Not every day do I come across interesting news that makes me curious to investigate and try to read between the lines. Normally, when advertising platforms announce a change or an update, it’s due to a reaction or a response to a bigger issue. The last few years have shifted dramatically in the way that advertisers interact with users in unprecedented ways. The word privacy became mainstream and continents like Europe and companies like Apple have led the way in transforming the world of online advertising into a much more consent-based and private-centric place. Honestly, it’s been requested for a long time by users. Advertising platforms were putting their hands on as much user data as they possibly could (mostly without asking) and it got to a point that half of the world was convinced that if they say something near their phone, then a relevant ad will pop on their feed.
Fast forward to today where user tracking (pixels & cookies) becomes a choice where users can decline whether or not they want their information and actions being tracked and reported back to advertisers. It’s the cookies’ consent policy that you see on most websites now, and it’s Apple asking you if you want to let apps track your activity while you are using other apps.
This shift introduced momentum towards getting rid of cookie tracking completely and replacing it with interest-based targeting and modeling methods to try to predict and report what actions users take. Just as this momentum seems to be at full force, Titkok announced on April 25th that they are going back to tracking the first part and third-party cookies by default. They announced that they are doing it in an effort to improve data matching and ultimately get better performance for their advertisers, but I think that this move reveals a much greater reason. Tiktok ads are performing poorly for advertisers, and advertisers are not getting the bang for their buck. Without cookies and all other data tracking they can get, the value of advertising on Tiktok is likely to be very limited. Obviously, Tiktok is not the only platform that is getting affected, but when you compare it to bigger companies like Facebook or Google, their algorithms are a lot more advanced and they have been collecting data for many years, so they have a lot more to work with.
Tiktok on the other hand, just launched ads a few years ago right before user privacy became popular when advertising platforms were more limited in the information they could collect. Although Tiktok is known to be the most invasive and notorious platform when it comes to tracking your data and online behavior, bringing back cookies would probably not be their first choice, but it’s the fact that advertisers have been experiencing relatively low performance that made them take action quickly. This comes at a very interesting time as Google announced at the beginning of the year that it will kill cookies completely by the end of 2023 and Facebook shared similar ideas where they will develop advertising solutions that won’t be based on cookies. Advertisers on all platforms are nervous by the fact that targeting accuracy will take a massive hit as their advertising campaigns have already been suffering a worse performance because of recent changes in privacy and overly saturated markets. The last thing that they want is to have targeting get worse than what it is right now. At least for Tiktok, they are bringing back the old ways of advertising by bringing back cookies to help identify users and better track what actions they take when on and off the social media network.
But what are cookies anyways?
If you got here and are still not totally sure what browser cookies are, let me explain quickly. There are two types of tracking solutions that advertisers and advertising platforms use:
Tracking pixels are a way for servers to communicate. A way for platforms like Tiktok to communicate back and forth with your website to understand what a user is doing on your website once he leaves their platform.
These tracking pixels are added to the advertiser’s website and track information that users take-off of the advertising platforms and on the advertiser’s website. If you click on a TikTok ad
And then go to a website to complete an action (purchase, sign up, etc..) a tracking pixel will report back to the advertising platform what actions you have made.
All this is happening without you even noticing it, fascinating isn’t it?
And how do tracking pixels know that it’s you? With Cookies.
Cookies are little lines of code that a website that you visit drops in your browser to identify you and the website that you visited that placed the cookie. So when you go to a website like Nike after seeing an ad on Facebook, they are likely to drop a cookie on your website so they can mark and know that it’s you. Then, they can report back to the advertising platform what actions they completed and show you relevant ads based on that. So the tracking pixel uses the cookies to send back information about you, so advertising platforms can optimize their ads and your advertising interaction based on those actions.
Third-party cookies are created and placed by other websites. So other websites throw in a line of code to track and identify you while on other websites.
Then website pixels communicate back via servers to the advertising platform letting them know what’s going on and which actions you completed. Insane isn’t it?
What it says about Tiktok
For businesses and consumers, the news here is not ground-breaking. For advertisers and marketers, it’s really interesting because it signals a step back to more traditional tracking that is due to the fact that Tiktok isn’t able to deliver the results it was hoping for.
When you are Google or Facebook, it’s easier to say that you are getting rid of browser cookies and being able to risk the possible outcomes. If you are Tiktok and your advertising platform wasn’t so great, to begin with, you have to hold on to any piece of data you can get, at any cost.
That’s why they announced that they are bringing cookies back by default. They need the data and insights. Tiktok reps are likely to bash up this claim and come up with examples of success stories for brands that used Tiktok ads, but the general perception among many advertisers proposes a different story.
One of the greatest challenges that advertisers face is the very extremely low conversion rate coming from their TikTok ads. The efficiency of advertising on Tiktok is dramatically lower than its main rival Meta on Facebook and Instagram. A low conversion rate means that you reach a lot of people but a very small amount of users end up making a purchase. That drives up the cost to generate a sale or a conversion using TikTok ads and that’s why most advertisers are having extreme difficulties making that switch between Facebook ads and Tiktok ads. It’s not that advertising profitably on Facebook ads is easy, advertisers have been experiencing a downtrend in performance for quite some time and have been desperately looking for alternatives. But for the time being, they haven’t been able to call Tiktok ads their new home. It’s important to remember that the same type of performance-related issues were associated with Facebook ads when ads were first introduced and it took years for the ad system to be built effectively. That might also be the case with Tiktok ads and perhaps it’s a matter of time.
The primary difference between these two cases is that back then, the cost to advertise on Facebook (CPM – cost per 1000 impressions) was a lot lower than it is now on Tiktok. Advertisers could still benefit from advertising on Facebook despite the low performance because the cost to advertise was lower, so they could afford and still benefit from a less efficient ad delivery because the cost was still low. In addition, businesses and advertisers who had active Facebook pages benefited from organic reach to their followers for quite some time which helped compensate for the low performance of ads since it brought in an additional stream of free traffic, which lowered the cost of bringing users to their website. On the other hand, the organic reach for most businesses on Tiktok is very limited.
In the case of Tiktok, CPMs (cost per 1000 impressions) are similar to what they are on Facebook and on other networks so there is no real benefit here aside from perhaps reaching users that are not using Facebook or Instagram.
The fact that the cost to advertise on Tiktok is quite similar to Facebook & other advertising network but the efficiency of the ads is lower, makes Tiktok react by enabling back user browser cookies and exploring other ways to increase ad value such as opening up more ad inventory by showing users more ads and adding ads to more placements.
It’s also important to consider that this is not a permanent state. Similar to Facebook, Tiktok ads will get more efficient over time. The more data that they collect, the more sophisticated their advertising platform becomes, and the better results they will be able to provide for advertisers. Some of the current challenges might also be related to the Tiktok demographic which is known to be younger than other platforms. Younger demographics have more limited financial capabilities and that could also contribute to the low performance that some advertisers are experiencing. The fact that it’s a young platform makes it more challenging for advertisers to run profitable run ads on the platform but as we learned from past experience, every challenge is followed by massive opportunities for growth and success.
Advertising on Tiktok might be less effective now than advertising on platforms like Google, Facebook, or Instagram but every marketer knows that the world of online advertising can transform completely in the blink of an eye.
Tiktok is going back to tracking user data via cookies. TikTok’s advertising platform has been struggling with low conversion rates since its inception, and the data privacy movement has only exacerbated that problem. Unlike Facebook and Google, Tiktok doesn’t have decades-worth of user data to fall back on. Instead, Tiktok is going back to a more traditional method of data mining by tracking their users’ activities via cookies. If Tiktok continues to charge similar CPM prices, then they’ll have to start delivering similar results, and they hope that cookies will help get them there.