In recent years, cookie consent banners have become increasingly common on websites, prompting users to accept or decline the use of cookies to track their activity. While these banners are essential for complying with privacy regulations like GDPR and CCPA, they can have unintended detrimental consequences for online advertising, particularly when it comes to Smart Bidding.
Smart Bidding is an automated bidding strategy that uses machine learning to optimize bids in real-time, helping advertisers achieve specific goals like maximizing conversions or achieving targeted return on ad spend (ROAS). Smart Bidding leverages vast amounts of data from users, including historical behavior, browsing patterns, and past interactions with ads. This data is crucial for making real-time bidding decisions that are aligned with campaign objectives. The concern becomes what happens when a material portion of this data is blocked as the result of cookie consent banners?
How Cookie Consent Banners Affect Smart Bidding
Limited Third-Party Data Collection
Cookie consent banners give users the choice to opt in or out of tracking cookies. If users decline cookies, their browsing behavior is not tracked, diminishing the ability of advertising platforms like Google, Microsoft, and others to gather the necessary data to inform their bidding algorithms as effectively as in the past. Ideally, advertising platforms would be able to access a full range of user behavior to refine and improve any automated bidding strategies. Without this full data, Smart Bidding algorithms are forced to work with incomplete or less accurate information. This can impact the efficiency of campaigns, especially for advertisers relying on data-driven bid targeting.
Diminished Conversion Tracking Accuracy
Without complete tracking data, Smart Bidding algorithms have less insight into which users convert, leading to less efficient bidding actions based on skewed data. Since Smart Bidding looks to find the most efficient path to conversion, algorithms may struggle to predict user behavior accurately, leading to higher costs per conversion and/or lower return on ad spend, along with less optimal budget distribution.
For example, if users who decline cookies represent a higher percentage of conversions, automated bidding algorithms might underbid, thereby missing opportunities to capture valuable leads or sales. Conversely, if users who accept cookies are less likely to convert, Smart Bidding may overbid, leading to greater potential for wasted ad spend.
This can be especially problematic for smaller businesses that may be operating under more limited advertising budgets. Without enough reliable data, they might not be able to compete effectively in highly competitive auctions, resulting in higher cost per acquisition and reduced return on investment.
How Advertisers Can Help Mitigate Detrimental Impacts
Advertisers should explore alternative, complementary tracking methods, such as first-party cookies or server-side tracking, to help mitigate the impact of cookie consent banners on Smart Bidding. Implementing features like Google Consent Mode, offline conversions and Enhanced Conversions can help improve conversion measurement while also respecting user privacy. Consent Mode allows advertisers to continue gathering some anonymized data from users who decline cookies, which can help the performance of Smart Bidding by filling in a portion of the data gap.
Best Practices For Implementing Cookie Consent Banners
- Clear and Concise Information: Provide straightforward explanations regarding cookie usage, including the types of cookies and their purposes.Â
- Minimize Disruption: Design banners that are visually unobtrusive and do not significantly obstruct content on the page.Â
- Consider User Context: Adapt the banner based on the user’s location and applicable privacy laws.Â
- Test and Iterate: Monitor user behavior and adjust banner design to optimize user experience and consent rates.Â
Adapting to a Privacy-First Digital Landscape
While cookie consent banners are imperative for privacy compliance, they can introduce challenges for advertisers using Smart Bidding. With less data to inform bidding decisions, advertisers may see a decline in campaign performance, accuracy, and efficiency. By adopting advanced tracking strategies and utilizing features like Google Consent Mode and Enhanced Conversion Tracking, advertisers can better navigate the complexities of privacy regulations while maintaining the effectiveness of their campaigns.
As the digital advertising landscape continues to evolve, understanding the impact of these privacy measures will be a key element in staying competitive and continuing to optimize ad spend.
