Blog Post

What is Second-Party Data?

by: Power Digital May 10, 2021

Table of Contents

Data is the bedrock of effective marketing. Without an abundance of high-quality data to guide your campaigns, marketing can feel like a shot in the dark. Fortunately, data is easier to obtain than ever before. You can collect it yourself or purchase it from other organizations offering digital marketing services.

Chances are, you’ve already heard of first-party data and third-party data. But what about their lesser-known sibling, second-party data?

Below, we’ll explain what second-party data is and how it can supercharge your marketing efforts.

First-Party vs Second-Party vs Third-Party Data

Do you like to party? If so, these marketing terms may inspire visions of a day party, followed by an afternoon bar crawl, finished off with a night out at the club. We’re sad to say that’s not what this article is about.

Instead, these terms refer to different types of data that marketers use to inform their marketing campaigns:

What is first-party data? – First-party data is any data that a company collects on its own. First party data collection can include customer feedback results, social media engagements, website tracking information, customer contact information, online purchase histories, and offline point of sale metrics.¹

Some make use of DMP to organize these data. You might be asking what is a DMP? Also known as Data Management Platform, it is basically a tool that helps researchers and marketers organize, collect, and analyze first, second, and third party data.

Since this data comes directly from a company’s existing audience, it’s ideal for retargeting campaigns. However, the highly targeted nature of first-party data means that it lacks scale and provides little insight into untapped markets.

What is third-party data? – Jumping ahead, third-party data is the inverse of first-party data. It includes a variety of data collected from a wide range of sources—not just a single company. This type of data is usually segmented, packaged, and sold by third-party aggregators.

Since third-party data comes from a broad set of sources, it offers a level of scalability that you can’t get with first-party data. It can be a valuable resource if you want to target new audiences.

The downside of third-party data is that it lacks quality control. Since you don’t know where the data originally came from, you can’t properly verify its quality.

What is second-party data? – Put simply, second-party data is another company’s first-party data that’s available for purchase. Other companies can buy this data and use it second-hand.

Second-party data is often sold privately between two companies that operate in similar industries. However, it’s unlikely that a second-party data provider would sell their data to a direct competitor.

Second-party data has become increasingly popular in recent years. In 2018 alone, second-party data exchanges saw a 1,200% increase in participation!² This type of data is highly sought after because it combines the quality of first-party data and the new audience insights of third-party data.

As you can see, all three types of customer data can serve as valuable resources for marketers. However, if your goal is to tap into a new market that another company has already cornered, second-party data has the most to offer.

Second-Party Data Examples

To help you understand how second-party data is shared and used, let’s dive into a couple of examples:

Second-party seller example – Let’s say you run a successful online electronics company. You collect a vast amount of data about your customers, including their demographics, purchase history, web browsing activity, and contact information.

Your business success is partly due to the way you’ve harnessed your first-party data to craft effective marketing campaigns. Since you understand the value of your data first hand, you suspect that other companies would love to have access to it too.

In the pursuit of some extra revenue, you decide to sell your data to non-competitive buyers, like electronic repair companies. You get to decide which companies you sell to, what data they can access, and how much you charge for it. By selling this data, both you and your buyers benefit—your company earns extra money and your buyers get the data they need to fuel targeted marketing campaigns.

Second-party buyer example – Next, let’s take a look at a similar transaction from a buyer’s perspective.

Let’s say you own a resort chain. While you mostly own ski resorts in mountain towns, you recently opened a new resort in a tropical location. Your marketing team wants to launch a campaign to promote this new beachy getaway, but they don’t have enough data to target it effectively.

After doing some research, you discover that a few cruise companies, bikini brands, and tropical outdoor adventure agencies are selling second-party data. Their data could offer you valuable insight into your new target market. You reach out to these companies to negotiate a transaction, which they happily agree to. It’s a win-win scenario for everyone involved.

As you can see, second-party data is like a networking event filled with all of the right people. By attending this party, you can mingle with everyone you’ve been dying to connect with and accelerate your business growth as a result.

How to Buy Second-Party Data

Second-party data can be slightly more elusive than the other types of data. While third-party data is readily available for purchase, getting your hands on second-party data may require more research.

One way to obtain second-party data is to reach out to a company directly. Maybe you have a specific company in mind that has the audience information you’re looking for. If they agree to sell their data to you, you can negotiate the terms privately. Finalizing this transaction may take more time than buying a pre-packaged third-party data set, but the quality of the data you receive will make your efforts well worth it.

If you don’t have a specific second-party data company in mind, you can also search for one on a second-party data marketplace. The companies on these exchanges are actively selling their data, so you can safely assume that they’re open to the transaction.

The Benefits of Using Second-Party Data

Second-party data comes with a ton of benefits, including:

More control – Compared to third-party data, second-party data gives you more control over what data you purchase. Rather than buying a massive aggregate of data that may or may not reflect your target audience, you can select a second-party data set that’s perfectly tailored to your marketing goals.
Higher quality – Additionally, second-party data is generally of higher quality than third-party data. You can feel confident in your data-driven marketing decisions when you know that your data comes from a relevant, reliable source.
Price flexibility – When you shop for third-party data, there’s not much room for negotiation. You have to buy data at the price the aggregator is selling it for. In contrast, second-party data offers you much more flexibility. You can negotiate the price with a second-party data provider and enjoy more transparency throughout the entire transaction process.
New audience insights – Second-party data offer you powerful insight into a new audience of potential customers. Just like you have droves of data about your existing customers, so do other companies. Unlocking access to their customer data can help you learn about their audience and gain the marketing edge you need to make their customers your own.
Predict future audience behavior – Second-party data can also help you improve the timeliness of your marketing campaigns since it allows you to examine the past behavior of your new target market. Armed with this insight, you can better anticipate their needs and reach out to them at the ideal time.

For example, let’s say you own a moving company. You buy second-party data from a local real estate firm. Your marketing team analyzes this data and discovers that a segment of contacts is actively searching for homes to rent. Based on their web browsing history and household income, you can reasonably assume that they’ll require moving services in the near future. This gives you the green light to market to them at this time.

Valuable business relationships – When you work with a second-party data provider, you have the opportunity to forge a valuable relationship that can serve you both for years to come. If you ever need to buy more data from them down the road, your established relationship will make subsequent transactions more efficient and enjoyable.

With benefits like these, second-party data has the potential to skyrocket your marketing success.

Party On! (With Second-Party Data)

As we move through the roaring twenties of the 21st century, there’s one party guest you need on your list—second-party data. With its ability to enhance your marketing and help you conquer new markets, second-party data is truly a marketer’s guest of honor.

While second-party data’s value is clear, understanding how to apply it within your marketing campaign can be complex. That’s where Power Digital’s expertise can help. To learn about our data-driven digital marketing services, reach out to us today.

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