What the Tech is first- and third-party data?

The different kinds of data in digital advertising, how it’s used and who owns what.
Data is increasingly the most important aspect of digital advertising. It’s the coin of the realm. The lifeblood of the industry. It’s what makes digital advertising go. Fill in your own cliché.

To fully understand and appreciate the role data plays in digital advertising, however, one must first learn about the different types of data (yes, there are different kinds), how they’re deployed, and who owns what — specifically the difference between first- and third-party data.

Your crash course on digital advertising data, in all of its many iterations, starts now.

Let’s do first-party data first. What is it?
For our purposes, an easy way to think about first-party data is that it’s the data owned by an advertising brand.

When a brand conducts an advertising campaign, they use all kinds of proprietary data to target that campaign at specific groups of consumers. First-party data is information that the brand has collected through a direct relationship with a consumer.

Let’s take a shoe brand, for instance. Customers need to provide all kinds of data when purchasing a pair of shoes from the brand’s eCommerce destination — including their shoe size, their color preference, the type of shoe (is it a golf shoe, a running shoe, a formal shoe), and their email. In addition, customers may also provide additional information as part of loyalty programs, often in return for discounts and special offers. As customers interact with those offers, additional data can be gathered regarding customer preferences. All of this is valuable first-party data that the brand can use when serving relevant ads to consumers.

For brands, this is all part of building the customer relationship and creating brand loyalty. In fact, many brands have spent decades nurturing these relationships and ensuring they are handled with integrity and trust.

So how does first-party data vary by perspective?
But brands aren’t the only ones that have first-party data. Publishers have first-party data, too, and they use it to increase the effectiveness of their advertising inventory.

A publisher knows which sections of their site different types of consumers like to visit. All of this data can be used to serve more relevant advertising, and the more relevant the ads, the more the valuable they are to the publisher, the more great content they can create.

So first-party data can also refer to a publisher’s proprietary data. Now agencies are saying they, too, have first-party data. So a lot depends on perspective.

How do brands put first-party data to use?
Let’s continue with the shoe brand example.

Say you’re a man, and you buy a pair of running shoes in size 11 (and you buy them in neon green because you’re flashy like that). The brand can use this first-party data to deliver advertising specifically to your unique style and interests.

Serious runners tend to change their shoes every three to four months, if not sooner, for instance. Using first-party data, the shoe brand can send you an email every few months about replacing your current pair. Or they can serve you display ads, showing you other shoes that are also available in neon green (your favorite). Other forms of first-party data include the actions a consumer takes when visiting a brand’s website, their purchase history with the brand, and loyalty program information.

All of these are examples of how a brand can deploy first-party data to deliver more personalized advertising. This advertising may include direct consumer benefits, such as discounts or other targeted offers.

Many within the advertising industry consider first-party data to be the most valuable of all data. It’s unique to the brand and no other company can access it. Those brands have spent years nurturing those relationships based on that data. And that confers a huge competitive advantage.

How does it differ from third-party data?
First-party data may be valuable, as it may tell a brand a lot about their most loyal customers. But how do they find their next million customers? That’s where they may use third-party data.

Third-party data, as the name indicates, is data provided by a third party — that is, a party that is neither the brand nor the publisher. The data boom in advertising has created a cottage industry around third-party data, with dozens of third-party data providers buying data and then selling it to advertisers for use in their campaigns.

This can include everything from the websites a consumer visits, to the unique ID on their smartphone device, to their credit score. Data management platforms allow brands to blend first- and third-party data together.

For example, if the shoe brand knows (from their first-party data) that their most loyal running shoe customers tend to subscribe to a running website, purchase certain nutrition supplements, and watch college track and field TV coverage, they can use third-party data to find new audiences where those same characteristics show up. And they can try to build new relationships with those potential consumers using relevant advertising.

Now, how to activate all this data? More on that next time.