First-party data, second-party data and third-party data

First-party data, second-party data and third-party data
Thursday, December 3, 2020

In the modern world, data has become increasingly important in the decision-making process for marketers, helping inform general business intelligence, as well as a marketing strategy. Never before have we had access to such vast amounts of data, which is why it’s important to understand the different types and their various use cases.

In this guide, we’ll define each data type, the benefits of each, and how they can be accessed. 

First-party data

First-party data has grown in popularity and importance as businesses look to unlock greater customer insights and move away from relying on third-party IDs for targeting and measurement. Used intelligently, this knowledge can power more relevant content and enable people-based marketing.

What is first-party data?

First-party data is the data a business collects about the individuals who interact directly with their brand. This can be from both online and offline sources, examples include:

  • Behavioral data on your app and/or website
  • CRM data
  • Point-of-sale data
  • Social media data
  • Subscription data

It’s arguably the most powerful data available to a marketer because of its incredibly high level of accuracy and relevance. 

How can you collect first-party data?

First-party data can be collected in a number of different ways. To gather customer data through your website, you first obtain permission from the user to place a first-party cookie on their browser, usually linked to a CRM system. This cookie then collects the behaviors and actions of a visitor as they navigate your website.

Businesses can also collect first-party data when a user buys a product or subscribes to a service or newsletter, as this is often tied to a piece of personal data, such as an email address. Again, it is important to ensure consent has been obtained, or that they have a valid legal basis for collecting and processing the data. 

Why first-party data is important for marketers

Up until recently, digital marketing has been largely powered by third-party cookies. These little files, dropped by adtech vendors on an individual's browser, track a user’s actions and behaviors across sites. The data which the cookies gathered is then collated and distributed by the ad platforms so that advertisers could target audiences wherever they were across the internet. 

However, recent privacy legislation such as the GDPR in Europe and CCPA in California are now requiring many marketers to reconsider how they use data. Third-party data, often collected by third-party cookies, is now seen as increasingly unsustainable due to privacy concerns. This has been accelerated by all the major web browsers removing support for third-party cookies - Google’s Chrome being the last to do so, signaling the end of such mechanisms by 2023. 

Now, savvy marketers are looking to make better use of first-party data to unlock customer knowledge. 

What are the benefits of first-party data?

Every company should be collecting first party-data from their customers and prospects, because it is the most valuable and also the most cost-effective source of consumer insights, enabling businesses to better understand specific behavior and buying signals from their consumers.

Because first-party data is information collected by a company about its prospects and customers, the accuracy and relevance of the data are incredibly high. This is why it’s considered the most powerful type of data.

For first-party data to remain valuable, businesses must take steps to maintain ownership and control of the data. The best way to achieve this is to never share it with a third party. However, conversely, there are exciting opportunities that become possible when businesses are able to collaborate on this data. As long as such collaboration is done in a privacy-compliant way that ensures the data is always held securely.

The InfoSum platform was built for precisely this reason, to create data ecosystems where businesses can collaborate using their first-party data, without ever having to share the raw personal data of their customers. More on this at the end!

Second-party data 

Second-party data helps businesses create a more complete understanding of their customers, by accessing another business’s first-party data. 

What is second-party data?

Second-party data comes from being able to use another company’s first-party data, usually made available through a data partnership. It’s the information that the data owner collects on people who interact directly with their company.

Like first-party data, examples of second-party data include behavioral data from an app or website to CRM data, social media data, and subscription data. 

Why second-party data is important to marketers

One of the limitations of first-party data tends to be its scale. Often, the data a company holds on its customers is limited to their direct interactions with them. Although highly accurate, this data often lacks the behavioral and demographic attributes that power more effective marketing decisions around audience segmentation, lookalike modeling and personalization. 

This gap has traditionally been filled by third-party data. However, as we have covered, since the death knell for third-party cookies was sounded, combined with tighter legislation, businesses have been searching for alternative ways to enrich their customer knowledge.

As a result, second-party data has increased in popularity in the last few years. 

What are the benefits of second-party data?

Second-party data allows companies to fill gaps in their knowledge for a greater understanding of their customers. To do this, companies establish strategic data relationships with other companies to enrich and validate their customer knowledge. 

This rich data source can provide greater scale to marketing efforts by offering access to insights and attributes that aren’t available through first-party data. And since this is another company’s first data, it can be relied upon for accuracy and quality.

As an example of how second-party data can be utilized, imagine an airline being able to make their first-party data on upcoming flyers available as second-party data for a hotel chain to offer a discounted room rate at specific destination cities. 

How do you access second-party data?

Traditionally this is done through platforms such as data management platforms (DMPs), which operate as data exchanges. They enable data to be shared by the first-party data owners with each other. 

There’s a couple of potential issues with this process though - particularly around privacy and trust. By sharing data a company may lose control of that data and risk exposing their customers’ personal data.

This doesn’t have to be the case, however. Decentralized data clean rooms are a solution that allows businesses to make their first-party data available as second-party data for analysis without having to share their raw data or hand control over to another company. 

Third-party data

Due to its low price point and relative ease of access, third-party data has traditionally been an attractive option for marketing purposes but has come under increasing scrutiny in recent times.

What is third-party data?

Simply put, third-party data is data collected by a company which is then sold on to other companies to use for their own marketing purposes e.g. a supermarket chain selling audience segments of cat food purchasers to advertisers who want to sell pet insurance.

It comes in various forms but the most popular example in the digital world is data collected by third-party cookies. Other forms come from independent research companies that use panels, surveys, and interviews to collate information about large audiences. 

The main benefit of third-party data is its scale and availability, but it also comes with many challenges. The main challenge being that it is often not possible to validate the data, and it is not clear where the data originally came from. And since it is available to all, it’s hard to gain a competitive edge from this data source alone. 

Third-party data vs third-party cookies

When thinking about digital advertising, third-party data is often used interchangeably with third-party cookies. However, they are not the same - third-party cookies are a mechanism for collecting third-party data. 

Other forms of third-party data exist - through panels, interviews, and surveys (all sometimes described as offline data). The drawback of these methods is that these pieces of information are available to everyone. Therefore, it’s best to use these kinds of data in combination with more reliable and accurate first and second-party data sources. 

Now to third-party cookies. As explained above, these allow companies to track a user’s behavior as they move across sites on the internet and are stored in a third-party platform, such as a DMP. This is then aggregated and sold in ‘prepackaged’ audience segments, defined by behavior, interest, and demographic attributes. 

It’s what has been used to power digital advertising for the last decade. But more recently, serious questions have been raised around privacy, consent, and the centralization of data. These concerns are generally related to the common practice of daisy-chaining consent between adtech vendors, which is considered non-compliant with the GDPR. 

With this in mind, their expiry date in 2022 and increased awareness among consumers around online privacy, attention is quickly turning away from third-party cookies towards first-party data.

Looking beyond cookies and to the future, InfoSum is making it possible for businesses to collaborate and combine multiple data sets without the need to share the underlying data - solving the privacy and trust issues that come with using third-party cookies.

Bringing first, second and third-party data together with InfoSum

InfoSum’s data collaboration platform has been designed to create a new decentralized data ecosystem, with privacy at its core. Our technology allows companies to connect any number of datasets for analysis, segmentation, and activation without the need to share raw data with a third party. 

How do we do it? Each dataset is held in its own unique instance on a cloud-based server called a Bunker, which can only ever be accessed by the data owner. Our permission controls allow you to grant analysis and activation rights to other InfoSum clients, but this never gives them access to the raw data. 

All analysis is driven by anonymous mathematical representations of data that move between Bunkers to deliver statistical aggregate answers - in simple terms: it allows for in-depth insights without the need to share data. The result is the ability to share and make use of the knowledge inherent in the data set, but without ever having to share the raw underlying Personal Data. 

Unlock the power of your first-party data

The InfoSum platform has been built with first-party data in mind. Insights can be gained from multiple disparate data sources to create a unified customer view; without sharing or commingling the underlying data. And as we move into an era where first-party data will likely power the adtech industry, our platform allows businesses to work together in a privacy-safe, secure and trusted manner.

Get started on your internal collaboration journey here.

Safely and securely access second-party data

Making your data available as second-party data, and accessing second-party data becomes safe, secure, and easy with InfoSum. Through our data collaboration platform, data owners are able to measure the overlap between their customers and the individuals within the second-party data source, to determine any opportunities that could be unlocked from collaboration - all without sharing any data.

Take advantage of one-to-one data collaboration and one-to-many data collaboration.

Validate your knowledge with third-party data

Much like our approach to second-party data, you can validate what level of enrichment can be achieved from various third-party data sources, and the data categories that would become available to you from the data.  

As the data is never centralized, or held in a third-party ID, it remains possible to see the underlying datasets which make up the curated audience segments. This provides the added benefit of being able to adjust the dataset you wish to buy, ensuring the right audience data for your campaign goals.

InfoSum’s Data Collaboration Platform is the most privacy-safe and secure environment to onboard your first-party data, and to access both second and third-party data for enrichment. Get in touch with our team to understand how you could be using InfoSum’s technology to deliver data-driven marketing.

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