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1st Party Data, 2nd Party Data, 3rd Party Data: What Does It All Mean?

September 13, 2018

Table of Contents:

1st Party Data

2nd Party Data

3rd Party Data

Data is everywhere — we create more than 2.5 exabytes of it every day, and researchers predict that there will be 163 zettabytes of the stuff by 2025. In addition, there are numerous kinds of data related to marketing and advertising. We have 1st party3rd party, and now there’s even 2nd party data. How can you possibly keep all this information straight?

The world of data as it relates to marketing might seem confusing at first, but once you understand the differences between the various types of data and how they relate to each other, it’ll start to make sense. And once you see for yourself what data can do for your campaigns through the use of a data management platform and other technologies, it’ll really hit home.

Why is it so important to understand the different types of data? Data is one of the biggest drivers of successful marketing today. Which kinds of data will benefit you the most, though, depends on your current situation and your goals as a marketer. With that in mind, let’s dig into what each type of data is, how you can use it and how to access it.

What is 1st Party Data?

First party data is the information you collect directly from your audience or customers. It includes:

  • Data from behaviors, actions or interests demonstrated across your website(s) or app(s)
  • Data you have in your CRM
  • Subscription data
  • Social data

It can also include non-online information such as completed surveys, customer feedback and other customer information stored in your CRM database.

Learn How to Use 1st Party Data

1st Party, 2nd Party, 3rd Party Data

First party data comes straight from your audience and customers, and it is generally thought of as the most valuable. Not only is it the most valuable, but also it’s available to you at no cost, making it cost-effective. It’s also relatively easy to collect and manage, especially if you use a data management platform. Privacy concerns surrounding first party data are minimal because you know exactly where it came from, and as a marketer, you own it outright.

First party data is king. Any company not collecting and activating 1st party data from their properties is basically leaving money on the table. Taking control of first party data should be a priority for any company today that wants to monetize, learn from, and use the asset to scale valuable audiences, deepen engagement with consumers and improve ROI across marketing efforts.

How Can Marketers Use 1st Party Data?

First-party data is highly valuable because of its quality. Because you collect it directly from the source, you know it’s accurate, and because it comes straight from your audience, you know it’s relevant to your business.

1st Party Data is Accurate

Another benefit of 1st party data is that privacy concerns surrounding it stay minimal because you know exactly where it came from and, as the marketer who collected it from your audience, you own it. Because of the high quality of first party data, there are many options for how marketers can use 1st party data.

Predict Future Patterns

The 1st party data’s accuracy and relevance allow you to predict future patterns, such as audience behavior, with confidence. If you’re a marketer and your data reveals, for instance, that a particular user has been visiting webpages about buying basketball shoes and placed a pair in their shopping cart, you can infer they may buy basketball shoes in the future.

Conversely, if your audience seldom clicks on banner ads but frequently engages with video ads, you know they prefer video ads and will like continue to prefer them in the future. The knowledge allows you to choose ads that appeal more to your audience.

Gain Audience Insights

Even if your audience is relatively small, first party data can give you valuable insights. You can analyze your data for traits that your customers have in common and build out that initial audience using Lotame’s Audience Optimizer to include new customers who also have those characteristics. You can expand your audience, improve your insights and grow your business.

Personalize Content and Advertisements

You can also use first party data to personalize the content or ads you show to a particular user. The data you collect on a visitor to your website will give you improved insights into their interests and needs, allowing you to serve content to them that feels personalized.

Say, for instance, you have various promoted videos on different topics that want to share with potential customers as part of an inbound marketing strategy. By looking at data about 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 whatever areas their interests lie in. Read more about 1st Party Data in our Back to Basics Post here.

How Do You Collect 1st Party Data?

To collect first party data, you enable a pixel on your website. The tool receives data about visitors’ activity on your site and can come from various sources, such as an integrated data management platform, or DMP.

Collecting First Party Data

You can also pull data from other databases you use, such as customer relationship management, or CRM, systems. Customers might also give you information when they sign up for your email list or buy a product from your website. To bring this offline customer data online, you can “onboard” the data, which is a service that matches your offline data to online cookies or mobile IDs. Read more about Lotame’s Data Onboarding services.

If you have a DMP, you can use it to gather the data you get from various sources into one place. Once you have all of the information in the system, you can manage, analyze and activate it all together for a holistic understanding of your customers.

What Is 2nd 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. There’s no middle-man in such a transaction. It requires you to seek out companies with data you need and form a relationship with them.

Second party data is similar to first party data, but it comes from a source other than your own audience. It could include data from many of the same sources first party data comes from, such as:

  • Activity on websites
  • Mobile app usage
  • Social media
  • Customer surveys

Learn How to Use 2nd Party Data

While 2nd party data is a relatively new concept compared to first- and third party data, it can be extremely useful if you find the right data set, so it may be worth looking into. Read more about 2nd party data in our Back to Basics Post here.

How Can Marketers Use 2nd Party Data?

Second party data has many of the positive attributes of first party data but gives you access to information and insights you couldn’t get from first party data alone. Because it comes directly from the company that collected it, you know it’s of high quality. The data is more precise than if you got data aggregated from a variety of sources.

Second Party Data

Second party data transactions also offer a lot of transparency because you work directly with a company. You have control over what you buy, the terms of sale and how the information gets used.

Increase the Scale of Your Data

You might purchase this type of data to add scale to your first party data. Although first party data is of a high quality, if your audience is small, you might not be able to reach the scale you are hoping for with your campaigns. Supplementing it with similar data from a second party can make your campaigns go further with no questions of quality.

Reach New Audiences

Second party data is also useful if you want to reach an audience that isn’t your own or find more new prospective customers.

If you’re a marketer for a cosmetics company that targets women, for example, your 1st party data will mostly come from women. If your company comes out with a new beard oil and you want to market it to men, you won’t have the 1st party data to reach the new audience. You might team with a men’s health or fashion website and buy the data you need from them.

Predict Behaviors

Like with 1st party data, you can also use 2nd party information to predict future patterns surrounding customer behavior and build out your current audience. By employing predictive behaviors, your company can work to monetize the insights down the line. Because it is gathered on a site that is not your own, you will receive additional insights into what your audience likes and interacts with most.

Build Out Your Current Audience

Build Relationships

Using 2nd party data can also have benefits that extend beyond the data itself. To get the desired data, you need to form relationships with companies that have it, a process that can lead to helpful new partnerships to help your business grow. If you ever need similar data in the future, you may be able to reach out to that same company again now that you can quickly get high-quality data from them.

How Do You Get 2nd Party Data?

To get 2nd party data, you need to go to the company that owns it and buy it directly from them. Find a company whose data you need, form a relationship with them and negotiate a transaction. The buyer and seller must agree in advance on what will be sold, the price, how it will be accessed and any other terms of sale. The seller might offer specific data points, audiences or hierarchies to the other company.

But how do you find those companies? One of the easiest ways to find a buyer or a seller is through a 2nd party data marketplace like Lotame Syndicate, which connects both Lotame DMP clients and non-DMP clients to enable 2nd party data transactions. Lotame’s team of data experts are on hand to help connect you with the target buyers and sellers you are looking for.

We offer two versions of this product for increased data portability — Syndicate: Direct and Syndicate: DMP:

  • Syndicate: DMP enables transactions between Lotame DMP clients. Since both parties already have their data in the Lotame DMP, the process is rather straightforward. You simply use the platform to communicate with the other party and establish an agreement on the terms and conditions of the sale. We connect the two companies and facilitate the transaction.
  • Syndicate: Direct allows DMP clients to sell their data to parties that are Lotame clients, expanding their reach. Rather than transfer the data within the DMP, we send it to whichever demand-side platform it needs to go to. This means that you aren’t limited to selling your data to only Lotame clients. As long as the other party as a DSP seat, they can get your high-quality data.

What Is 3rd Party Data?

Third party data is data that you buy from outside sources that are not the original collectors of that data. Instead, you buy it from large data aggregators that pull it from various other platforms and websites where it was generated. Essentially, these aggregators pay publishers and other data owners for their 1st party data, collect it into one large data set and sell it as 3rd party data. Many different companies sell this kind of data, and it is accessible through many different avenues. The Lotame Data Exchange is one of the largest 3rd party data exchanges in the world.

Third Party Data

Learn How to Use 3rd Party Data

After aggregating this data, providers organize them into categories based on aspects such as industry, audience behaviors and interests and demographic characteristics such as age and gender. Each category is then broken down into specific segments, and the buyer chooses which particular segment they want to purchase from each individual buyer. The name and contents of the 3rd party data segments will vary from provider to provider, so you need to understand what you are buying and where it came from before you make a purchase to power your campaigns.

3rd party data is bought and sold programmatically, which means it happens rapidly and generally on a large scale. The large volume and broad scope are some of the primary benefits of third party data. The downside is that you don’t know the original source of the data. The data is also not exclusive — it’s publicly available, so your competitors could have access to the same data.

How Can Marketers Use 3rd Party Data?

Because of the volume and reach of 3rd party data, you can use it to expand your audience and gain more profound insights into their behaviors and interests. Data from a third party is especially powerful when you combine it with your first party data.

Combine Third Party Data

Enhance Your First Party Data

While data you collect yourself is valuable because of its precision and relevance, it often lacks scale. Scale, however, is third party data’s specialty. When you identify your core audience through collecting first party data and build on that audience through the use of third party data, you can reach new potential customers and learn more about the people that are interested in your products or advertisements. Buying additional insights on your own first-party audience means you learn more about your customers for a more complete view of who you are trying to reach.

Expand Your Audience

Third party data gives you access to many more data points than 1st and 2nd party data alone could, which is why it’s so useful when you want to expand your audience. It gives you information about users you would never have access to otherwise, and it does so on a large scale.

Say the owners of a new apartment building are looking for tenants. With their first party data, they’d only have access to people who had already visited their website. With third party data, however, the owners could reach much broader populations and target people within the data set who had recently searched online for nearby apartments.

Increase the Precision of Your Targeting

Third party data is also helpful for demographic, behavioral and contextual targeting and making that targeting more precise, especially when it comes to the middle and upper parts of the funnel. Read more about finding your target audience here.

Say you’re a brewery owner whose audience is made up primarily of men in their 20s and 30s. After analyzing third party data, you might discover that men in the age range who live in urban areas are more interested in your brand than those that live in rural areas. Third party data could enable you to narrow that focus further to the sub-group, making your ad campaigns more efficient.

Discover New Audiences

Additionally, looking at the broader data might help you to discover a new demographic that would be interested in your product, helping you to expand your reach and grow your business. You could even use it when developing new products to help make them appealing to new audiences.

Expand Your Reach And Grow Your Business

As an advertiser, you might create these segments yourself or use pre-existing sections within the data set.

How Do You Get 3rd Party Data?

To obtain third party data, you need to purchase it from data providers. You can find these providers through DSPs, DMPs and public data exchanges like the Lotame Data Exchange (LDX).

LDX includes billions of data points from around the world, sold as Lotame segments as well as over 40 branded data providers. LDX also integrates directly with the Lotame DMP. The integration enables you to connect your 1st and 2nd party data right to 3rd party data so you can easily expand your audience and optimize your targeting.

When purchasing 3rd party data, there are many factors the buyers should be aware of. To decide on a data provider, you need to find out how they collect their information, when they obtained it and from where. You’ll also want to know what kind of data they’re offering. Some common variations include:

  • Declared data: Information knowingly provided by a user through avenues such as an online form
  • Inferred data: Insights about non-demographic data, such as interests and preferences gleaned from a user’s online activity
  • Observed data: More concrete data gathered by tracking a user’s online activity, such as product pages visited

There are also various kinds of audiences:

  • Observed audience: These users took a specific action, such as purchasing a particular product or visiting a certain website.
  • Modeled audience: Data providers create the audience by finding users with similar characteristics to an observed audience. You can use these similarities to predict future behaviors.

Having information about a set of data will help you to assess how relevant it is to your goals and to evaluate its quality. The kind of data you want depends on your objectives and preferences.

You’ll also need to know how the provider has organized the data, the price for each provider and the amount of data you’ll receive. Ask as many questions as you need to ensure you get the data that will be most helpful to you.

1st, 2nd, 3rd Party Data: All Together in a DMP

Data management platforms like Lotame are used by marketers, agencies and publishers in every industry around the globe, to help them collect 1st, 2nd, and 3rd party data into one unified platform. This data can be sliced and diced into any audience you are focused on, and offers granular insights about what each audience is interested in, actions they take, where they live, and beyond. Learn more about data management platforms in this article: What is a Data Management Platform?

 

Learn More About Lotame Solutions

Lotame addresses the dilemma of how to collect, organize and analyze your customer data. We offer the tools you need to gather, organize and activate 1st party, 2nd party and 3rd party data. Our award-winning data management platform enables you to collect first party data as well as easily access 2nd and 3rd party data from right in the DMP. It provides a central platform where you can organize all of your data points, whatever sources they come from, and readily activate them.

Lotame Syndicate is our easy-to-use second party data marketplace. Syndicate connects buyers and sellers and facilitates transactions between them with complete transparency. You can use our marketplace to find the right partners while maintaining control over your interactions and transactions.

The Lotame Data Exchange is your source for high-quality third party data. It includes data from billions of users packaged into thousands of precise segments available in more than 40 advertising platforms. We can also build custom segments. In addition to purchasing Lotame-branded data through LDX, you can access data from more than 40 other branded data providers.

To learn more about these and our other products, browse our website or contact us. As an independent DMP provider, we offer superior customer service and support, as well as leading technologies. We’ll help you find the data solution that’s right for you. You can also request a demo of our products to try them out for yourself. To find out what data can do for your business, get started with Lotame today.

Learn How to Use Data