What is First, Second, and Third Party Data?

Sep 10, 2021 - By Adomas Sulcas

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There has been a lot of buzz about data, especially about third party processors, since GDPR hit.

However, most people take “third party data” as something for granted without ever delving deeper into the meaning of the concept.

In fact, far fewer people have even heard that first and second party data exist. While it may seem logical that such concepts should exist if the concept of third party data exists, most people don’t trouble themselves too much about understanding them or getting to the statistics. 

Understanding the concepts of first, second, and third party data, however, is vital if you are looking to build the most effective marketing campaigns possible. Additionally, it may also grant you a better overview of information management practices and allow you to create center goals and strategies.

What is First Party Data?


First party data is defined as information you have collected about customers on your own. Usually, sources for first party data include CRM data, databases, website activity, cookies, and numerous other ways of collection. Of course, semantic data such as reviews would also count as being first-party as long as it was left on your website. 

One of the greatest benefits of 1st party data is its accuracy and quality. Since it’s data collected by your business, from your customers, and for your business, it is therefore extremely relevant and highly accurate. If there are some hiccups in data quality, these can quickly be remedied.

However, it is comparatively limited data as you can only collect information if people interact with your business. While it may describe a particular audience extremely well, there’s often not enough data to make wide-sweeping conclusions or to extrapolate findings into other audiences.

Finally, first party data is probably the most utilized source of information in marketing or any data-driven research. After all, it perfectly describes your customer base, making it perfect for retargeting, A/B testing, and numerous other marketing activities.

For example, one of the most frequent and powerful uses of first party data is for personalization and programmatic advertising. Since you can build a fairly accurate profile of your average customer, you can tailor marketing messages (sent through ads, email, SMS, and other channels) to feel more personal to them.

What is Second Party Data?

Second party data is information acquired directly from another business or company that most often has direct interactions with consumers. Put simply, it’s getting the first party data of another company that also uses cookies, CRMs, and many other methods of collection.

There are numerous benefits to using second party data. If the provider is carefully selected, second party data can still be fairly accurate and of high quality. However, in many cases, it’s best acquired through data exchange with a vetted partner. As an example, imagine an airline and a banking service sharing data for a joint marketing campaign.

The utility of second party data is not much different from first party data. As it’s essentially the same type of information, collected through the same methods, that means everywhere the latter can be used, so can the former.

Second party data acquired from marketplaces will likely need to go through a much more rigorous vetting process. Best providers on marketplaces are more likely to deliver data that might not be as applicable or of such high quality as required for business purposes or apps.

Disclaimer: there’s some inherent risk in using second party data if it’s acquired from an untrusted source as the data collection methods might not have been legitimate. Using such data can run you into some trouble and undergo Data Subject Access Request (DSAR) inquiries.

What is Third Party Data?


When comparing 1st party vs 3rd party data, the difference is quite notable. Third party data is generally aggregated by companies from various sources that usually do not acquire it by interacting with consumers.

A current trend in information governance and management is to acquire datasets from DaaS (data-as-a-service) companies. These aggregators are the perfect entry example of a third party data provider.

Such data can be acquired from other companies who collect it as first data, from automated collection processes (e.g. web scraping), and other vendors. Once acquired, DaaS and other similar businesses create audiences and datasets based on some categorization like demographics.

Obviously, the benefits and power of third party data cannot be underestimated. As the datasets are incredibly large, they can drive decisions of many departments within many different companies. A common use case is to use a data management platform (DMP) to create data-driven marketing sale. 

However, third party data might diminish ineffectiveness in the coming years. Tech giants like Google and Facebook have been collecting and granting partial access to very large datasets and it has caught the attention of lawmakers. GDPR was partially created out of an interest in regulating every data processor and protecting people from a data breach experience. 

Governments are still coming to an agreement on how much third party data should be regulated. It seems that new laws might be enacted that might restrict the collection or access to third party data. Finally, even Google themselves are considering phasing out third-party cookies (a popular collection method) by 2023.

1st, 2nd, and 3rd Party Data with DMPs Integration

You might be thinking of how companies could even manage taking care of so much data. Even with strong data governance principles in place, the amount of information that needs to be handled is enormous.

A lot of companies turn to data management platforms in order to simplify informational control, gain insights, and become data-driven. Data management platforms use numerous advanced technologies (including artificial intelligence) to aggregate data from many different sources, parse it, and provide an easy-to-understand output for each ad serving.

There are numerous steps involved such as data harmonization. However, what is most important is that the end result is essentially one single data warehouse. Out of that warehouse, businesses can retrieve normalized, verified, and globalized data that can be used for analytical purposes.

However, DMPs do rely on third-party cookies to gather a lot of their data. As they are being phased out and users can now opt out of data collection, the power of DMPs might slightly diminish over time.

Nevertheless, DMPs solve most of the usual issues in regard to data management and acquisition. However, it should be noted that smaller businesses might struggle to integrate these large datasets into daily operations or cannot truly unlock its power.

1st, 2nd, and 3rd Party Data – The Future of Digital Marketing

Understanding all of these key elements is a great way to start your own data-driven journey. You likely already have a significant amount of 1st party data. However, if you want to unlock the power of data-driven marketing, acquiring and managing second and third-party data will be necessary.

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