Understanding First, Second, and Third Party Data for Marketers

In today’s digital landscape, data is king. For online businesses, leveraging different types of data can mean the difference between targeted, effective marketing and wasted ad spend. That’s why it’s so important to understand the differences between first, second, and third-party data.

Each data type has its own advantages and methods of collection. Recent privacy law changes are also impacting how third party data can be used. In this post, I’ll break down the definitions, sources, and uses for each data type so you can better navigate the data landscape.

First Party Data

Data that you collect.

First-party data is information that a company collects directly from its own visitors/customers. This includes purchase history, website activity like page views and clicks, app usage data, and information provided through forms, surveys, or registrations.

Since first-party data comes directly from the source, it provides valuable insights into customer demographics, behaviors, preferences, and motivations. Companies own this data and have full control over how it is collected and used. With user consent, first-party data enables personalized marketing, predictive analytics, and other models that rely on detailed customer knowledge.

Second Party Data

Data that someone else collected on their visitors/customers.

Second-party data is shared between two companies, often through a partnership agreement. For example, a retailer may provide a manufacturer with its customer sales data. In exchange, the manufacturer shares its research on customer demographics.

This type of data exchange helps both companies enhance insights beyond their first-party data. Because brands directly provide the data, second-party data maintains relatively high quality and transparency. Collaboration also fosters stronger business relationships.

Second-party data helps fill gaps, reduces redundancies, and opens new marketing opportunities. Partnership agreements govern it, so both parties must consent to the data sharing.

Third-Party Data

Data that someone else collected on someone else.

Third-party data is collected by external companies who then sell or share that data with others. Common sources of third-party data include website analytics tools, ad networks, data brokers, public records, and surveys.

For example, an analytics service may provide visitor demographic information to a website owner. Ad platforms share behavioral data for targeted ad campaigns. Data brokers compile information from various sources and then structure the data for marketers.

While this data can help uncover new audiences and trends, quality varies greatly. There is also little visibility into how the data was sourced and processed before marketers acquire it. Third-party data usage faces increasing regulation due to privacy concerns.

Cookies

Cookies play a big role in how different types of data are collected. The site owner drops the first-party cookies to track visitors over time. This helps with tasks like personalization, shopping carts, and site analytics.

External services, like ads and widgets, drop third-party cookies. They help build user profiles and track site interactions tied to that third party. Third-party cookies power targeted ad campaigns, for example.

Importance of Different Data Types

First-party data is the most powerful for understanding customers and delivering personalized experiences. It also builds loyalty through tailored messaging and offers.

Second-party data fills gaps and reduces guesswork while enabling mutually beneficial collaborations. However, it is limited to partner data.

Third-party data casts a wider net and plays a key role in advertising. But quality and transparency vary greatly. Regulations also limit how this data can be deployed.

Recent Privacy Law Changes

Regulations like GDPR in the EU and CCPA in California are putting limits on how third-party data can be collected and leveraged. There are stricter requirements around opt-in consent and data transparency.

As a result, digital marketers need to increasingly prioritize first and second-party data strategies. Creative methods for collecting self-reported data, like surveys and website registrations, are also gaining traction.

There is also more reliance on contextual advertising and on-site engagement analytics rather than past user profiles. Technologies like data clean rooms help brands directly share data without third-party involvement.

As privacy regulations restrict third-party data options, many companies are investing in customer data platforms (CDPs) as an alternative. CDPs provide a privacy-focused way to unify first-party data for marketing and personalization.

Customer Data Platforms

Customer data platforms (CDPs) are gaining traction as a way to consolidate first-party data from various sources. This gives companies a unified customer profile for activation across channels.

CDPs pull data from sources like:

• Website and app activity
• CRM databases
• Email and marketing automation systems
• Commerce and transaction systems
• Offline databases

Key features of CDPs include:

• Centralized data ingestion and management
• Identity resolution across data silos
• Segmentation of customer attributes and behaviors
• Integration with marketing and advertising systems
• Machine learning to uncover additional insights

For companies with distributed customer data, CDPs are powerful for creating unified profiles in a privacy-safe manner. They provide the convenience of third-party data without the risks. With clear consent policies, CDPs enable responsible access and use of first-party information.

This gives much greater control compared to third-party alternatives. Brands can also avoid the compliance risks of third-party approaches. As regulations tighten, investment in unified first-party data systems is increasing.

Key Takeaways

• First-party data from customers provides personalized insights and experiences. This owned data is the most powerful for marketing.
• Second-party data enables mutually beneficial data partnerships and collaboration opportunities to fill gaps.
• Third-party data expands its reach but has quality and transparency issues. Regulations are also restricting use cases.
• Cookies play an important role in online data collection and tracking. Third-party cookies face legal headwinds.
• Recent privacy laws limit third-party data options for marketers – leading to greater emphasis on first and second-party approaches.
• Customer data platforms (CDPs) are emerging as a way to unify first-party data from disparate sources while maintaining privacy.

That wraps my overview on understanding first, second, and third-party data in the era of privacy regulations and restrictions on third-party cookies. I hope it helped.