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A Guide to Second-Party Data for Data Buyers

A Guide to Second-Party Data

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At Lotame, we saw a 600 percent increase in our second-party data client portfolio in 2018, and we expect the popularity of this data source to continue increasing in 2019. Why is second-party data in such high demand? It has significant advantages related to transparency and can help you uncover valuable insights to improve your marketing and grow your audience.

In this article, we’ll look closer at these benefits and also discuss the challenges of using second-party data, how the second-party data marketplace works and more. Let’s start by explaining what second-party data means.

What Is Second-Party Data?

What Is Second-Party Data

To get a better second-party data definition, we’ll first define another common type of data — first-party data. First-party data is information you collect directly from your audience. Examples include details customers give you when they subscribe to your email list, data you gather when users interact with you on social media, data you collect when visitors take actions on your website and other similar kinds of information.

So, what is second-party data? It’s essentially another company’s first-party data you purchase directly from the source — the company that collected it. The buyer and seller must agree on what data will be available, the price, how to access it and other terms of sale. The seller may offer particular data points, audiences or hierarchies.

Get Started with Second-Party Data

Second-party data differs from another popular kind of data, third-party data, in several ways. You don’t purchase third-party data from the company that collected it. Instead, other organizations aggregate data from multiple sources and sell it on publicly available marketplaces.

To get second-party data, you can reach out to a company with which you already have a relationship, or you can seek a company that may have the data you need and attempt to start a conversation. As long as they’re not in direct competition, there’s a good chance they’ll be willing to discuss a possible exchange of data. You can use a second-party data marketplace such as Lotame Private Data Exchange to help you find these potential sellers.

How to Use Second-Party Data

How to Use Second-Party Data

So, once you get second-party data, what do you use it for? Here are a few of the most common applications.

  • Reach new audiences: You can use second-party data to expand your audience into new areas. Let’s say, for example, you run a company that makes soda, and you want to branch out into selling sports drinks. You have lots of first-party data about people who like soda, but none about athletes. You could contact a sporting goods store and arrange to purchase data from them, allowing you to target advertising to people interested in sports.
  • Increase your audience scale: If your audience is relatively small, you might not have enough data to reach the size you want with your campaigns. You can increase the range of your data by supplementing it with second-party data that’s similar to the data you’ve collected from your audience.
  • Predict customer behavior: By analyzing behavioral data, you can determine which actions best predict conversions. As a basic example, if a user searches for information about car prices in their area, you can predict they will soon purchase a car. You can do this with first-party data, but adding second-party data increases the size of your dataset, enabling you to make predictions more accurately.
  • Fill the gap between first-party and third-party data: First-party and third-party data are useful, but even with these two highly valuable data sources, you might still find some gaps in your understanding of your audience. With second-party data, you can seek out the exact information you need to fill in those gaps.

Get Started with Second-Party Data

Second-Party Data Benefits for Data Buyers

Second-Party Data Benefits

We’ve already touched on what makes second-party data so beneficial to advertisers, but let’s look more in depth at some of its most important benefits.

1. Data Transparency

One of the most advantageous aspects of second-party data is the high level of transparency that comes with buying data directly from the source. Because you’re buying data right from the company that collected it, you can get a lot more information about it than if you bought it from a third-party data exchange. You can ask for information about how the other company gathered the data, and how best to use it. This increased clarity into the source of the data gives you full confidence it will be accurate and relevant to you.

Get Started with Second-Party Data

This transparency also helps alleviate privacy concerns. With the introduction of the EU’s General Data Protection Regulation (GDPR), privacy issues regarding data have taken center stage even more so than in the past. To comply with GDPR, you need a clear view into where your data comes from and how it’s getting used. Second-party data offers this capability, so using it as opposed to less transparent data sources decreases risk. Because of this, the introduction of GDPR has contributed to the increase in second-party data’s popularity.

2. Precise and Niche Audiences

If you need to fill in gaps in your first-party data, you can turn to third-party or second-party data. Third-party data is excellent for adding scale to a campaign, but it’s not as precise as second-party data and typically covers a broad selection of data points. With second-party data, on the other hand, you have more control over the data you receive. You can go directly to the data sellers who have the information you need and work out a deal exclusively for what you want to purchase. If you need data for a specific niche, all you have to do is find a data seller with audience members in that niche.

When purchasing second-party data, highly specific sets of data are available. You could request, for example, data collected at a particular frequency or the data collected over a certain time. Say, for example, that you are looking to run a marketing campaign to sell luxury vehicles. You could request a dataset for people only within higher income brackets who searched for information about cars within the last six months. Precise datasets like this could allow you to run intensely targeted campaigns.

3. Direct Relationships With Data Sellers

Buying second-party data requires forming relationships directly with data sellers. That means purchasing second-party data is also an opportunity to expand your network and can help you start working relationships that can benefit both companies involved. Once you’ve established a relationship with a company, it becomes easier to purchase data from them in the future if you need similar information again. Over time, these relationships can lead to better deals, quicker access to data and other benefits.

You don’t even have to start these relationships entirely on your own. Through our private second-party marketplace, PDX, Lotame can help you make these connections.

4. Endless Activation Channels

With Lotame PDX, second-party data is just as flexible as first- and third-party data. PDX makes it easy to export second-party data to the demand-side platform, or DSP, of your choice. We’ll get into the specifics in the section below titled “How the Second-Party Data Marketplace Works.” PDX also provides a potential additional revenue stream for companies that sell their data in the marketplace and makes it easy to do so.

Challenges of Second-Party Data for Data Buyers

Second-party data has a lot of benefits, but like any resource, it comes with some issues. Here are the hurdles data buyers most often cite regarding second-party data, and how to overcome them.

  • Scale: Second-party data is an excellent high-quality option, but it does have some limitations regarding scale. Especially large companies that need high volumes of data may not be able to get enough information from second-party data, even in combination with first-party data. These companies may need to use third-party data because it is available in the highest volumes. That doesn’t mean they can’t use second-party data, but they may need to use third-party data in addition to their first- and second-party data.
  • Access to data sellers: For some companies, making connections with quality second-party data providers can be challenging. Data buyers who work with Lotame have access to tools and resources that make this process much easier. You can find potential sellers in PDX, and our data team is available to connect you with data sellers and point you in the right direction. We have close relationships with all our data sellers, so we know what data is available and which segments might work best for you.
  • Price: Because second-party data is more exclusive and sold directly from the source, the cost may be slightly higher than what you have historically paid for third-party data. Your company will need to evaluate where your priorities are and what your budget is for your data buys. You can always purchase some second-party data and supplement it with third-party data. Buying highly precise second-party datasets can help keep costs down, too, since you’ll avoid buying data you won’t use.

Get Started with Second-Party Data

How the Second-Party Data Marketplace Works

If you want to enjoy the benefits of using second-party data, you need to know where to buy it and how to make agreements to purchase it. Here’s how to get started.

One option for how to buy second-party data is to find a potential seller and approach them yourself via a phone call, an email or another communication channel. Some companies might advertise their willingness to sell data, but you can also contact any company and ask about the potential to purchase data. This method offers complete flexibility, since you can contact any company and propose any transaction you want. It’s easiest, though, if you already have a relationship with a potential seller. It can be challenging to know whom to approach and what kind of transactions to propose to get the data you need.

Get Started with Second-Party Data

Another option for where to buy second-party data is to use PDX, the second-party data marketplace from Lotame. PDX serves as a channel through which you can quickly sell and acquire second-party data. Using a marketplace like PDX gives you extra assurance the data you’re getting is credible, and facilitates complete transparency while still allowing you to maintain control over the terms of your transactions. The marketplace is also self-service and automated, allowing for immediate access to the data you purchase. Lotame, meanwhile, handles the billing. We can also help you find the right data to meet your needs and connect you to sellers.

To provide enhanced flexibility, Syndicate offers two tools for accessing second-party data — within the DMP, and direct to DSP.

  • Within the DMP: With Lotame, you can exchange data with other DMP clients within the DMP pipes. You can then export the data you purchase to any of your activation channels, or sell your first-party data to other Lotame DMP clients.
  • Direct to DSP: You can also access second-party data through DSPs. Sellers can send their data directly to DSPs, which is not a standard option for second-party data marketplaces, and make that data accessible via the buyer’s DSP seat across Google, Tubemogul, Appnexus, MediaMath and TradeDesk.

The Lotame Difference

Experience the Lotame Difference

How is our solution different from our competitors’ products? Here are five key advantages of using Lotame over other second-party data marketplaces.

  • Relationships with premium publishers: Lotame has relationships with many premium publishers, which means extensive sources of high-quality data at your fingertips. We can also help connect you to these data sellers.
  • Superior technology: Our technology outperforms the competition. Lotame PDX is entirely automated and self-service, and audiences are available in real time. Some of our competitors require up to five days for audiences to become available.
  • Ease of use: We designed the PDX platform to be easy to use. Plus, we handle all billing and payout, taking the heavy lifting off of your team. We also offer extensive customer support.
  • Data sales experience: Lotame’s data team has years of experience pricing, evaluating and selling data, and we are ready to share this experience with you. Not sure where to start or where to look for the best data? Our data team is happy to help talk you through your options to make sure your campaigns are successful.

Contact Us Today

Want easy access to high-quality second-party data? Private Data Exchange, our second-party data marketplace, is the perfect solution. Our data management platform and other data products can also help you take control of your data, expand your audiences and optimize your campaigns.

To learn more about buying and selling second-party data in a private marketplace, check out our guide to success with second-party data. The Lotame data team would also love to chat with you about second-party data, give you a demo or talk about the data options available to you. Contact us today to set up a time to chat or request a demo here.

Get Started with Second-Party Data