First-Party Vs. Third-Party Data

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In today’s digital world, everything marketers do revolve around collecting data to garner better insights into their users.

In terms of first-party[7] vs. third-party data[1] and even second-party data[2], there’s a race to find the most beneficial data that provides a substantial value. So, which type of data is better and how can it be used to better learn about and serve your audience?

Keep reading to learn more.

Defining First-Party Data and Examples

First-party data[3] is simply defined as the data an organization collects directly from its audience. This “audience” is typically made up of the organization’s customers, site visitors, and social media followers.

The term “first-party” always refers to the party that’s collecting the data firsthand with the purpose of retargeting its audience based on that data. First-party data is also considered to be the best type of data to use, as it’s collected from the people that an organization has the most to learn and gain from. 

This makes it the most reliable in terms of making future predictions and forecasting[8] future user behavioral trends.

For a clear picture, first-party data is typically comprised of the following:

  • The data collected based on user behaviors and actions across an organization’s website or app. For example, a purchase decision.
  • The data in a CRM
  • The data collected song social media platforms
  • The data collected from subscription-based emails or product subscriptions
  • Survey data
  • Customer feedback data

The type of information collected by first-party data would include but are not limited to the following:

  • User demographics
  • The websites visited by a user and their interactions with those websites
  • The user’s purchase history
  • The user’s interests
  • The time a user has spent on an organization’s website

More importantly, first-party data can easily be collected for free and monetized using a Data Management Platform[4] (DMP). Additionally, the organization in question automatically has the users’ consents—which is a top priority since the GDPR[5] rolled out its privacy laws

Lastly, First-party data allows advertisers and publishers to deliver personalized and relevant ads to users wherever they go online.

Examples of First-Party Data

As mentioned above, with first-party data organizations can build on any segments available within the digital market. 

Here’s an example of that:

Let’s say someone runs an online shop selling makeup. This person can create a type of user profile based on the first-party data collected among the various channels listed earlier. For argument’s sake, we’ll say that the users that come across this person’s online shop are mostly women that spend a minimum of $100 on makeup products per month. 

The segments created by the first-party data collecting this information will have many of the same data points as third-party data segments, such as timestamps, URLs visited, the user’s IP address, localization attributes, the browser’s language, and so on. From all the data points collected, the segment[9] for this user could look like this:

  • Demographics: Women between the ages of 26 and 32
  • Interests: Travel, wine tasting, exercise
  • Purchase intentions: Tinted moisturizing SPF 
  • Location: The United States

This segment may not seem like it’s enough to retarget users, but the information creating a user profile is very powerful as it allows for more specific targeting[10]. For example, any woman within that age range could be looking for the product type specifically, or they may be served ads as they’re making travel plans.  

How Is First-Party Data Collected?

Technically speaking, first-party data is collected by adding a specific data tracking pixel to a website, product, or among your social media channels. This pixel is what records the necessary information about user actions and behaviors within your CRM or CDP. Each time a user lands on or clicks on an organization’s website, browses through the products, interacts with a social media post, or completes a survey, their data can be collected.

More generally speaking, there are several tools that organizations can use to collect first-party data. Google Analytics is among the most popular tools as it helps organizations to analyze their online traffic to gain deeper insights about their customers.

As previously mentioned, DMPs are another option as they allow you to create audience segments quickly and easily to deliver more personalized ads to your recurring visitors—even if those visitors leave your website. 

How to use First-Party Data

Using first-party data allows you to serve your recurring visitors with the types of ads they would expect to see—or would at least find useful. Let’s talk about how to use first-party data in terms of creating a retargeting strategy:

  • Determine which channels will bring in the best data. Examine your social media profiles, website, email subscriptions, mobile apps, points of purchase, CRM system, and so on to see which locations would be most beneficial to your data tracking pixel.
  • Get in front of your data management and storage. The goal is to encourage your privacy-conscience visitors to want to give you their personal data. This means proving that your organization has implemented responsible data governance by asking for user permissions. It also means setting yourself up with a secure data warehouse that allows user segment history to be built upon.
  • Focus on personalization and retention. Personalization raises the absolute lifetime value of each individual user while retention allows their value ratio to increase over that time. By ensuring that you can deliver more personalized and relevant ads that speak to your users, you’ll see an increase in your overall profits.    

Keep in mind that you can also use a DMP to collect first-party data, which helps to automate the process of collecting and using it. DMP platforms allow you to gather and store the data in a centralized location to create specific audience segments. They also allow you to run more personalized ad campaigns.

The Benefits of Using First-Party Data

First-party data is critical for publishers as it offers deeper insights into their audiences and allows them to deliver personalized content. 

Let’s talk about the most significant benefits of first-party data:

It’s Much Safer in Terms of Compliance

When you collect first-party data, you’re collecting it firsthand which means you’re in total control of the information recorded. This makes it much easier to ensure you’re working within the limitations of the GDPR and CCPA in terms of compliance. 

Knowing the source of your data segments makes them much safer to use for targeting your audience since you know that each user has purposefully given his or her consent.

Created Segments Can Be Monetized More Efficiently

When you collect first-party data, you’re opening up new revenue streams for your organization. Since you’ve created these segments based on the permissions of your users, you technically own the data and can sell it through a global DSP[6] to marketers from all over the globe.

The Data Will Be Safe on All Browsers

First-party cookies, unlike third-party cookies, are typically accepted by all web browsers. That would include Chrome, Safari, and even Firefox—which almost always automatically block third-party cookies. 

This means that publishers can continue to target segments created from their own data to reach their audiences with targeted ads without getting blocked.

Custom Segments Can Be Created

By collecting first-party data, you can create custom segments (rather than general ones) to tailor a more personalized experience for your audience. Those you’re specifically targeting with custom segments would likely be the visitors who spend the most money on your products or make purchases more often.

The segments you can create with first-party data are virtually unlimited, which means you can create one for every situation and need your visitors may have.

First-Party Vs. Third-Party Data and Second-Party Data

Put simply, third-party data is the user information purchased by other companies. There are tons of data providers out there that sell first- and second-party data regarding their online customer base on global platforms.

Moreover, third-party data typically includes information such as demographics, interest, and purchase intentions. This data is mostly used to fill the holes in CRM systems to build more well-rounded user profiles or segments with specific attributes.

First-party data is the most valuable data that can be collected on an organization’s audience. It serves as a powerful retargeting resource for ad campaigns as it provides specifics about an existing customer base. 

Third-party data is still beneficial due to the sheer volume of user data[11] that can be accessed upon purchasing it. However, it’s data that’s available to everyone—that means your competitors. Therefore, the information isn’t all that unique.

So, who wins in the first-party vs. third-party data competition?

Well, first-party data will always be more unique—but sometimes they’re better when used together. 

Additionally, when it comes to second-party data, you’re essentially getting first-party data from someone else. However, unlike third-party data, the information is more granular, and upon purchasing it, you can pick and choose the type of information you’re missing whereas third-party data comes as one large package. 

Using First-Party and Third-Party Data Together

Implementing an ad campaign[12] strategy where both types of data are used will allow you to do the following:

  • Find new customers to target
  • Gain new insights into your audience (in other words, fill in the gaps of missing information from sources you may not have)

The same goes for including second-party data, as long as you’re purchasing it from a seller who has the same audience or similar goals within the same industry. Ultimately, the goal is to extend your audience as far and wide as possible to increase your bottom line.

Terms
1. third-party data. Third-party data is any information collected by an entity that does not have a direct relationship with the user the data is being collected on. Often times, third-party data is generated on a variety of websites and platforms and is then aggregated together by a third-party data provider such as a DMP.
2. second-party data. Second-party data is essentially someone else's first-party data. The seller collects data straight from their audience, and it all comes from one source. You can feel confident in its accuracy. You purchase 2nd party data directly from the company that owns it.
3. First-party data. First-party data is the information that companies can collect from their own sources. In other words, every information about customers from both online and offline sources, such as the company's website, app, CRM, social media or surveys is first-party data.
4. Data Management Platform. A platform that unifies and centralizes collecting, organizing, and activating large sets of data from disparate sources. Any audience built within the DMP can be defined and analyzed using audience profile reporting.
5. General Data Protection Regulation [GDPR] ( GDPR ) GDPR which is also known as the General Data Protection Regulation is a set of personal data regulations created for EU citizens. It changes the way businesses stores and collects data from its users from the EU.

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