First-Party Data vs Third-Party Data: How to Use Them

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.

Jump to:

• What is First-Party Data?
• How Can You Use First-Party Data in Marketing?
  
• How Do You Collect First-Party Data?
• What is Second-Party Data?
• How Can Marketers Use Second-Party Data?
• How Do You Get Second-Party Data?
• What is Third-Party Data?
• How Can Marketers Use Third-Party Data?
  
• How Do You Get Third-Party Data?
  
• What is Zero-Party Data?
• How is Zero-Party Data Different from First-Party Data?
  
• First, Second, Third-Party Data: Putting It All Together
• Frequently Asked Questions

What is First-Party Data?

First-party data is the information you collect directly from your audience or customers that includes but is not limited to:

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

This data 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 First-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 an audience management platform. Data 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 first-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.

First Party Data Strategy in Advertising and Marketing

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.

Another benefit of first-party data is that privacy concerns are 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 it.

Predict Future Patterns

The first-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 web pages 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 likely 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 lookalike modeling capabilities 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 you want to share with potential customers as part of an inbound digital 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 First-Party Data in our Back to Basics Post here.

Define the Customer Journey

In addition to personalizing content, you can use first-party data to understand the journeys potential buyers take before they purchase your product or service. Understanding the road to conversion can help you target messaging that keeps people on the right path.

Knowing when to supply your message is key. If Instagram ads initiate the customer journey more than other forms of media marketing, you may use these more for potential leads that fit your demographic. In the same way, you may find that SMS or email marketing is a helpful channel to keep your audience interested with promotions for new products and coupon codes.

Streamline Attribution Processes

With a map of the customer journey, you can more effectively analyze attribution techniques. The customer journey will tell you what marketing methods are most effective for conversion and help you align your budget with these methods. Knowing how to budget effectively can make your marketing techniques more efficient and increase your return on investment (ROI).

Enhance Multichannel Measurement

Your marketing efforts likely include a range of platforms and sources that reveal valuable information about your consumer base. First-party data in your marketing strategy can help you bridge the gap between these multiple channels and see how consumers move between them. With a better understanding of usage across channels, you can guide behaviors that encourage conversion. 

How Do You Collect First-Party Data?

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

For first party data collection, 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 an audience management solution, 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.

Once you understand how to collect first-party data, you can start leveraging multiple sources through your audience management platform. Beyond your website and CRM, you can obtain first-party data through:

• Mobile apps: Any customer who takes the time to download your app has a clear enthusiasm for your product or service. Your mobile app can reveal more about your most loyal consumers. To obtain meaningful data, you must define meaningful events within the app to log and measure them when they occur — for example, adding an item to the cart.
• Email and SMS: Through email and text messaging, you can collect valuable information like open rates, bounce rates and click rates. This information, paired with demographics, can help marketers better understand your company’s audience and who is most likely to be interested in your products or services.
• Call centers: Your call centers are often the source of information like new account holders and the problems consumers face. Even if you’ve automated a large portion of your call center, you can still use this data to understand your marketing needs.
• Beacons: Beacons are transmitters that use a device’s location to gather information. Using first-party data through beacons can help you understand in-store behaviors and the demographics that shop at your locations.

Is First-Party Data More Privacy Compliant?

There isn’t anything about first-party data that makes it more privacy friendly. Remember, the term “first-party” just refers to who collects and owns the data. It doesn’t refer to whether the party is collecting personal identifiable information (PII), or sharing company data haphazardly with others. When it comes to data privacy it’s consent that matters full-stop. 

What Is 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 can share second-party data directly from the company that owns it. There’s no middle-man in such a collaboration. 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

While second-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 second-party data in our Back to Basics Post here.

Learn How to Use Second-Party Data

How Can Marketers Use Second-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 transactions also offer a lot of transparency because you work directly with a company. You have control over what you share, the terms of the collaboration and how the information gets used.

Increase the Scale of Your Data

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

Using second-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 Second-Party Data?

If your interested in second-party data, you can use a data collaboration platform like Lotame’s Spherical to find companies to partner with. You then will need to form a relationship with this specific partner, and negotiate the terms of your collaboration. Lotame’s team of data experts are also on hand to help connect you with potential data collaborators.

What Is Third-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. These aggregators pay publishers and other data owners for their first-party data.

The aggregators then collect it into one large data set and sell it as third-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 third-party data exchanges in the world.

Learn How to Use Third-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 audience segments, and the buyer chooses which particular segment they want to purchase from each individual buyer. The name and contents of the third-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.

Third-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 data source. The data is also not exclusive — it’s publicly available, so your competitors could have access to the same data.

How Can Marketers Use Third-Party Data?

Because of the volume and reach of third-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.

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 first and second-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.

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

How Do You Get Third-Party Data?

To obtain third-party data, you need to purchase it from data providers. You can find these providers through DSPs, Audience Management platforms or 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 all of Lotame’s Data Connectivity solutions. The integration enables you to connect your first and second-party data right to third-party data so you can easily expand your audience and optimize your targeting.

When purchasing third-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.

What about Zero-Party Data?

Every time you think you’ve got the hang of this industry, another buzzword is added to the ad tech buzzword bingo bonanza! The latest? Zero-party data. 

What is zero-party data, and how does it differ from the other definitions above? Zero-party data is a relatively new term, coined by Forrester in 2018, which can be defined as data shared with a company or brand intentionally or voluntarily by the user. This data could come from the following sources: 

• Subscriptions 
• Preference Centers
• Quizzes
• Surveys
• Pop-up forms 
• Interactive digital experiences

Typically, this type of data is given in exchange for something of value. Perhaps a user gives their information in exchange for a more personalized experience, a payment token or a discount. Whatever the case, generally the user will walk away with something in return for the data they’ve given.

How is Zero-Party Data Different from First-Party Data?

The main distinction between zero-party and first-party data is that zero-party data is both explicit and declared. When a customer trusts a brand enough to provide this really meaningful data, it means that the brand doesn’t have to infer what its customers want, or what their intentions are. 

First-party data forces a marketer or publisher to make assumptions about that user on their site. On the other hand, zero-party data is information that a customer explicitly and intentionally shares with your company, which makes it gold.

First, Second and Third-Party Data: Putting It All Together

Data collaboration platforms and solutions like Lotame are used by marketers, agencies and publishers in every industry around the globe, to help them collect first, second and third-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 collaboration platforms in this article: What is a Data Collaboration Platform?

Get Started with LOTAME Today

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 first-party, second-party and third-party data. Our award-winning data connectivity solutions enable you to collect first-party data as well as easily access second- and third-party data from Lotame’s data collaboration platform Spherical. It provides a central platform where you can collect and connect all of your data points, whatever sources they come from, and enrich, model, collaborate and readily activate them.

To learn more about our solutions and what our data can do for your business, contact us!