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Understanding the Differences Between First-Party Data, Second-Party Data and Third-Party Data

Anyone who is aware of brand marketing and data analytics has heard of different types of data and their sources, also known as first-party data, second-party data, and third-party data. Let's explore the distinctions between these data sets.

Differences Between First-Party Data, Second-Party Data and Third-Party Data

It is important to understand the basics around these three different types of data and their sources. Many marketers and brand professionals find that first-party data is the most valuable of the different types. Here is a quick overview of each data type and why first-party data is essential for the future of advertising.  

What is First-Party Data?

First-party data is information that a business or organization collects directly from individuals and customers. This data type is the most valuable and reliable because it comes directly from customers through a primary, trusted source. First-party data is collected through customer interactions and touchpoints, including customer registrations, email subscriptions, feedback forms, or website visits.  

A first-party data strategy empowers business owners with the ability to harness their data assets and help future-proof their data assets. It can help companies and organizations gain insights, improve customer relations, personalize experiences, and sell products.  

An example of first-party data would be a clothing retailer who collects data through a pixel on their website to better understand customer preferences, purchase history, browsing behavior and more.  

What is Second-Party Data?

Second-party data is first-party data that has been shared or exchanged between two parties. For instance, a data recipient gaining access to another organization or company’s first-party data for their own analysis and use would be considered second-party data. Typically, this type of data sharing is done through a direct agreement or partnership between two companies or organizations. Although it is not as valuable as first-party data, second-party data can be valuable to the data recipient if the data provider shares a complementary customer base.  

An example of second-party data would be a car dealer securing a list of known vehicle owners to advertise newer models or service offers.  

What is Third-Party Data?

Unlike first- and second-party data, third-party data is collected and aggregated by businesses and organizations that are separate from the data recipient and the data in general. These entities are commonly referred to as data aggregators or data brokers. They collect data from various sources, such as other data providers, apps, public records, social media platforms, and websites.  

With major platforms like Google blocking third-party cookies from its Chrome browser in an effort to move toward “interest-based” and “privacy-first” advertising technology, browser-based targeting will bcome infinitely more complicated for businesses if they don’t have first-party data assets to use for audience targeting.

Third-party data can be bought or licensed from external sources and can help companies and organizations have a broad view of customer behavior, demographics, and interests. Third-party data is typically used to help reach new target audiences and enrich existing first-party data.  

An example of third-party data would be an advertising agency buying third-party data from a data aggregator to identify new customers based on their demographic information.  

To summarize the several types of data, first-party data is collected directly by a company or organization. Second-party data is first-party data shared between two entities, and third-party data is collected and shared from external sources such as data aggregators or data brokers. Each type has its own advantages, but first-party data is considered the most valuable data to build the foundation of data for a company or organization.  

The Value of First-Party Data

Diverse types of data sets can all serve a valuable purpose for businesses hoping to target their ideal customers. However, first-party data is seen as the most pivotal data set that a business or organization can have to implement successful marketing campaigns and build a solid foundation of data. Let’s look at the various benefits of first-party data.

First-Party Data is Accurate and Reliable  

First-party data is typically collected directly from the company or organization’s own customers or users. This means that the data is trustworthy, accurate and reliable. The data shows the actual behavior of the customers or users, as well as their preferences and interactions with the company or organization’s products. First-party data gives the most exact representation of a customer’s characteristics and interests.  

First-Party Data is Specific and Relevant  

First-party data is very specific and relevant to the company or organization that is collecting it. This type of data gives very detailed information about specific data points for customers, such as customer interactions, purchase history, and preferences. Having specific and relevant information about customers allows companies and organizations to have deep insights into their customer base. They can use this information to tailor their marketing efforts and provide personalized customer experiences.  

First-party data allows for the most customized, targeted messaging, which leads to top-level customer engagement and conversion rates.  

First-Party Data Allows for Ownership and Full Control  

One of the most compelling reasons to collect first-party data is that it allows a business or organization to have full ownership and control over their customer data. Businesses and organizations that have solid strategies inherently also have the keys to collect, store and utilize first-party data how they see fit. It also allows the entities to be flexible in using the data to improve upon their customer relationships, products, and services. Most importantly, first-party data gives these entities the ability to be compliant with privacy regulations and data protection practices.  

First-Party Data Gives a Competitive Advantage  

Want to have a competitive advantage in the marketing space? If so, first-party data is your new best friend. First-party data is completely unique to each business or organization collecting it. This data can’t be replicated by competitors. First-party data enables businesses to understand their customers, make data-driven decisions, and identify relevant trends. Businesses and organizations can stay ahead of the competition by utilizing first-party data to enhance customer experience, expertly optimize marketing campaigns, and ultimately resonate with the target audience that is interested in their products or services.  

First-Party Data Allows for Customer Trust and Privacy

In the ever-evolving world of data, a promise of trust and privacy is pivotal. With first-party data, individuals are opting in to provide their data and are aware that it will help personalize their consumer experience. Opting in to share first-party data allows customers to have a stronger bond with the organization that they’re interested in. With increasing privacy concerns and regulations, first-party data helps reduce the reliance on third-party data, which is perceived as having potential privacy implications.  

Final Thoughts  

When building your data foundation as a company, collecting first-party data as your first priority should be a no-brainer. With the changes on the digital pathways limiting available audience targeting, a first-party data strategy should be any company’s number one priority and should play a central role in business operations, business strategy and future planning.  

While second-party and third-party data can still be a complement to your business’s first-party data, it’s essential to build your data foundation in a way that is going to best support your marketing efforts to bring you the results you desire.