What’s the difference between first, second, and third-party data?

Raange blog | difference between first-party, second-party and third-party data

Learn about how customer data is gathered and used by marketers today. We break down each type of data collection (first party, second party and third party) to help you determine what’s best for your business.

We marketers are often tasked with the responsibility of collecting, analyzing and using data to grow our business. Data is a powerful tool that can be used in many ways, but how do you know which type of data will work best for your marketing campaign?

In this blog post, we’ll explain three types of data (first-party, second-party and third-party) so you can make an informed decision on when to use what kind for your next campaign.

What changes have we seen so far?

An essential milestone in this transition was the implementation of the GDPR back in 2018, which has put the focus globally on user privacy.

Most recently the ad industry has been tossed another curveball with Apple’s iOS 14 update and how that negatively relates in particular to Facebook advertising.

And, Google’s recent message to the ad industry disavowing tracking users in Chrome using third-party cookies and putting support behind the importance of first-party data collection by brands.

We’re confident that this transition to a predominantly first-party data collection will prove to be beneficial to companies in the long run.

It means that marketers need to move toward a more transparent approach to compiling user data. 

So what’s the definition of first-party, second-party, and third-party data?

User data can be split into three categories based on their source. The easiest way to think of this is by asking the question “who owns the data?”

By categorizing the data by ownership, it is a lot easier to figure out what type of data you have.

What is first party data?

First-party data is owned by the Brand. It comes directly from the user. It provides marketers with a more extensive range of benefits, compared to the other two. 

For example, if a user filled out a contact form on your website that is first-party data.

Your audience has shared this information willingly with your brand, which includes data from website cookies, captured email addresses, and mobile numbers, or POS data.

First-party data has its benefits and limitations. First-party data is undoubtedly among the most valuable assets for a company’s marketing efforts. Your customers are showing an intent to build a more meaningful relationship with your brand.

However, just like any high-quality information, this type of data is fairly complicated to acquire.

In another blog post, we go over 3 creative ways for brands to capture first party dat.

What is second party data?

Second-party data is owned by, as you can guess, a second-party Party; ie. second-party data is someone else’s first-party data.

The owner of this data has decided at some point to share it with you. This is very common with larger organizations or using targeting in most ad platforms like Google and Facebook. You’re using data they’ve collected about their users. 

Second-party data has its benefits and limitations. Companies pay vendors to use their data, but don’t actually own it. At the same time, the buyers can actually vet the data they receive, which makes it a more effective and cost-efficient approach. 

What is third party data?

Third-party data is owned by a 3rd Party – essentially someone is reselling data to you. If you’re getting it from an intermediary — it’s third-party.

This type of data is abundant, and it’s for sale. However, there is one central caveat — it’s very imprecise. Furthermore, since there is a middle person involved, companies often don’t even know where it’s coming from.

Purchasing leads or customer lists are usually examples of third-party data aggregated by one company from multiple sources and then resold.

Third-party data has its benefits and limitations. The benefit of third-party data is that it’s really easy to get a hold of. However, if you’re using third-party data, then chances are that one of your competitors is using it as well.

Why focus on first-party data?

Clean and compliant first-party data has a broad spectrum of benefits like:

  • Better targeting.
  • A bigger picture on the customer lifetime value.
  • A better understanding of customer intent and their location in the funnel.
  • A more curated brand experience for consumers. 
  • Potential for ROI-busting marketing campaigns.

It calls for a more profound and long-lasting relationship with your audience, prospects, and existing customers.

In contrast, companies that rely on third-party data are prone to a more spray-and-pray approach, which results in a poor experience for the user and hurts your brand in the long run.

How to collect first-party data

Businesses must now be more thoughtful about how they collect their customer data. We’ve now shifted from just buying information behind the curtains to having a meaningful conversation about it with our potential and existing customers. 

Here are a few ways how we should incentivize our users to share their data:

  • Provide them with a detailed description of the benefits they’ll receive.
  • Provide them with a meaningful offer in exchange for their contact information. 
  • Make the editing of privacy preferences intuitive and straightforward. 
  • Promote consumer privacy and data stewardship.

As a result, this approach will motivate people to build longer, more meaningful relationships with the brands they take their business to. 

Wrapping things up…

Things have changed dramatically in the last year or so. The latest data privacy regulations have made it harder for brands and marketers to collect and use data.

However, through these trials, we’re heading toward a more consumer-focused and sustainable way of conducting business and having meaningful relationships with our customers. 

And we’re here to help you with that. 

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