1st party data, 2nd party data and 3rd party data: who is who, and who does what?
The world of data continues to push us. According to IBM, 90 of the world’s data was created over the last two years and every day 2.5 quintillion bytes of data is generated. Data is absolutely everywhere and has even become an exchange currency. First party, Second party or even Third party, data is intertwined to become powerful marketing tools today. However, it is important to be well aware of the interest and uses of each one in order to get the full potential for optimised marketing campaigns. What type of data would benefit you the most and how to use it? That’s what we are going to try to explain to you in this article in a simple way.
So what exactly are the different ‘data’ categories? To understand the potential of each of the existing data, nothing better than to start with clear definitions in order to also understand how they relate to each other.
A — 1st party data
1st party data is the simplest data to understand and harvest. Indeed, first party data is data that corresponds directly to the data of your audience, your first circle. It is you, who would collect it directly by means of digital tools following the site visits of Internet users and/or applications or directly on your sales sites.
This data is the essence of the behaviours, actions or interests that your target has generated by interacting on your sites. This may include social data, subscription data and CRM data. All this information is stored in a database and can also be supplemented with information collected offline as is the case for surveys that completed in-store, checkouts or even customer feedback to the teams, etc.
First party data is ultra important for different reasons:
- It is collected directly by you without any intermediary on the sites and/or points of sale;
- It is easy to collect and manage in a database;
- It is more cost-effective than the others, therefore more profitable for your marketing operations;
- It is relatively free of ethical and privacy concerns, because you know exactly where that data is coming from.
Last but not least, the first party data comes from users who have a real interest in the brand, because they are the ones who came to you directly. It will, therefore, allow to determine the target audience of future display campaigns precisely.
Today, taking control of this data must be a priority for any company that wants to monetise, leverage this asset to expand valuable audiences and seek out similar ones, strengthen its brand image and relationship with consumers to systematically improve the ROI of all marketing campaigns.
B — 2nd party data
2nd party data is essentially the same as 1st party data except that the data comes from a 3rd party company. The goal is to buy data from a company that owns it. This data is therefore similar and may come from the same sources as your own 1st party data.
In this case, it includes online and offline data like:
- Activities on third party company websites;
- Activities on third-party company mobile applications;
- Social media data;
- Customer surveys;
- Surveys or in-store feedback, etc.
In such a 2nd party collaboration, there is no intermediary involved. The art of 2nd party data lies in the fact that links of trust and interest must be established with selected companies. The buyer and seller must agree in advance on what will be sold, the price of the transaction, the terms of access and other conditions of sale. The vendor can offer specific data points, audiences or hierarchies to the other company.
This type of win-win partnership is still a relatively new concept and deserves to be seriously considered in a marketing strategy, as the audiences and data of each complement the other without competing. These are larger targeted audiences that allow for a multiplied impact on marketing campaigns.
There are multiple examples of collaboration: An airline could exchange its data with a hotel group, a brand of running clothes could join forces with a brand of connected watches, etc. You get the idea: the possibilities are endless as there is strength in unity.
Therefore, second party data plays an important role in the extension and targeting of audience. There are immense opportunities and it is essential to seek, form and maintain mutually beneficial partnerships.
C — 3rd party data
Third party data is different from the first two data mentioned because the data purchased from a third party company is not collected by that same company. This means that data is purchased from “data merchants” or, more precisely, data aggregators that get their material from platforms and websites where users have left their information.
These data aggregators can be considered as intermediaries that buy-sell. They buy from publishers and site owners to resell to companies and brands that need to acquire data to run their marketing campaigns.
These intermediaries not only buy and sell, but also classify data. They organise the data according to various aspects:
- Demographic characteristics;
- Online behaviour;
- Interests, etc.
This segmentation is critical so that companies that resort to them can buy the data, which they can leverage according to their goals. On the other hand, if the buyer knows what kind of data they are buying, they do not know exactly where it comes from. The buyer knows the source (the seller) but if they want to know the origin of the data, they need to contact the seller. This opacity about data sources is largely offset by the fact that third-party data is bought and sold on a program basis, which means that volumes are large. Often, the role of 3rd party data is to complement 1st and 2nd party data and consolidate audiences.
Global data situation
Today, it is possible to collect an infinite amount of information on Internet users who leave “traces” of their visit. The implementation of GDPR has not necessarily diminished the world of data. It is still possible to collect information in compliance with the law and the means of collecting it are becoming more and more sophisticated.
“1st party data: the most popular data”
With the latest scandals about Internet users’ privacy, a study by Quantcast and Iligo reports that first-party data is the most valuable: 56% of advertisers and media agencies prefer this “proprietary” data.”
Any digital strategy involves the collection of data. The implementation of the GDPR has increased the responsibility of companies in terms of data transmitted and on the other hand the proper use of this data by the CRM system used.
In concrete terms, 1st party, 2nd party and 3rd party data have not really been impacted by this regulation, as the sector knows how to adapt (or at least is in the process of doing so). Moreover, today, data can be made anonymous or pseudonymous, and thus emerge stronger. GDPR requires a real reorganisation of the data market and an increased professionalism of editors, which implies maintaining activity registers, prioritising security and being able to provide proof to authorities like the CNIL that personal data is used after having obtained the consent of users.
A 2017 Mc Kinsey report found that less than 5% of total data was analysed and used. The same study predicts that by 2021 big data will account for over $66 billion of the global market. This is how important data is, with benefits that go far beyond marketing, and for all sectors. Artificial intelligence, predictive analytics and a prospect of more than 20 billion objects connected in 2020 make data a more than valuable commodity, sometimes more valuable than gold itself.
How can marketers put each of them to good use?
A — 1st party data
1st party data is collected directly online and offline, without intermediaries. It is a pixel copied straight onto the site and/or application that will allow us to know all the interactions that Internet users have with the digital interface accurately. The pixel receives data about visitor activity on your site and can come from a variety of sources, such as an integrated data management platform or DMP.
Indeed, if you have a DMP, you can use it to gather the data you get from different sources in one place. Once you have all the information in the system, you can manage, archive and analyse it for a thorough understanding of your customers.
Because of this direct harvesting, first party data has a high added value. It comes directly from the Internet user, who has expressed an interest in what is offered to him. Because of the high quality of first-party data, there are many options out there for marketers to use first-party data.
Obtaining information on the audience.
Before even trying to decipher your target’s behaviours and influencing them in the best way possible, the first task will be to analyse your initial data to understand who your natural audience is. It is up to you, marketers, to research, classify and segment the common traits of each Internet user to fully understand your personas.
Once this work is done, it will be easy to go after similar audiences by expanding your audience during marketing campaigns to reach new prospects that might be interested.
Predicting future trends.
Analysing the behaviour of Internet users on the site makes it possible to predict their future behaviours at the same place. Since data is collected directly without intermediaries or interference, it is very easy to draw conclusions. Is your audience more sensitive to one type of advertising than another? Is the traffic coming from a particular traffic source? What are its purchasing intentions? By carefully analysing what happens on digital interfaces, it is easy to anticipate the next actions of each of your target’s segments
As we have seen, the data collected allows you to better understand your prospects, what they do and what their interests are. In addition to knowing them well, you, as marketers, will be able to talk to them better, adapt the content and message to make them relevant enough. Let’s take a simple example to illustrate our point: you set up a marketing campaign that includes several videos on different topics that you want to share with potential customers as part of an inbound marketing strategy. By looking at data relating to the content your audience has viewed in the past, you can determine users’ interests and send them videos about science, sports, music, fashion, nature, health or any other area they are interested in.
B — 2nd party data
The partnership you create with a third party company will determine the quality of the data you receive. This 2nd party data is fascinating, as it is complementary to that of the 1st party. The data is more accurate and is acquired in a more transparent manner than if you would have obtained aggregated data from various sources.
Scaling your data.
The addition of data similar to your initial data allows you to move faster than a one-sided collection from a smaller audience. Scaling your data with similar data will allow you to also scale the marketing campaigns. This means reaching a higher level much faster without compromising on quality.
Touching new prospects
2nd party data is perfect for finding new audiences. In order to reach a potentially similar audience and attract new customers, there is nothing better than to rely on audiences that could be responsive to your products. It is by creating valuable partnerships with similar clients that you can save time and money. Let’s take another example to illustrate this advantage. A new vegan cosmetic brand wishes to communicate to increase its reputation. A collaboration for a data exchange with an organic and vegan food brand would definitely be a win-win partnership for both parties.
As with first-party data, careful analysis of the data can make predictions about the behaviours of prospects during their future visits. By using predictive behaviours, the company can then work to monetise the information downstream in a more relevant manner. Because data is collected on a site that is not yours, you get additional information on what your audience likes and interacts with the most.
Quality B-to-B partnerships.
2nd party data can lead to relationships that go far beyond data exchange. The two companies may indeed realise that they have much more to share as they have similar audiences. Along the same lines as “strength through unity”, such relationships can be beneficial in many ways, particularly in terms of development and growth.
C — 3rd party data
Again, 3rd party data is particularly interesting and powerful when you couple it with 1st party data. More voluminous than the first two and with a larger scope, it allows you to broaden your audience and draw more in-depth conclusions regarding the behaviours and interests of your targets.
Improve your 1st party data
Scaling is to 3rd party what accuracy is to 1st party, it is even its speciality.
With 3rd party data, it is possible to refine the 1st party data of the target audience owing to the sheer volumes of the data. Proportionally, the more relevant information there is, the better the results. By purchasing additional information about your primary audience, you will learn more about your customers, which will give you a more complete picture of who you are trying to reach.
Increase your audience
3rd party data points are so important that you will be able to access audiences that you would not have had access to even as a marketer. If there were no intermediary to provide quantities of qualified data, it would be much more complex and time-consuming to expand your database.
Increase your targeting accuracy
Perfectly analysed data is also data that allows you to segment and sub-segment different audiences accurately. Whether it is demographic, social, behavioural or contextual characteristics, the classification can be done in subparts and even subparts of subparts. It is essential for a better knowledge of its audience and therefore of its promotional and/or advertising message.
Discover new audiences
As briefly outlined above, 3rd-party data can bring out new audiences that you might not have had access to, but also that you might not have thought of. It allows you not only to improve your prospect targeting, but also to develop new products to make them perfectly attractive to new audiences. Once the first, second and third party data has been collected, it is ideal to consolidate it on a single platform that allows for optimised archiving, classification and management of the data. This way, you can quickly select the material you need to develop optimised and relevant marketing campaigns.
While all estimates predict that the hegemony of data is still in its infancy, it is increasingly useful to couple 1st, 2nd and 3rd party data to have a panel of quality prospects and customers. Collecting, organising and analysing is no longer enough. In an ever-changing digital world, it’s up to companies and agencies to be adept at integrating both new privacy regulations and marketing practices. Equip yourself with powerful tools to collect your own data, rely on 2nd party data with a B2B collaboration or work with reliable service providers, these are the real challenges for brands and companies to turn data into pure gold.