Why your customer acquisition costs keep rising (and what to do about it)

In this article, we’ll cover a few main actors behind your rising customer acquisition cost, and what you can do about it:

1. The math behind rising conversion rates
2. Breaking down digital marketing costs
3. Some hidden multipliers impacting your marketing strategies
4. Setting the right benchmarks for your ads
5. Some truths about ad conversion rates
6. Getting the most from your campaign measurement
7. Revenue metrics you should pay attention to
8. Tracking and attribution methods

The real math behind your rising conversion rates

Let's break down what's actually happening with a real example:

Let’s say your monthly ad spend is $10,000.

Your analytics show 100 conversions, suggesting a $100 CAC. But here's the kicker - if you're losing track of 40% of your conversions (incredibly common in 2024), your actual conversion count could be closer to 170. That means your true CAC is around $59.

This tracking discrepancy can create a nasty cycle:

• Your marketing channels appear less effective than they really are
• You might pause campaigns that are actually delivering solid ROI
• Ad platforms can't optimize effectively because they're missing vital conversion data
• Your referral tracking becomes unreliable, making it harder to identify valuable channels

Breaking down digital marketing costs

While basic advertising costs are climbing, the increases vary significantly across marketing channels:

Meta (Facebook/Instagram)

• Cost per thousand impressions (CPM) has increased by 20-35% annually, driven largely by increased competition and reduced targeting capabilities after iOS privacy changes made precise audience targeting more difficult
• Retargeting campaign costs have nearly doubled as marketers compete for a smaller pool of trackable users who haven't opted out of tracking
• Stories and Reels placements are seeing the steepest cost increases as more advertisers shift their budgets to these high-engagement formats

Google search

• Cost per click has risen 15-25% year over year across most commercial intent keywords, particularly in competitive B2B and ecommerce sectors
• Automated bidding strategies are driving up costs as more advertisers rely on Google's AI to optimize bids, creating a cycle of increasing competition
• Previously affordable long-tail keywords are seeing dramatic price increases as more businesses expand their keyword coverage to maintain growth

LinkedIn

• Premium B2B audience commands consistently high rates with 10-15% annual increases across all ad formats
• InMail and lead gen form campaigns have seen the steepest rises, with some industries reporting 25%+ increases in cost per lead
• Targeting costs for senior decision-makers and specific industry segments have increased dramatically as more B2B companies shift budgets to LinkedIn

The hidden multiplier destroying your marketing strategies

Signal loss impact

• Attribution windows have been forcibly shortened from 28 days to just 7 days for clicks and 1 day for views, meaning you're no longer seeing the full impact of your upper-funnel marketing efforts
• Cross-device tracking limitations mean you can't see when someone discovers you on mobile but converts on desktop, leading to incorrect assumptions about channel performance
• Customer journey data has become fragmented, making it impossible to understand how different touchpoints contribute to conversion, especially for products with longer consideration cycles

Audience quality degradation

• Lookalike audiences have become significantly less effective because they're built on incomplete data, forcing you to target broader audiences at higher costs
• iOS privacy changes have eliminated many of the behavioral signals used for targeting, reducing the precision of interest-based targeting by up to 50%
• The loss of third-party cookie data means you're often paying premium rates to reach less qualified prospects, dramatically increasing cost per acquisition

Not feeding algorithms enough or high-quality data

• Machine learning models are receiving incomplete conversion data, preventing them from accurately identifying valuable audience segments and optimization patterns
• Ad platforms can't effectively learn from unattributed conversions, creating a negative feedback loop where targeting becomes progressively less efficient
• Automated optimization struggles with inconsistent data signals, leading to erratic performance and requiring more manual intervention to maintain efficiency
• Luckily for companies who implement server-side tracking, it is possible to ‘teach’ the algorithms by providing them with high-quality, first-party data.

Setting the right benchmarks for your ad spend

Your digital marketing benchmarks probably need a bit of a NYC facelift. Considering tracking limitations and attribution issues, reality is becoming further and further from what we assume to be correct. Here's what we're seeing across different channels:

Facebook/Instagram

• Engagement rates that appear to be 1-2% are actually closer to 3-4% when accounting for tracking limitations
• Cost per lead metrics need to be adjusted up by 30-40% to account for leads that aren't being properly attributed
• Return on ad spend calculations should factor in a 25-35% margin of error due to cross-device conversion tracking issues

LinkedIn marketing

• Average cost per lead metrics are showing $150-200, but true costs are often 30% lower when accounting for indirect conversions
• Content engagement rates appear low at 2-3% but are actually closer to 5-6% when including dark social sharing
• InMail response rates need to be combined with regular message and connection request data for accurate engagement metrics

Google Search performance

• Conversion rates appearing as 2-3% are often actually 4-5% when including phone calls and direct visits
• Cost per acquisition metrics need to be reduced by 20-30% to account for assisted conversions
• Quality Score impacts on CPCs are more significant than reported, often affecting costs by up to 40%

What about advertising conversion rates – are they truthful?

Let's talk about what's really happening with your marketing channels in 2024. Time to get uncomfortably honest about your benchmarks:

SEO performance:

• Those organic traffic numbers you're seeing? They're probably off by 40-50% because privacy-focused browsers aren't sending referral data correctly, making it look like your SEO efforts are tanking when they could actually be driving significant traffic
• Your conversion tracking is most likely missing most visitors who start their journey on mobile but switch to desktop to complete a purchase, creating a false narrative about mobile SEO performance
• That beautiful graph showing declining organic traffic might actually be hiding steady growth - you're just losing visibility into how users are finding you

Social media marketing:

• Your social media engagement metrics are likely showing only a fraction of actual interactions because dark social sharing (people copying links directly) isn't able to be tracked properly
• IG story views won’t include iOS users who have opted out of tracking, making your content appear less effective than it really is
• Your social conversion attribution is potentially missing purchases that happen more than 7 days after someone sees your content, even though your sales cycle might be 30+ days

Referral programs:

• Your referral tracking is missing about half of word-of-mouth conversions because they're happening through untrackable channels like messaging apps and email forwards
• Customer acquisition cost calculations for referral programs are likely inflated by beecause you can't see the full chain of influence behind each conversion
• The lifetime value of referred customers is probably higher than your data shows because you're not catching all their repeat purchases across different devices

Rethinking your tracking and marketing channels for 2025

Just because we can’t measure everything that happens, we can get pretty close with first-party data and server side tracking (particularly when using solutions that are able to track offline conversions).

This is a list of things we think are important for building sustainable advertising channels in today's ad world:

1. First-party data collection

• Your email marketing program needs to go beyond basic newsletters - implement progressive profiling to gather data points over time instead of overwhelming new subscribers with long forms|
• Create a customer loyalty system that tracks not just purchases but also engagement markers like product views, support interactions, and content consumption
• Build referral programs that incentivize both the referrer and referee while capturing detailed data about how customers talk about your product to their networks
• Develop social proof mechanisms that automatically collect and display customer testimonials, reviews, and usage statistics to boost conversion rates across all channels

2. Technical infrastructure and automation

• Set up server-side tracking that can maintain accurate conversion data even when users block cookies or use privacy-focused browsers
• Implement cross-domain tracking to maintain user journey data across your various web properties and subdomains
• Create automated data validation systems that compare tracking data against actual business results on a daily basis
• Establish backup tracking mechanisms using UTM parameters and server logs to cross-reference against your primary tracking tools

3. Marketing strategies across channels

• Test emerging ad platforms before your competitors drive up costs - for example, you could look for platforms that still have good organic reach and reasonable CPMs
• Build an organic social presence that focuses on engagement rather than follower count, using platform-specific content types like LinkedIn carousels or Instagram Reels
• Invest in SEO content that targets specific customer pain points rather than just high-volume keywords
• Develop direct response campaigns that can be measured through unique phone numbers or landing pages to maintain accurate tracking

Some revenue/channel metrics you should pay attention to

Industry-standard benchmarks are still based on broken tracking. Here's what to measure instead:

Revenue metrics that matter:

• Track your blended customer acquisition cost across all channels, or (sorry, but it’s true) use a server-side tracking tool that can get you up to 100% conversion tracking accuracy
• Measure customer lifetime value based on actual purchase patterns, not just what your tracking can see - we're finding true CLV is often 50% higher than reported
• Calculate your referral program ROI including "dark social" shares by surveying new customers about how they heard about you

Channel metrics that are worth watching

• Monitor your database growth rate rather than individual campaign metrics - this gives you a more accurate picture of marketing impact
• Track revenue per email subscriber instead of open rates - with email privacy protection, opens are meaningless but revenue never lies
• Measure organic traffic quality through micro-conversions like newsletter signups rather than relying on increasingly unreliable Google Analytics data

Tracking and attribution solutions that truly work

Look, we get it. Reading about broken tracking and rising costs is about as fun as watching paint dry. But here's the thing — there are legitimate solutions that work right now. Let me break them down:

Harness the benefits of server-side tracking

• Focus on implementing rock-solid server-side tracking for your most critical conversion events like purchases, sign-ups, and high-intent actions that directly impact revenue
• Create a hybrid tracking setup where your server-side implementation catches the vital stuff happening under the hood, like offline conversions and other enrichment data like profits, while your client-side tracking fills in the engagement details happening on your website - best of both worlds
• Set up validation processes that compare your server-side data against actual business results daily, so you can spot and fix discrepancies before they tank your marketing performance

Make first-party data work for your business

• Build a customer data platform that actually makes sense for your business - not just copying what the big players do. Start with basic purchase history and email engagement, then gradually layer in website behavior and product usage data
• Create compelling reasons for customers to log in that go beyond "join our newsletter" - think exclusive tools, personalized dashboards, or members-only content that provides genuine value
• Implement progressive profiling that feels natural - ask for small pieces of information over time instead of hitting visitors with a form that looks like a tax return

Marketing channel measurement – measure what’s important

• Stop obsessing over platform-reported ROAS and start measuring actual business impact - track your total marketing spend against real revenue growth over 30, 60, and 90-day periods
• Build redundancy into your crucial conversion tracking by implementing both UTM parameters and server-side event tracking, then reconcile the data weekly to maintain accuracy
• Create micro-conversion events that you can track reliably (like email signups or product page views) and use them as leading indicators for revenue (Tracklution can do this server-side)

Making marketing automation work in 2025

Tips for lead scoring that could influence your CAC

• Rebuild your lead scoring models around high-confidence signals like direct purchases and form submissions instead of relying on increasingly unreliable behavioral data like page views
• Create separate scoring tracks for known versus anonymous visitors - your anonymous visitor scoring should focus on major actions only, while known visitors can be scored on more granular behaviors
• Implement a decay factor in your scoring that accounts for the shortened attribution windows we're all dealing with - a lead that was hot 30 days ago might be ice-cold now

The truth about rising CAC in 2025 and what you can actually do about it

Look, there's no sugar-coating it: customer acquisition costs aren't going down anytime soon. But that doesn't mean you have to watch your marketing budget evaporate into thin air.

The real story here isn't just about rising costs – it's about adapting to a new reality where traditional tracking is broken, and privacy restrictions are the norm. The marketers who are thriving right now aren't the ones with the biggest budgets.

They're the ones who have:

1. Stopped relying on tracking methods that don't work anymore
2. Implemented solid server-side tracking to capture accurate conversion data
3. Built strong first-party data assets they actually own and control
4. Focused on metrics they can trust, not vanity metrics that look good in reports

Here's what it comes down to

You can't fix what's happening with ad costs. But you can fix how you track, measure, and optimize your marketing spend.

Start by auditing your current tracking setup. How much data are you actually losing? What conversion events really matter to your bottom line? Which channels are genuinely driving results versus just looking good in your analytics?

The marketers who get this right in 2025 won't just survive the rising costs – they'll thrive because they'll know exactly where every marketing dollar is going and what it's bringing back.

Ready to stop throwing money at broken tracking systems? The first step is admitting your analytics might be lying to you. The second step is doing something about it.

Want to implement these solutions more thoroughly? Check out our detailed guide on server-side tracking, or send us a message. We're always up for a chat about making marketing budgets work harder.

Remember: The goal isn't to track everything. It's to track what matters, accurately.