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Both first-party usage 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.
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
First-party data is comes directly from consumer interactions. 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.
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 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.
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.
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 a 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.
Seeking New Ways To Maximize Your Customer Acquisition Efforts?
Digital Media Solutions (DMS) is a technology-enabled, data-driven performance advertising solutions provider connecting consumers and advertisers. Contact DMS today to learn how our first-party data asset, proprietary technology and expansive digital media reach can help you scale your customer acquisition results.