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InContext / An inside look at the business of digital content

1st, 2nd, and 3rd-party data walk Into a bar…

January 30, 2017 | By Haley Adam, Product Marketing Manager—Lotame@haley_adam

Learning more about your audience is key to any successful data-driven advertising campaign, and using data, whether it be 1st, 2nd or 3rd party, is an important driver in making that happen. But not all data is created equal.  When you are managing an advertising campaign, it is important to know the differences between each type of data and how you can leverage each to fit your business needs and goals.

First Party Data: The Ring Leader
Let’s begin with what is considered to be the most valuable form of data: first-party. First-party data is the data that you own and have gathered directly from your customers, and can include actions or interests demonstrated across your websites, social data, offline data, mobile data, and even TV data. First-Party data is the ring leader in your group of friends at the bar. Everyone wants to get a piece of him or her. People generally look to first-party data for guidance—it’s valuable, free, and trusted.

So why is first-party data so amazing? First of all, first-party data is yours, and it will always belong to your brand. Your company owns that data set (unless you choose to sell it, which demonstrates its value). Second, because you gathered it straight from the source, it’s accurate, and relevant; there’s no question of quality. And third, it is unique. Your first-party data is different than anyone else’s, no matter how alike you are in brand and awareness strategies. Lastly, it is less regulated than the other forms of data. No rules, no expectations. Nobody can tell you what to do with your data, because it’s yours.

So what are the limitations of first-party data? It’s finite. It is only as large or broad as your brand footprint. For example, if your site produces fitness news, your first-party data will only consists of the fitness behaviors that occur on your page. If you are looking to target more people with different interests, you may not have those other interests in your first-party data. There is no such thing as extending your first-party data, especially for free. And that will come at a cost.

Third-Party Data: The Party Animal
Third-party data is the friend who may not be the most trustworthy, but they sure know how to gain a following. They are friends with everyone, and no one can match their reach.

Third-party data refers to the customer data that is ingested from an outside (or “third”) party, at a cost. It is generated on other platforms and often aggregated from many data providers, while the original source is left unknown to the data buyer. For example, a third-party data provider will choose to pay certain publishers to let it collect information about their visitors (essentially, the publisher’s first-party data). The third-party data provider will then aggregate all those data points and organize them into a broad behavioral hierarchy, ranging from automobiles to recipes, and beyond.

Typically, third-party data falls into large, industry-standard categories based on attributes ranging from behaviors and interests to age and gender. This data is housed in dozens of marketing and ad tech platforms and can be sold to advertisers who are looking for help in targeting their advertisements. As readily accessible as it may be, third-party data is sometimes considered less valuable than other types because it is a) very readily available in many places – including to your competitors, and b) you can’t be sure where it came from.

Let’s not throw third-party data under the bus though. It is great for demographic, behavioral, and contextual targeting; and because of its scale, it plays a critical role in solutions like audience targeting and reach extension. When you don’t have enough first-party data to fulfill a campaign, many people turn to third-party data to save the day.

Second-Party Data: The Peacekeeper
This three musketeer group at the bar wouldn’t be the same, however, without second-party data. Being the middleman of the group, and at most times the peacekeeper, second-party data is all about relationships.

In essence, second-party data is another company’s first-party data they sell directly to you, rather than through a data exchange. Through this direct, transparent relationship, you are able to define exactly which segments are being bought or sold, the price of the data, and any other important terms you may require, allowing you to be fully confident in its quality.

For niche brands, second-party data can be a powerful option. For example, a 5-star hotel might want to partner with a travel website to gain location information about certain buyers. The hotel can serve specific ads to consumers who have searched flights in a specific location. In turn, if a consumer books a hotel first, the travel site can send ads for good deals on flights. Through a second-party relationship, each company involved can access a new type of audiences, providing both with scale and precision.

Second-party data is the new kid on the block, and not all publishers have embraced it. Although many believe it is higher quality than third-party data (as it’s coming directly from the source, and not available on the open market), it’s also harder to get your hands on. Often this is because a buyer doesn’t know where to go if they don’t already have personal relationships with other publishers or brands.

Rather than managing this exchange, a shared cookie environment (such as a DMP) can help foster your data and the privacy requirements that go along with it. A DMP serves as the “middleman” organization that both parties can trust to help with the syndication of their data, especially in a privacy-friendly manner.

Obviously not all data is equal. Just like the three uniquely different friends at the bar, first-, second-, and third-party data comes in various forms. Data-driven marketing campaigns wouldn’t exist without the data to run them, but thankfully there is an almost unlimited amount of it available for marketing campaigns. Truth be told, there is a place for each type of data in the digital marketing/advertising world. The key is to know the ins and outs, strengths and weaknesses of each type, and use them accordingly.

Haley Adam is fascinated with all things sitting at the intersection of technology, digital, and advertising. She is an integral part of the Lotame marketing team, participating in product marketing, social, events, and corporate marketing efforts. When she’s not talking data, Haley spends her time traveling the world or playing soccer. Haley holds a BA in Public Relations from Wilkes University.

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