Collecting user data has long been a kind of free-for-all in doing digital business, enabling companies to shape their marketing strategies and interpret performance based on analysis of the data they collected. But not all kinds of data are created equally.
As leading technology firms (Apple with ITP; Mozilla and Google are following suit) begin to shut down this free-for-all, and consumers start to ask questions about privacy and protecting their own data, it’s important to understand the different kinds of data: first-party, second-party and third-party. What is the difference between these data categories? How do they work and how do they affect digital marketing activities and outcomes? And most importantly, how can you be prepared as digital marketing, like the rest of the online world, moves toward a first-party-driven, privacy-first approach?
What is the difference between first-party and third-party data?
What is first-party data?
First-party data is the data you collect about your own customers (or audience). You collect it; you own it; you manage it. The data represents customers or users who have come to your site or apps, calling your contact center or giving customer feedback. Because they are already interacting and have consented, they are already in your “sphere of influence”, choosing to identify themselves as existing or potential customers.
First-party data can be described as a real-world example of quality over quantity. You will probably get fewer prospects or leads when relying solely on first-party data, but these users will already have demonstrated their interest in what you’re doing or selling. First-party data is considered more valuable and relevant for these reasons. Once you have collected such data, you’re free to use it in your marketing, segmentation and profiles, and it should give you solid insight into everything from the customer journey to most-used features, from features you need to improve, to understanding what content you need at different points in the funnel. Even if there is less first-party data to work with, it is exponentially more powerful in terms of the insights you can glean from it.
Second-party data is someone else’s first-party data. That is, you might have a relationship with another business that you consider to be a trusted partner. You may have a data-sharing agreement, and it’s possible their customers have opted into this sharing as well. It’s the middle ground between having your own data and having third-party data: it’s a trusted source with users who are more likely to be receptive to you, and even if it’s not quite your audience, it’s not completely indirect and unrelated like third-party data.
What is third-party data?
Third-party data is data that is collected and aggregated from across many different sources. Third-party data is collected by third parties who do not have any direct relationship with the customer or user, for example, data companies that specialize in collecting, packaging and selling data. While the volume of third-party data can be vast, its value depends very much on whether or not you know how to use it and whether you can trust the data source (we’re back to the question of data quality again). It’s also general: the data isn’t your data about your customers, and it’s also not exclusive. Third-party data is designed to be a product itself that can be sold to as many people who want to pay for it.
Third-party data can help to build a bigger-picture view of user profiles based on past patterns and behaviors. This makes it useful for building large-scale models, for example, based on aggregated statistics, but again isn’t your data or specific to your business or customers. Its greatest benefit has long been perceived as reach; here we get the inverse to the axiom: quantity over quality. Depending on what your digital marketing plans are, for example, reaching a much wider, broader audience, this might be what you want.
Why is third-party data’s value decreasing?
Time’s being called on third-party data. While it has always had its place and has formed the basis for an entire discipline and industry, the practical disadvantages of third-party data make it increasingly difficult to work with. And as mandates come into force about preserving user privacy and complying with a growing list of privacy-oriented protections, such as GDPR and CCPA, as well as the aforementioned browser-based restrictions on third-party data collection, the list grows highlighting reasons to sundown third-party data.
Why shift away from third-party data?
We’ve highlighted a few of the challenges with third-party data already, but here’s a breakdown of the things to consider:
- lack of consent from end-users
- yielding lower-value results
- privacy compliance complications: GDPR and CCPA are just the beginning
- the coming scarcity of availability of third-party data, as more browser makers enable versions of tracking protection and disallow third-party tracking cookies
- the inability to guarantee data quality or verify the data source
What is high quality data?: The data quality question
High-quality data, in an era of enhanced data privacy and fewer third-party collection options, is often defined as data that is accurate and complete. This is a relatively technical definition, and we could at this stage argue that quality data is first-party data. Not only do you have the opportunity to ensure that the data you have is accurate and complete (because it’s all in your own hands), you know two things right away:
- you own the data, and you’re going to be able to use it how you want to in current and future marketing projects
- you know that the data is representative of your prospect and customer base because they have already shown some kind of interest in your business, services, or products
High quality data is data you can put to work to help understand the total customer experience. This is something that third-party data cannot deliver.
What does first-party data mean for digital marketing?
Understanding how you want to use data in your digital marketing strategy can guide how and what data you collect. A world without third-party cookies and data sounds daunting at first, but it can be turned to your advantage. You can refocus your efforts on the first-party data you already have to achieve important goals, such as:
- Developing a single customer view – knit together your first-party data sources to get a comprehensive and actionable view of customers
- Performing better audience segmentation
- Creating better or augmenting existing audience targeting and channel strategies
- Enhancing the current customer experience or workflows/journeys
We’re here to help you navigate the journey from third to first-party and to discover the best ways for you to understand and reach your prospects and customers.
Let us help you navigate digital marketing in a first-party world.
