First-Party vs. Third-Party Data: Consumer Engagement for the Win

September 27, 2018 Rachel Schulties

Both first-party and third-party data usage are growing for marketers, despite headlines that may imply otherwise. But no matter what data you’re using or how you’re using it, consumer engagement should be top of mind.

first party third party data

What’s the Difference Between First-Party and Third-Party Data?

A conversation about data needs to begin with an understanding of data sources and parameters. Because many marketers confuse first- and third-party data, we’ll start with definitions.

First-Party Data: Direct from the Consumer

As defined in the AdAge Explain It Like I’m Eight” video, first-party data is “any information that comes directly from an interaction with a consumer.” First-party data can include a long list of data points including name, address, email address, phone number, purchase history and behaviors demonstrated on a website. In general, first-party data is more accurate and more reliable than third-party data. It’s also typically considered free, though a lot of time and expense can go into the collection of it.

Third-Party Data: Collected Surveillance

Amassed without a direct consumer relationship, third-party data can be licensed or purchased from the data collector for a variety of uses. Like its first-party counterpart, third-party data can include a long list of fields, but it is often gathered from a combination of surveillance methods, including web browsing, clicks and cookies, and is not always verified by the consumer. Often considered a commodity because it can be purchased by competitors, third-party data can be highly effective for targeting or expanding reach. Third-party data is generally cost effective and is often purchased on a performance basis.

Second-Party Data: Someone Else’s First-Party Data

The often-forgotten second-party data can be powerful at helping advertisers better understand their audiences. Essentially first-party data that is being shared from one entity to another, this data gets the title “second-party” because it is one step away from first-party data. It was gathered from consumer interactions by the other entity.

first-party versus third-party data

Sometimes Third-Party Data Pretends to Be First-Party Data

In certain situations, it can be tough to determine if data is first- or third-party, especially if that data is generated by an external vendor.

Single-Action Opt-Ins Earn First-Party Data Classifications

When leads are generated by third-party vendors using single-action opt-ins, during which the consumer knowingly opts-in to receive information from your brand – and only from your brand – the data can be classified as first-party.

Lead Generation Transparency Is Essential in First-Party Data Generation

Before you classify data from leads generated by an external vendor as first-party, make sure you understand exactly how the leads were generated, including the full user flow. Many lead generation websites and co-registration opportunities deliver clear user experiences, but that’s not always the case. Aggregated matching techniques are also common. In these instances, consumers provide consent to be contacted by numerous parties at one time. These generic opt-ins create third-party data. Ask for complete transparency in the user experience that results in lead generation to be sure you know if you’re purchasing first-party or third-party leads from your lead generation vendors.

Third-Party Data Usage Is Growing

Despite the lack of transparency or exclusivity issues facing third-party data, data creators and data users this year, third-party data usage by marketers is still growing.

Many Groups Are Pushing for Reduced Third-Party Data Usage

In 2018, we witnessed new regulations and decreased public access of third-party data by a number of brands and platforms.

  • data protectionFebruary: Google Chrome launched a built-in ad blocker.
  • March: Facebook announced they would be shutting down their Partner Categories product that had enabled the use of third-party data to target ads on their platforms.
  • May: The General Data Protection Regulation (GDPR) of the European Union became enforceable, requiring explicit permission to use people’s data.
  • June: California passed the Consumer Privacy Act. According to Jonathan Lacoste of Chief Marketer, this law, which is planned to go into effect in 2020, “gives consumers unprecedented rights over sharing their data and personal information with companies.”
  • June: Freckle IoT launched the Killi app, intending to jumpstart a data revolution by letting consumers sell their data directly to advertisers.
  • August: 23andMe shut down the API that allowed third-party app developers to use anonymized customer datasets.
  • August: Mozilla’s Firefox started automatically blocking ad-tracking software.

Throughout the year, new data usage and transparency policies of governments and companies gave consumers more control over their online identities.

Many Consumers Are Willing to Share Data to Gain Enhanced Experiences

Despite some desires to restrict data collection, many consumers appreciate the personalized experiences that can be the result of smart data usage, and they’re willing to share data for personalization, including offers or discounts, product recommendations and online shopping experiences. In fact, more than half of consumers believe “technology has significantly changed expectations of how companies should interact with them,” according to a 2016 Salesforce report. And three-quarters of consumers expect “consistent and intelligent experiences” every time they interact with a brand.

Consumers seem to understand data collection is a requirement for personalized brand interactions, and many are willing to share data with companies they trust to be reliable data stewards.

Third-Party Data Has Significant Value

Third-party data sources provide the ability to quickly scale customer acquisition campaigns via lead generation and data consumption. Just make sure you know what consent was provided before you engage in email, SMS or phone call outreach to align your actions with communications regulations.

growing data

Third-Party Data Usage by Advertisers Is Still Increasing

First-party data usage is growing twice as fast as third-party data usage. But, according to an August survey conducted by Duke University’s Fuqua School of Business, American Marketing Association and Deloitte, almost one-third of marketers reported an increase in third-party data usage over the prior two years, and an almost equal amount expected their third-party usage to increase in the next two years. Just 9% noted a decrease in third-party data usage to date.

With Third-Party Data Still in Play, Marketers Need to Evolve Their Use

Marketers don’t always follow best practices for third-party data use. Sometimes sales and marketing act in silos, purchasing and using third-party data without involving the other team. In other instances, third-party data is uploaded into CRMs without being standardized to match current database formats. Frequently, data is not refreshed often enough.

Third-Party Data Is Best When Its Aligned with Marketing Objectives

Third-party data can be incredibly helpful at scaling opportunities, but it should be purchased with purpose. What are you trying to achieve? What are your data gaps for that objective? Where can you go to fill them? How often do you need fresh data?

In addition, third-party data should always be cleaned before being appended to existing data to remove bad data, standardize fields, fill in blanks and resolve inconsistencies.

Identity Resolution Makes Third-Party Data Stronger

Identity resolution is the data management process of connecting information from disparate data sets to identify and connect data for specific individuals. The act of identity resolution connects data fragments from actions taken across platforms to create single consumer views. The foundation of people-based marketing strategies, identity resolution can be performed with both first-party and third-party data to gain visibility into the customer journey, create robust customer profiles, better target prospective customers and partake in cross-channel attribution.

First-Party vs. Third-Party Data: Both Have Their Role

Both first-party and third-party data have their roles in an effective marketing campaign. The key to success falls largely in understanding why you’re buying data in the first place and how that data will support your marketing strategies. If you have gaps in your database that are curtailing your ability to personalize consumer engagement, now is the time to take action and find a data solution to help you achieve your goals.

Are You Ready to Enhance Your Data Generation Strategies?

From lead generation to email marketing, contacting Digital Media Solutions should be your first step. Want someone to do all the work for you? DMS Digital Agency is a full-service digital marketing agency that develops, executes and optimizes integrated, cross-channel lead generation campaigns on behalf of clients. Need help centralizing your lead generation data and campaign management? Sparkroom performance marketing technology integrates data from disparate marketing systems to provide a holistic view of your marketing performance. Click here to request a Sparkroom demo.

About the Author

Rachel Schulties

Rachel Schulties is the Executive Vice President of Agency Services at Digital Media Solutions (DMS), an industry leader in providing end-to-end customer acquisition solutions that help clients grow their businesses and realize their marketing goals. As the leader of the agency team, Rachel oversees client relationships, agency services, the award-winning Sparkroom performance technology and technical support function that helps clients boost performance and redefine the win. Since its inception, DMS has evolved into a full-service performance marketing company that services firms within highly complex and competitive industries including mortgage, education, insurance, consumer brands, automotive, jobs and careers. DMS has achieved incredible year-over-year growth, which has earned recognition on the Inc. 5000 list in 2014, 2015, 2016 and 2017.

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