What Is Third Party Data and How it Relates to the First & Second Party Data
While the marketing world is awash in data, there remains some confusion about the definitions of first party, second party and third party data.
While the practical questions advertisers really need to answer are whether they have rights to use a certain data set, how to use it, and whether it will drive improvements to their marketing strategy, understanding where data has come from and how it was collected are critical to making informed decisions about its use.
That’s why it’s important to understand whether data is 1st, 2nd or 3rd party data.
What are 1st, 2nd and 3rd party data?
In the digital advertising industry, the terms first-, second- and third-party data are often heard and often misunderstood in terms of their meaning and their importance.
Data is, ultimately, just data. It’s information. The terms first party data, second party data and third party data refer primarily to who collected the data. From these terms, inferences are often drawn about the accuracy and performance of data based on these labels, which is simply not justified. When it comes to the accuracy of data or how well it can improve marketing and ad targeting efforts, understanding where the data came from matters, but is hardly the whole story.
When it comes to advertising, whether it’s 1st, 2nd or 3rd party data really does not matter much and does not indicate whether the data is accurate or useful. Advertisers’ concerns should be whether they have the rights to use the data, when and how to use it, and whether it will be effective.
1st party data definition
First party data is simply data that you have collected yourself. If a retailer collects purchase data about their customers, that is their 1st party customer data. If a web or app publisher collects data about who comes to their site, that’s their 1st party data.
First party data can be incredibly valuable as a means to learn about customers and better cater to their needs, for loyalty marketing campaigns, and to make more informed decisions about customer acquisition strategies.
It is often assumed that first party data is the most accurate, but having robust data hygiene practices is not a guarantee for most first party data owners. The accuracy and reliability of first party data can vary.
2nd party data definition
Second party data is commonly thought of as simply the first party data of another company. It was sourced by another company.
In practical terms, though, the lines between 2rd party data and 3rd party data become a bit blurry. Strictly speaking, it is data from another company that may have a direct relationship with a consumer, whereas third party data companies may not. But, from an advertisers’ perspective, the differences are somewhat academic.
3rd party data definition
Third party data is simply data that is collected and packaged by a third party. Like second party data, it is data that was not collected by the company in question, and that they have to enter into a commercial relationship to utilize it.
The types of data that this can include are many and can be categorized in a number of ways, including how the data was sourced, how many different sources are included, whether it is known or inferred data, what marketing strategies it can be used for, what industry(s) it is relevant to, and so on.
While there is no guarantee on data accuracy or performance, companies that source, compile and build audience products as their primary reason for being often have much more sophisticated data hygiene practices.
What is the purpose of using third party data for audience targeting?
The purpose of using any data for advertising purposes is essentially to drive greater marketing efficiency. If an advertiser’s addressable market is approximately 10% of the population, then showing their ads to 100% of the population will lead to roughly 90% waste! Using data targeting, they can limit the audience that sees their ads to people that are more likely to be potential customers, yielding a reduction in ad waste and a likely increase in ad effectiveness.
This is the role that third party data companies fill in the industry. They produce audience targeting products that, when properly selected and utilized by advertisers, can help drive much greater ad efficiency.
How is 3rd party data collected?
Data that is utilized to create these audience targeting products is collected in a wide variety of ways, and should always be collected in a way that provides clear notice and consent to consumers.
Some data companies collect data directly from consumers, some create co-ops of second-party data, some are third party data aggregators, which collect data from a variety of public and private sources and aggregate it.
But, whether the data is collected via surveys, panels, devices, websites or applications or even from public records, it’s critical that consumers have notice and choice about data collection at the point of collection for privacy reasons. All data providers available via DeepSync (INTERNAL LINK) have passed rigorous privacy reviews.
What are some examples of third party data providers?
Some examples of third party data companies are listed below and illustrate some of the premium data sets available for advertisers and agencies to make use of via DeepSync Labs.
NCSolutions is a premium data set focused on the CPG (consumer packaged goods) industry. CPG companies often lack any strong first party data, as their products are largely sold through retail partners. Having access to reliable data about what products people purchase is critical to understanding their customers and targeting their advertising in the most effective means possible.
NCSolutions uses in-store purchase data from nearly 90 million households to help CPG advertisers, agencies and media companies define their most valuable audience, reach them with advertising and measure incremental sales driven by ad campaigns.
NCSolutions segments are available today. Just search for NCSolutions!
Experian Marketing Solutions
Experian is one of the world’s largest global information services companies. Experian’s U.S. ConsumerView marketing database covers over 300 million individuals and 126 million households. With data compiled from hundreds of public and proprietary sources, Experian has thousands of powerful data points to help marketers reach their targeting goals, including demographics, purchasing habits, lifestyles, interests and attitudes.
Experian segments are available today. Just search for Experian!
Oracle is one of the industry’s leading providers of data to the marketing ecosystem. Oracle’s audience solutions help advertisers reach their most relevant buyers in key moments and at scale so they can increase customer acquisition and deliver effective global advertising campaigns. Their privacy-centric approach keeps security and compliance at the core of their products, giving buyers peace of mind.
Oracle Proprietary Audiences combine audiences sourced from offline, verified data spanning automotive, consumer packaged goods, and retail verticals with data sourced from online behavioral habits. To ensure advertisers have access to the full gamut of data signals available online, Oracle’s Premier Branded Audiences source the highest quality, most trusted, and privacy-centric third-party audiences available. Audiences by Oracle curate the best signals from within Oracle’s own datasets and those sourced from third-party providers to deliver increased quality and scale, diverse signals, and simplified buying and cost structures.
Oracle segments are available today via their Data Package!
What are the benefits of 3rd party data?
The benefits of using any data for ad targeting and, in particular, data that is not the advertisers’ own first party data, are many. Audience targeting can eliminate ad waste, extend the reach of a campaign, and improve the relevance of the advertising.
Eliminate Ad Waste
Showing ads to only your existing customers, using first party data, prevents you from acquiring new customers. But showing your ads broadly results in a tremendous amount of ad budget being wasted showing ads to people who are not your target audience. Using data for audience targeting is how leading advertisers improve customer acquisition while limiting wasted ad budget.
By using third party data to better understand your existing customers, you can improve the reach of your campaigns by identifying new audiences that may be part of your addressable market. Your existing customers may have more in common that you know, and that can lead to new strategies and audience targeting tactics to drive new customer acquisition.
Improved Ad Relevance
Showing ads to people more likely to be your best potential customers enables you to better focus on tailoring your ad messaging to meet their needs.
What are the risks involved with using third party data sources?
Using data for audience targeting has become commonplace among leading advertisers over the past several years for a reason – it works. The benefits of using 3rd party data sources to help drive your ad strategies and tactics are many, but they do require that attention be paid.
Incorrect Data Selection and Limited Optimization
Data is not magic. There are hundreds of thousands of potential data ‘segments’ available for advertisers to use, and the likelihood that they will select the right segment to start with and that it will perform forever is incredibly low.
Advertisers should approach the use of data as a continuously evolving process of researching, selecting, testing and optimization, just as they do with creatives, ad formats, and media partners.
Poor Campaign Strategies
Ensuring that there is a sound understanding of the target market for a campaign is critical to the data being effective at driving results. If the advertiser is incorrect in defining who they want to show their ads to, a great 3rd party data segment will result in accurate targeting but low performance.
How do you use third party data?
There are a variety of ways that leading advertisers use data from second or third party sources to augment and improve their overall marketing strategies. Two of the most important are:
Audience Targeting or Ad Targeting
Using data segments from data companies can drive significant improvements in delivering relevant ads to the right target audience, significantly reducing ad waste.
Customer Data Augmentation
Using data collected by other companies about your customers can provide significant insights into who your customers are, what they are about, how better to meet their needs, and how to find more of them.
What are the privacy concerns around third party data?
Recent years have seen an increase in regulatory activity as it relates to the use of data, including GDPR in Europe and the CCPA in California. An ethically sound approach to data collection and utilization is good for everyone and these developments have brought attention to the space in a way that helps ethical data providers better highlight their practices.
It is important for advertisers and agencies to ensure that the data companies they work with are good actors and are sourcing and distributing data in keeping with all applicable laws and industry best practices.
DeepSync Labs only works with industry-leading sources that comply with all applicable laws and industry best practices.
Is the data collected in accordance with applicable laws and industry best-practices?
Ensuring that the partners you utilize have a sound approach to data acquisition, management and overall data governance should be a priority for any advertiser. By working with enabling partners, such as DeepSync Labs, who have this approach woven into the fabric of their solution, advertisers can rest easy that the data they are utilizing has been ethically sourced.
Is sensitive data being incorrectly used or associated?
Some data, such as online, medical or political data, may be restricted in the ways it can be used. The nuances of how each data set is collected, how it is onboarded and distributed, and the inner workings of the media or data management platforms where it is sent, are far too much for any one advertiser to keep track of.
By working with partners that use information such as this when architecting their solutions, to ensure compliance, advertisers can avoid problems down the road.
How to choose quality third party data providers?
Selecting the right data partner can seem daunting, but it does not need to be. Some 3rd party data providers are universally well-regarded and may be safe choices for advertisers to start with. Other niche 3rd party data companies may offer data solutions that are far more relevant and that may perform far better for the advertiser.
The right approach is not one or the other, but a continuous optimization approach that has the advertiser test and learn with different audience targeting solutions just as they do with their creatives, ad formats, and media partners, among other optimizations.
There are countless data options available and the right approach is to test and learn what will perform well for each advertiser.
Key Takeaways about 3rd party data
- Audience targeting, whether with first party, second party, or third party data, is how leading advertisers find ways to reduce ad waste and improve the overall effectiveness and efficiency of their advertising.
- Third party data is not better or worse than first party data; it simply has been sourced differently and is commonly used to solve different problems.
- Use of third party data should be approached as a process of ongoing testing & learning. Similar to how advertisers continually optimize their campaigns in other ways, data should also be continually optimized.
- Working with trusted enabling partners, such as DeepSync Labs, enables advertisers to easily access, utilize and test a variety of different third party data sets for their digital advertising.
Is Facebook data first, second or third party?
Facebook offers ‘native’ ad targeting using their own first-party data, based largely on Facebook users’ profiles and behavior. However Facebook’s data has significant gaps, may make false inferences based on user signals, and limits advertisers to just targeting inside their walled garden.
Who are leading third party data providers?
Luckily, DeepSync Labs can offer a range of industry leading data companies’ solutions. The right solution will depend on the industry, campaign goals, target audience and other factors, but leading providers such as NCSolutions, Experian, and Oracle and countless others are available to use today.
How much does third party data cost?
Using third party data does not have to drive massive increases in campaign spend. In fact, for Facebook advertising, the data costs are tied to the media spend amount, ensuring that data costs stay manageable. For more information, see www.deepsynclabs.com/pricing .