtowers are not separate buildings, they are an improvement of walls. While watchtowers cannot be directly targeted by enemy rams or catapults, if the walls are destroyed, the watchtowers are destroyed as well.

You can upgrade watchtowers up to level 20, regardless of the level of walls.

Each level of watchtowers improves the Rally Point bonus by 3. For example, if Rally Point is on level 20, it allows you to see unit types of any attacking army of fewer than 20 units. Each level of watchtower increases this number by 3. So watchtowers on level 20 together with Rally Point on level 20 allows seeing unit types of any attacking armies of less than 20+20*3=80 units.

Watchtowers also increase the population of the city, without increasing its crop consumption, unlike regular buildings.

Cost to build watchtowers

Level	Lumber	Clay	Iron	Crop	Bonus
1	240	110	275	100	3
2	305	140	350	130	6
3	395	180	450	165	9
4	505	230	575	210	12
5	645	295	740	270	15
6	825	380	945	345	18
7	1055	485	1210	440	21
8	1350	620	1550	565	24
9	1730	795	1980	720	27
10	2215	1015	2535	920	30
11	2835	1300	3245	1180	33
12	3625	1660	4155	1510	36
13	4640	2130	5320	1935	39
14	5940	2725	6810	2475	42
15	7605	3485	8715	3170	45
16	9735	4460	11155	4055	48
17	12460	5710	14280	5190	51
18	15950	7310	18275	6645	54
19	20415	9360	23395	8505	57
20	26135	11980	29945	10890	60