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Customer Acquisition Costs on the Rise? Data Privacy Changes May Be Why

Browser cookie tracking disallowment isn’t a brand-new concept, but the full effects of Google’s imminent phase-out of third-party cookies on Chrome are still yet to be realized. Third-party cookies are on death’s door, and as a result marketers have had to change up their strategies.

According to HubSpot, in 2022 44% of marketers predicted they would have to increase their marketing budgets by 5-25% to meet the same goals they hit in 2021. This is partially due to a need to invest in new tracking methods for marketing and advertising campaigns. 

85% of marketers say some aspect of their strategies relies on third-party cookie tracking, so many companies have had to change how they collect and use consumer data - and some still need to explore alternatives.

Loss of third-party cookies is arguably the most prominent data privacy change that has affected marketers’ ability to target campaigns and track conversions, but other changes have also had an effect. Why have these changes been implemented, and how can companies adapt?

What are cookies?

A cookie is a file that is sent from the server of a website you visit to your browser. It’s used to identify your computer and track your behavior. There are two main types of cookies, and their purposes are similar yet distinct.

First-party cookies

First-party cookies are placed and stored by the websites you visit. They are used to create a better user experience by remembering user preferences such as:

  • Language settings
  • What products you add to a shopping cart
  • Login information

First-party cookies also allow marketers to track user engagement on their website.

Third-party cookies

Third-party cookies tend to track more information than first-party cookies, and are often used for advertising purposes. They’re set up by a third party and are designed to send data from one website to another, or transmit it to separate online platforms.

The main difference between first-party cookies and third-party cookies is that the latter transports data off of the websites you visit to be used for external purposes such as advertising, while the former stays on one website.

Why are third-party cookies being phased out?

Many people are becoming increasingly concerned about how much of their private information is being collected when they go online, and how their data is being stored and used. High-profile data breaches and a general lack of transparency from companies in terms of how they use consumer data has made consumers view cookie tracking unfavorably.

To put it simply, consumers don’t trust companies to keep their data safe, and feel that the amount of data being collected for advertising is excessive. In response to this, search engines made plans to phase out third party cookies, and some tech giants and regulatory bodies have put forth other privacy changes as well.

What other privacy changes have gone into effect in recent years?

GDPR regulations

The EU General Data Protection Regulation, or GDPR, specifies a legal precedent for how companies can collect and process user data. If a company wants to be available to users in the EU, it has to abide by these regulations.

One main aspect of the GDPR is that website visitors have to be informed as to what data of theirs will be tracked. Website owners have to give site visitors the option to opt-out of cookie tracking. 

The GDPR is why, on pretty much every single website you visit (including ours!) you see a pop-up banner on the bottom of the screen linking to the site’s privacy policy and asking whether you accept their cookies.

Apple’s App Store tracking

Another contributor to the demise of third-party cookies came from tech giant Apple. They implemented a policy that apps must ask for permission before tracking your activity across other apps on your phone. If you have an iPhone, you’re likely familiar with this message. 

If you choose to disallow the app from tracking, the app can’t collect third-party cookies from other apps or the web browsers on your phone.

Why have data privacy changes increased customer acquisition costs?

The impact of cookie bans is individual to each company, but generally, those of us who use targeted ad campaigns have been hit the hardest. 

Companies can no longer leverage consumer browsing data like they used to, and have needed to rethink their strategies for gaining new leads. Since third-party cookies are dead, companies need to rely more on first-party cookies. This has meant pivoting to other, potentially more expensive technologies and services, and investing higher amounts in inbound marketing tactics.

Social media in particular has been a major piece of marketing strategies, since these platforms can rely on first-party cookies to target users. Social platforms are saturated with ad content, meaning companies have to spend more and bid higher just to get on their prospects’ radar.

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How can marketers adapt to data privacy changes?

If your methods of customer acquisition rely on third-party cookies, it’s best not to wait until the phase-out is complete to consider alternatives. Many new solutions and innovations are being proposed that comply with new privacy restrictions while allowing marketers to personalize their promotional content. Some solutions are even coming from Google itself.

Google Privacy Sandbox

Google has offered a solution for marketers concerned about cookie tracking bans throwing a wrench in their strategies: their Privacy Sandbox. It sets new standards for how user data can be collected and leveraged. It aims to create a middle ground between respecting users’ privacy and allowing advertisers to target relevant audiences.

The Privacy Sandbox is still in development, but Google has proposed multiple types of targeted ad campaigns, including:

  • Interest-based targeting using the Topics API, which puts users into topic buckets based on past browser activity.
  • Remarketing campaigns that take into account websites a user has previously visited. This type of campaign keeps user data local to a user’s browser, rather than allowing it to be stored by third-party platforms. This is known as the FLEDGE method of targeting. 

The new tracking solutions proposed by the Sandbox keep data local to a user’s Chrome browser, making it compliant with third-party tracking bans. The Privacy Sandbox is still in beta, and the tech giant has agreed not to get rid of third party cookies until this new service is ready for public release.

Contextual Targeting

As opposed to behavioral targeting, contextual targeting entails placing ads on a website based on the subject matter of the website’s content, and the assumed interests of the users who frequent the website. 

Contextual targeting can be set up using broad topics as well as specific keywords. This type of targeting is mostly relevant to the ad platforms that are connected to browsers, like Google AdSense and Yahoo! Bing Network.

Use first-party cookies and information collected directly from users

Even though third-party cookies are dying out, first-party cookies are alive and well. 

The first step to building a strategy that relies on first-party cookies is to establish what information you’re currently getting from first-party cookies, and what you’re getting from third-party cookies. Suss out what data you actually need, vs. what you might want.

If you’re seeking more demographic data, add fields to your site forms, or any forms associated with social media ad campaigns, that will help you learn more about your buyer personas. Just be careful not to make your forms too long, and keep the questions relevant.

Though we’ve explained the potential downsides of the social media ads market, the enormously popular platforms are still great methods of releasing targeted ad campaigns without using third-party cookies. Social media sites glean lots of user data based on the content that users interact with, so you can learn a lot about your prospects by using these platforms.

The bottom line

Third-party cookies are considered by many consumers to be too intrusive, so they’re being phased out. It’s best for companies to start looking for other ways to leverage data now, rather than waiting until the last minute.

New solutions for advertising and data management tools are in development, and there are other tracking resources brands can take advantage of as well.

If you’re finding your customer acquisition costs are rapidly increasing, download our eBook to find ways to manage.

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