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What is Second-Party Data?

September 16, 2019

Today’s businesses can use audience data to fuel their marketing campaigns, personalize their content and acquire new customers. Ultimately, it can help them boost their bottom lines and grow as a company.

Different situations, however, call for different kinds of data. Businesses can choose between three main types of audience data — first-party, second-party and third-party. While each type of data has its benefits, second-party combines many of the best aspects of first-party and third-party data to make for an exceptionally valuable resource. Especially when combined with high-quality data management tools, second-party data can help you grow your business and meet your goals. Here are the topics we will cover in this article.

 

What Is Second-Party Data?

What is second party data

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So, what exactly is the definition of the term second-party data? Second-party data is data that an organization collects straight from its audience and then sells directly to another company. To further clarify what second-party data is, it’s helpful to define the other types of data first.

  • First-party data is data about your audience that you collect directly from them. It’s your data.
  • Third-party data is data that an aggregator collects from various sources and sells as a package.

Second-party data is essentially another organization’s first-party data, as they gather it directly from their audience. It may include data from activity on websites, apps and social media, in-store purchase history, survey responses and more.

To purchase second-party data, you need to have direct interaction with the organization that collected the data. This differs from the process for purchasing third-party data, in which you work with a data aggregator. In a second-party data transaction, the buyer and seller connect, agree on terms and then exchange the data. This arrangement gives you more flexibility in the transaction, helps ensure that you get high-quality data and enables you to build relationships with other companies. A marketplace like Lotame Private Data Exchange (PDX) can help you find and connect with both second-party and niche third-party data providers.

The Power of Second-Party Data

Power of Second Party Data

In 2018, Lotame saw 460% growth in the number of participants in its second-party data marketplace. Participation grew especially quickly in North America, where it increased by 1,200%. Why the sudden growth in the popularity of second-party data? It’s likely because more companies are realizing the value that it can bring to their organizations.

With second-party data, you get many of the benefits of first-party data but also the ability to gain insights you couldn’t get from just your own data. When you buy second-party data, you have much more control over the data you purchase than you would if you bought third-party data. You can go directly to the organization that has the data you need and work out an agreement to obtain just the data that’s most relevant to your goals.

Because you know exactly where the data is coming from, you can be confident in its quality and its relevance to your audience. There’s a lot of transparency in second-party data transactions and you have the opportunity to be more flexible in your agreements. This flexibility enables you to create unique datasets that meet your needs perfectly.

As you’re interacting directly with data buyers and sellers, you can also build relationships that can benefit both organizations for years to come. If you need more data in the future, you may be able to come back to that organization and buy more, which is an efficient way to purchase the data you need.

Second-Party Data Example for Sellers

Let’s say, for example, that you run a national online shoe store, and you collect data about your customers, including information about their purchase history, interests and demographics. You’ve used this information to inform your marketing campaigns and improve your sales. It’s served you well, but you realize there’s another way it could help you boost your revenue — by selling it.

Selling your data in a second-party transaction is an excellent way to maintain control over who gets the data and the conditions of the sale. To find a buyer, you could seek out other local businesses who may be interested in your data. A clothing company may be interested because they could advertise items that go with the shoes customers buy. Just be sure not to choose a clothing store that also sells shoes, as that would make them a competitor.

As another example, let’s say you’re a publisher that’s collecting data on the visitors to your website. You could gather data about the visitors who read sports content and offer to sell it to a sporting goods store. The store may be able to use this information to improve their audience targeting.

If you don’t have a direct connection to a buyer, a great way to monetize your valauble data is to join a second-party data marketplace where you can find buyers for your data, connect with them and work out a deal that meets both parties’ requirements. Our Lotame PDX solution can help you with this.

Second-Party Data Example for Buyers

Now, let’s look at it from the other side — the point of view of a data buyer. Let’s say that you run a clothing store, and you want to find out who you should target for athletic wear ads. You could talk to the shoe store and work out a deal to purchase their data about customers who bought athletic shoes. Or, you could find a publisher who creats and shares content related to sports and fitness. This information will tell you which types of customers are most likely interested in sports or fitness. You could then target ads for sportswear to these customers.

Again, if you don’t have direct relationships in place with data sellers, another way to find a shoe store or other type of company to buy data from is to join a second-party data marketplace such as Lotame PDX.

How Is Second-Party Data Used?

Need more of a reason to get started with second-party data? Here are five ways companies can use it.

1. Inform Marketing Campaigns

Inform Marketing Campaigns

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Second-party data can help you to improve the targeting of your marketing campaigns, enhancing their performance. You can use second-party data to improve your ad campaigns in much the same way you would use first-party data. First-party data helps you learn more about your own audience’s demographics, interests, preferences and behaviors. Second-party data does the same for potential customers you want to target because they’re likely to be interested in your products or content.

You can be confident that the second-party data you purchase is high-quality because you have transparency into the source. This means it is likely more accurate, precise and relevant to your needs. These qualities help you to better target your ads to the right people.

2. Increase Data Scale

First-party data is extremely valuable but often lacks scale since it only includes your customer data. This is especially true if you run a small business. To achieve scale with your campaigns, you might need to add data from other sources. Second-party data is an excellent way to increase the reach of your campaign without sacrificing any quality.

3. Reach New Audiences

If you want to expand into a new market and find new customers, second-party data can be beneficial. Your first-party data is limited to your existing customers so, for example, if

you run a company that exclusively sells skateboarding gear, all your first-party data will be about people who are interested in skateboarding. If you want to expand into selling surfing gear, you’ll need some data about customers who surf. To get this data, you could reach out to a surfing publication or publication that has data on surfing enthusiasts. 

4. Predict Customer Behaviors

Second-party data can also help improve your ability to predict the behavior of your audience. Being able to predict behaviors enables you to anticipate customers’ needs, reach out to customers at the right times, proactively meet their needs and boost your sales. For instance, if a user searches for homes for rent in their area, there’s a good chance they’re planning on moving soon. Using this information, advertisers may show them ads for apartment complexes, moving services and other relevant products.

Second-party data allows you to add to the information you already have through your first party data to get a more robust and accurate pool of data through which to make your predictions. 

5. Monetize Data

Selling your first-party data in a second-party data marketplace is an excellent additional source of revenue, and companies that sell their data in second-party transactions can expect to make more than if they sell their data to third-party aggregators. The improved quality of the data and, potentially, the fact that it remains exclusive enables it to command a higher price. You also have more control over the transaction, which helps you ensure you get a better price. The data also goes directly to the advertiser’s demand-side platform (DSP) seat, which reduces the risk of a diminishing cost per thousand impressions (CPM). 

5 Benefits of Second-Party Data

Benefits of Second-Party Data

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Second-party data can help you grow your business in numerous ways. Some of the leading benefits of this type of data include:

1. High-Quality and Precise Data

With second-party data, you can have confidence that the data you purchase is high-quality, provided you are buying it from a reliable organization. You can also seek out highly precise data segments from specific companies.

Second-party data is another company’s first-party data, so it’s likely recent and well-maintained. It’s often already organized and in a usable form. In a second-party data transaction, you have the opportunity to ask questions and ensure that the data meets your needs before you purchase it. In a third-party data transaction, you have less flexibility in the transaction.

2. Access to Niche Data

Third-party data is excellent for adding scale to a campaign, but it’s not as precise as second-party data. Third-party data packages typically contain a broad array of data points, and you have limited flexibility in the kinds of data you can obtain.

With second-party data, however, you can go directly to a data seller who has the information you need and create a unique agreement for the data you want to purchase. In theory, you could buy nearly any type of data from almost any company if you can find the right business and come up with an agreement, even if you need a niche dataset.

3. Complete Data Transparency

The fact that you work directly with the company buying or selling the data means that you get exceptional transparency in the transaction. When working with second-party data, you have more control over the type of data involved, the terms of sale and how the buyer uses the data. You get a lot more information about the data you’re purchasing than if you buy it from a third-party marketplace.

This enhanced transparency eases privacy concerns. You have a clear view of where your data came from and what it contains, which decreases risk and helps you ensure compliance.

4. Price Negotiation

Because second-party data transactions are one-on-one interactions between the buyer and seller, there’s a lot more room to negotiate the terms of the agreement, including the price. Sellers can often get more for their data than they could if they sold it to an aggregator, and buyers may be able to negotiate a deal that gives them data for a favorable price. The parties could work out deals that include a variety of arrangements. The seller, for instance, might agree to provide fresh data every month. The buyer might agree only to use the data for one particular purpose.

5. A Direct Relationship Between Buyers and Sellers

Second-party data transactions require that the buyer and seller interact with each other directly, which can lead to a relationship forming between the two companies. This relationship can benefit both companies for years to come. After you buy data from a company, you may be able to go back to that same company later to obtain more data. Because you already established this relationship, you can acquire your data more quickly in the future. Over time, the relationship may also lead to better deals on data.

How to Buy and Sell Second-Party Data

Buy and Sell Second-Party Data

When you work with Lotame, you don’t have to find second-party data buyers or sellers on your own. Our products and services make buying and selling second-party exceptionally fast and easy. For data buyers, our Lotame Private Data Exchange can help you find the data you need and provides tools that enable secure, transparent transactions.

For second-party data sellers, Lotame PDX makes it easy to connect with buyers and turn your data into an additional revenue stream while still maintaining control over your data and transactions.

Want to unlock the power of second-party data? Contact us to learn more about our second-party data solutions or request a demo today.