Dana Stevens
Dana Stevens 30 March 2020

The Fall of Third-Party Data: Why First-Party Data Reigns Supreme

Although third-party data was once favored by marketers trying to reach target demographics, it’s now clear that first-party data is far more accurate. The use of first-party data allows businesses to attain their goals more efficiently while staying compliant and competitive in the digital marketplace.

In the digital age, we use data in countless ways. It makes our lives easier and allows us to store important information (and even memories) for later. Businesses also rely on data for numerous purposes. For instance, marketers have used data collection as an essential component to personalising brand promotions and communications.

But the way in which this data is collected is starting to shift. In years past, many marketers relied on third-party data to reach their target demographic. It’s an easer and subtler way of gathering intelligence -- but it’s not necessarily more effective. In some cases, it may not even be legal. 

Fortunately, there’s a viable alternative to third-party data collection. Before we delve into those specifics, let’s reacquaint ourselves with what’s involved in third-party data, how it’s often been used, and why first-party data provides a far better result.

Understanding Third-Party Data and Its Uses

It’s important to first remind ourselves what third-party data is and how it’s often been used. Third-party data is defined as information pertaining to a particular individual that can be obtained from a variety of sources (such as websites, surveys, subscriptions, social media platforms, and more). This data may include first and last names, physical addresses, phone numbers, and email addresses, as well as website browsing history, purchasing activity, and social media handles. 

The key to third-party data is that it’s actually collected by a company that has no direct connection to the individual in question. Generally speaking, it’s collected by companies that specialize in data management or provision. After it’s collected, this data can be purchased by brands or companies to use as part of a marketing strategy. The idea is that this data can improve the brand’s reach when targeting certain consumers or can add to what the brand already knows about specific customers. In other words, this third-party data can either be used to help a brand understand more about an audience it’s trying to reach or to supplement the information a brand has already gathered through first-party data collection. 

A brand might use this information to improve its targeting for both traditional advertising (e.g., print ads, direct mail, TV and radio spots) and digital marketing (e.g., email blasts, social media ads, PPC ads, and more). In the past, this method was preferred because it was a less obvious way of collecting intel on new prospects and to get a leg up on the competition.

Why Third-Party Data Has Fallen Out of Favor

There are a few reasons as to why we’re now seeing the demise of third-party data. For one thing, this form of data collection doesn’t always provide the most accurate picture of a consumer. Simply put, the tools used for these purposes often get it wrong.

While one service might claim that a particular individual is a woman in her 30s who has no children and rents her home, a different data collection company may maintain that the same individual is male in his 50s who has children and owns his home. Specifically, different vendors tend to have very different findings relating to age and gender -- which is a huge problem for the marketers who purchase this information.

The companies that gather this information don’t have a lot of incentive to get the information right. That, combined with the immense pressure marketers feel to move the needle, ends up hurting the brand. In the end, this practice wastes time, money, and resources. 

It also presents problems for consumer security. Regulatory legislation has been put into place to give consumers more control over how their personal information is used, while some of the biggest tech companies in the world (like Google and Apple) are now restricting how third-party cookies can be used in web browsers. Combined with the increasing number of data breaches many companies are facing, it’s no wonder that this technique is no longer preferred.

The Enduring Importance of First-Party Data

This is where first-party data collection comes in. It’s the obvious choice -- not just because it can be performed by the brands themselves but because consumers will know when their data is being collected. Those factors might have once been a deterrent, but they’re now a major selling point.

First-party data can be collected with far more accuracy. When retailers collect this information directly from the consumer, it’s much easier to verify whether the information is precise and that the method for collecting that data is reliable. While it may take more effort on the part of the brand to collect this data, that effort will pay off in its marketing campaigns. Being able to target the right customers the first time will result in less waste, more conversions, and improved customer experience. 

Not only does first-party data collection factor in compliance regulations, but it also provides a way to build a relationship with a customer. Instead of obtaining customer data through subversive means, a brand can be upfront about its intentions -- while also providing something of value to the customer.

For instance, signing up for an email list with the promise of an order discount clearly provides something of value in exchange for data. The same can be said for loyalty and affiliate programs, giveaways, and other techniques. 

Although first-party data collection might have once been viewed as basic, most experts would now agree that it’s a vital part of advertising and marketing in the digital age. In order to ensure your campaigns are relevant, compliant, and effective, first-party data provides a simple solution that can set your brand up for success.

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