1st Party Data, 2nd Party Data, 3rd Party Data – What’s The Difference?

Introduction

Data is changing everything. Data is everywhere. Over 2.5 quintillion bytes of data are created every single day, and it’s only going to grow from there. By 2020, it’s estimated that 1.7MB of data will be created every second for every person on earth.

For marketers, this is an awful lot of data to keep in check. It’s easy to be overwhelmed by the amount of information available. Even more so when we hear terms like 1st party data, 2nd party data, and 3rd party data.

To help make this easier there are several ways of classifying data. This helps us as marketers and advertisers to understand the relationship between datasets and understand what each dataset can be used for.

Why is this important?

Data is one of the most effective tools to drive successful marketing. Marketers that can make sense of the data at their disposal and deploy it successfully have demonstrated the rewards that come with it.

Depending on your goals different kinds of data will be more relevant to you. That’s where data classifications such as 1st, 2nd, and 3rd party come in.

Let’s look at what these terms mean and how each type is relevant for your marketing.

1st party data

First party data is data that you have collected directly from your audiences or your customers. It includes

• Data from your CRM
• Behavioral data collected from interaction with your business (website, app, stores)
• Data around subscriptions
• Data generated from your social media accounts

This data is generated directly from your customers or your audiences. This data set is genuinely regarded as the most valuable as you are aware of the method of collection and it is generally free or costs little to attain.

First party data is easy to collect and manage in solutions like CRMs and DMPs.

As 1st party data is collected by you directly, any privacy issues are minimal (assuming you are following the correct procedures!). You own your data directly, and you know exactly from where it came.

First party data is extremely valuable as it provides valuable insights around customers and audiences for little to nothing. Companies that aren’t collecting and activating first-party data are missing a trick.

What you can do with first party data

For organizations taking control of first-party data collection should be an immediate priority. Because you have complete control fo the data, it is of higher quality. There are many different uses for 1st party data from monetization to engagement.

Engagement, personalization

Your first party data can help you to personalize your marketing and help you to engage with your customers.

1st party data can effectively segment your audience and allow you to create more specific, and personalized ads for your customers.

Insights

First party data can be invaluable in helping you to understand your customers. You can identify and map out the customer journey or see how your users behave and interact with your business or product.

Monetization

First party data is highly monetizable as you can demonstrate the methodology of data collection. The data carries maximum revenue as you didn’t have to purchase the data. First party data monetization can help to generate revenue to fund other areas of your business.

2nd party data

Second-party data is a term that is making more of an appearance these days. We hear a lot of people asking “what is second party data?”.

Second-party data is somebody else’s first-party data. This data comes from their first-party audience, the source is clear, and the provider usually demonstrates the accuracy and collection.

You can purchase 2nd party data straight from the provider – there’s no middle party in these instances. This allows you to form a relationship with the provider and understand the value in the data.

The data is usually collected from the same sources as your first-party data. However, some specialist 2nd party providers provide unique datasets that offer new insights.

These come from behavior outside of your audience, so it’s likely to include potential new customers.

What can you do with second party data

Second-party data is a relatively new concept, but it carries enormous potential for marketers. Because it comes directly from the partner and because you will likely have a direct relationship with the company it’s easier to verify the accuracy of these data sets.

The data is more consistent and will be more precise than a bunch of aggregated third-party data sets. 2nd party data offers more transparency for the end data user, making it easier for you to understand the value that the data can bring to your business.

New audiences, new business

Second party data is great for prospecting and reaching new audiences that aren’t already a part of your audience.

This allows you to expand into new regions or new demographics with new products.

Scale-up

Second-party data can help you to fill the gaps in your existing 1st party data sets. Your datasets might be high quality but might not be large enough to scale your business in the way that you want.

Supplementing 1st party data with 2nd party data is an effective way to make your campaigns reach more people without compromising on quality.

3rd party data

Third party data is data that is purchased from outside sources where the seller is not the direct collector of the data.

These data sets are usually aggregated and could have been resold multiple times. These aggregators pay other businesses that generate the data and collect it into a single dataset.

This large dataset is then broken down based on demographics, behavior or another characteristic. This allows the data to be split into segments that are easily resold.

Third party data is often bought programmatically – this means that it happened quickly and on a large scale. This means businesses can purchase large amounts of data for their campaigns quickly. The downside to 3rd party data is that it’s much harder to verify where the data came from and how it was collected.

What you can do with third-party data

Third party data accuracy is hard to verify, and its availability is public, so that means that other companies (and potentially competitors) will be using the same datasets as you.

But that doesn’t mean that it carries no value for marketers. It can be useful when it’s appropriately combined with your first-party data.

Expand your audience

Combining third-party datasets with your first party data can help you grow your addressable audiences. Lookalike modeling can identify characteristics in your current dataset and look for similarities in third-party data to find similar prospects.

Tips for marketers and advertisers

Third-party data has been prevalent in many marketing campaigns in recent history. The vast amount of data that is available along with the results it could potentially generate have made it a valuable asset when combined with your first-party data.

However, two significant developments have occurred which have made second party data a much more reliable option for marketers.

Privacy

Unless you have had your head in a ditch for the last few years, you’ll be well aware of the GDPR in Europe. Privacy concerns in third-party datasets are always present for marketers.

Often third-party datasets are hard to verify in terms of consent. This is where a direct relationship with a second party data provider is useful. You can verify the consent process and ensure that the data is collected in accordance with the relevant privacy standards.

Accuracy and transparency

The truth is that your first party data is more transparent than any other kind of data set. Hover that doesn’t make it accurate. Third party data is difficult to verify in terms of accuracy and often transparency isn’t even part of the discussion as it’s an aggregated dataset.

Second-party data is as good as first-party data as long as you can identify the methodology and verify that it meets your accuracy standards. This is again why a direct relationship with your data providers is a useful situation to be in.

Many second party data providers can provide their data directly into your data management solutions. SO where your first party data sets aren’t enough, you can purchase new data from reliable and transparent providers directly in your existing infrastructure.

Data is here to stay. As a marketer, it’s your job to ensure that your data is activated and that your second and third party data is accurate and transparent.

James Ewen

James is the head of marketing at Tamoco