Signal Loss & Its Impact on Digital Advertising

Rising Cost Per Lead and Falling Search Ad Click Through Rates

How critical changes in the ecosystem are driving up costs of advertising and restricting marketers.

The recent changes in privacy policies and the advancements in ad-blocking technologies have significantly impacted the world of digital advertising. Over the past decade, marketers have heavily relied on cookies and 3rd-party trackers to serve personalized ads to targeted audiences. However, companies like Apple and Google have been working on restricting the use of all types of intrusive tracking in an effort to give users a more private browsing experience.

In this blog, we will be discussing the impact of signal loss on clickthrough rates, the rising costs of digital advertising, and the solutions marketers can adapt to tackle these challenges.

TLDR

Digital ad prices are on the rise across the board, with costs increasing across virtually all major players including Meta, Google, Amazon and TikTok.

Absence of audience signals due to privacy settings, ad-blocking, lack of data sharing has resulted in a price increment across digital advertising platforms.

The State of Digital Advertising Amidst Signal Loss

The ongoing deprecation of third-party browser cookies, used by advertisers and marketers to track and understand buyer behavior, means that brands are losing critical data signals for targeting, optimizing, and measuring marketing effectiveness.

In July 2022, marketers had received a bit of reprieve when Google announced a push in timelines to implement a deprecation of 3rd party cookies to the end of 2024, but that timeline is now just around the corner and its impacts are already visible.

If you are continuing with a ‘lets wait and see’ approach, you have already fallen behind.

Apple’s adoption of new privacy policies like App Tracking Transparency (ATT) on iOS 14.5 and Google’s announcement to phase out 3rd-party cookies have brought about a significant change in the digital advertising landscape. Signal loss has led to advertisers having limited information on targeting and understanding the behavior patterns of their audiences.

We can see the effects of these policy changes as many businesses have experienced a sharp decrease in clickthrough rates, illustrating that ads are becoming less effective in engaging users.

Lets take a look at some 2023 benchmarks:

The average conversion rate in 2022 was 7.85%.

The average CPL in 2022 was $44.70.

The average CTR in 2022 was 5.91%.

The average CPC in 2022 was $4.01.

Furthermore, in the face of signal loss, advertising platforms are experiencing increased difficulty in optimizing campaigns and allocating budgets efficiently, which in turn has led to a spike in advertising costs. According to a study by Flurry Analytics, after the implementation of Apple’s ATT, only 15% of iOS users in the US opted-in to be tracked through apps. Similarly, digital ad experts estimate that Google’s move away from 3rd-party cookies will potentially impact up to 85% of targeted display ads.

Counteracting the Impact of Signal Loss

The reliance on third-party cookie and device identifier data has provided marketers with valuable insights into customer preferences and habits across the web. However, the deprecation of cookies and device data resulted in significant marketing signal loss, leaving many marketers in the dark regarding customer engagement and experiences on external platforms. Despite this shift being expected, brands have been slow to react, with many CMOs unaware of their dependence on third-party data for marketing and advertising orchestration. Others struggle to find alternate privacy-compliant data sources or lack access to their own customer data due to external partner agreements.

Key Measures to counteract signal Loss:

1. Build first party data fortresses: Addressing signal loss starts with taking ownership and management of your first-party customer data, which is essential for understanding customers, personalizing experiences, and measuring results. To achieve this, implement in orchestrating or building solutions that help you store, tag and enrich your first party data.

2. Test and Optimize Ad Creatives: Captivating ad creatives have the potential to improve engagement and boost performance. Creatives should be regularly tested and optimized to ensure they effectively capture users’ attention. Advertisers should pay closer attention to the ad formats, messaging, and visuals for better overall performance.

3. Explore Contextual Advertising: Contextual advertising allows marketers to serve relevant ads based on the content a user is viewing, rather than relying on personal data. This non-intrusive strategy has become popular, and its supply has more than doubled in the past year. By focusing on contextual targeting, you can continue to deliver ads to the right users even without intricate tracking technologies.

4. Utilize Privacy-Compliant Data Sources: To lessen the impact of signal loss, advertisers should seek to partner with reputable data providers which specialize in privacy-compliant data sourcing. These partners can assist in enhancing audience targeting and segmentation in a secure and privacy-friendly manner.

5. Invest in Consumer Intelligence Platforms [like consumr.ai]: Consumer intelligence platforms [like consumr.ai] offer a privacy-friendly alternative to decode who their consumers are. In a cookieless world, these solutions help marketers understand and engage with relevant audiences while respecting user privacy, thus not relying on individual identifiers to provide intelligence that helps marketers better strategise and understand several cohorts of audiences at scale to suggest creative that resonates, identify new cohorts to expand in to and determine what consumers think about your product or brand or category.

   The advent of signal loss has undeniably ushered in a new reality for digital advertising. While the decrease in clickthrough rates and higher advertising costs may pose challenges to marketers, the solutions discussed above can offer a viable means of maintaining a strong online presence in a post-cookie world. At the same time, marketers can take this opportunity to develop innovative strategies that overcome limitations and focus on providing relevant, privacy-friendly experiences to their users.

Abhinay Bhasin, Head of Product Marketing, ProfitWheel Inc.