Driving awareness and demand is easier for larger companies backed by big budgets, but what about local businesses? Many small businesses moving into the digital marketing space are finding that the costs of lead generation for driving their growth are higher than expected — and higher than some articles on the Web are telling these business owners a lead should cost.

One should always be careful of these generalized, generic price-points. Not only do they rarely provide niche-specific pricing, they also become quickly dated as supply-and-demand metrics and technological changes shift the pricing of advertising bids on the most popular Web platforms.

As we have observed a dramatic rise in the cost-per-lead for small businesses, we thought it would be a good idea to provide an overview of what has been causing these changes so small businesses can be aware of how the market is changing and what they should expect in the months to come.

The iOS Privacy Feature Roll-out

With the addition of iOS 14.5, Apple has introduced an App Tracking Transparency feature (ATT) that allowed users to opt-out of the more invasive tracking measures used by major data-harvesting platforms like Facebook. While Facebook was previously able to track users across the Web, gathering immense amounts of data about their preferences which it could then link to their Facebook profiles, this massive data pipeline of cross-site tracking has now been disabled by 80% of iPhone users. While Facebook can still gather data from its apps and the websites it controls, this privacy roll-out has greatly diminished its sightlines. After all, previously, Facebook was able to track 30% of the top 10,000 websites in the world and now it can track only a handful of its own properties.

The Fall in Supply

This change to iOS means that the number of users known to be interested in a particular topic or located in a particular area has shrunk dramatically: Facebook may still know that a user is accessing Facebook from a particular town, but the social platform now faces great difficulty in determining what that user’s interests are, having to rely solely on their on-platform actions. With this fall in supply, bids on users from a particular location interested in a particular topic have shot through the roof

The Rise in Demand

However, this iOS change has further ramifications in terms of increased advertiser demand. Think about it this way: each time a user scrolls through their Facebook feed, they see an ad once every 10 posts; if Facebook used to have 100,000 users in your area, each with several thousand data points about them, it was likely that your ads would always be matched to a user who fit your targeting criteria in some way, no matter your bid. Now, though Facebook may still know about the 100,000 users, the lack of data points about each user means that there may only be a few thousand who match your targeting criteria — and, furthermore, many of those users will be the only ones who match other advertisers’ criteria! That means that not only are you now bidding for a smaller pool of users, but you’re bidding for them against more advertisers!

The Future of Digital Advertising

Small businesses should know that, even though ad prices are growing right now, Google and Facebook have been making significant changes to their advertising platforms to make up for this loss of data thanks to the iOS changes.

Facebook has been rather tight-lipped about what their solution, “Aggregated Event Measurement,” actually does, but judging by Google’s more explanatory description of its two new demographics algorithms — FLoC (Federal Learning of Cohorts) and FLEDGE (First Locally-Executed Decision over Groups Experiment) — the two platforms are going to move toward aggregating data about ‘groups’ and ‘cohorts’, which will use AI technologies to make educated (but extremely accurate) guesses about what users’ interests are based on the few data points that these platforms do have about them.

While these features are yet to be fully implemented, with Google still in the testing phases and Facebook’s changes still in development, we hope to see not only a drop in lead generation cost in the next year, but an increase in ad efficiency as these companies use cutting-edge technology to literally do more with less.

If you have questions or queries about digital advertising in the age of iOS 14.5, or would like help executing a digital marketing strategy that can succeed in today’s competitive environment, please contact us.