Blog Post

What Is Third-Party Data?

by: Power Digital May 10, 2021

Table of Contents

Data is the fuel that makes modern digital marketing engines run. And that fuel source grows larger by the day.

The total amount of consumer data being generated, collected, and analyzed has increased exponentially. The World Economic Forum estimated that by 2020 there were more data bytes in the entire digital universe than stars in our observable universe.¹

Companies that offer digital marketing services know that the right data collection can help you make better decisions about your digital marketing strategies. But not all data is useful. Sifting through troves of it for actionable insights is a herculean feat. Not to mention, there are different types of data to consider including first party data and second party data.

Today, we’ll be discussing third-party data and how it can elevate your marketing campaign.

What Is Third-Party Data?

Third-party data involves any type of data that is collected or distributed by a third-party source and has no direct connection to the consumer whose data is collected. Some use a DMP or data management platform to do this. What is DMP? It is a tool where you can do first party data collection or organize third party data from any data source.

In other words, the entity collecting the data is neither the buyer (the individual visiting the site) nor the seller (the company selling the product or service). The third party data source does not have a direct relationship with the consumer.

This type of data can help a business learn:

More about their current customer base
Where to find target customers
How best to target and message customers

First-Party, Second-Party, and Third-Party Data: Understanding the Differences

When it comes to understanding third party data, it helps to know what first and second party data are and how they relate. First-party data is information that a brand gathers directly from its audience.

This might include customer data and personal information such as name, address, contact info, order history, browsing history, etc. Should they choose to do so, a business could then share that information with another company that has a similar audience.

In this scenario, the company purchasing the data would consider it to be second-party data.

First-party data is incredibly valuable for marketing campaigns targeting repeat customers. Second-party data is, by extension, equally valuable for targeting new audiences, given how marketers will have concrete data to rely on.

The method of data gathering changes between first-party, second-party, and third-party data.

In the past, the vast majority of third-party data was collected by third-party cookies. Cookies are placed on users’ devices where they track users’ web traffic information, including data on personal preferences or search history.²

Today, most third-party data is gathered by third-party data providers or data management platforms (DMPs) who mine websites, social media networks, surveys, and subscriptions for user information or purchase it directly from the site. Examples of third-party data include:

First and last name
Email address
Postal address
Phone numbers
Social media handles
Web browsing activities
Purchase history

Data In Action

To understand how the three types of data capture function, here’s an example in action:

First-party data – A clothing store maintains a list of customer data and information, including their name, contact info, shipping info, and shopping history. Armed with this information, they can keep customers informed about new releases or deals on preferred items.
Second-party data – The clothing store could then share its customer list with a shoe company that serves a similar demographic. Or, they may ask for information about potential consumers from their clothing brand. The efficacy of this exchange depends entirely on whether or not working partnerships can be forged and then maintained. Generally, these brands are in adjacent markets rather than direct competitors.
Third-party data – In order to drive more online sales, the store contacts a third-party data provider to help them reach new high-quality buyer segments of people who have recently visited competing online retailers. With this knowledge, the clothing store can then target those people with relevant marketing and advertising efforts.

How Is Third-Party Data Collected?

In most cases, third-party data is purchased from data aggregators that pull that information from the various web pages or apps that it was generated from. The third-party provider pays data owners and publishers to use their first-party data.

This process is repeated until it’s aggregated into a massive third-party data set. That information is then categorized into four types of data:

Personal data – This includes personally identifiable information as well as non-personally identifiable information like an IP address or web browser cookie.
Engagement data – This includes information on how a consumer interacts with a company’s website, app, email, or marketing efforts.
Behavioral data – This includes information on purchase histories, qualitative data, and product usage information.
Attitudinal data – This includes information on consumer satisfaction, product desirability, and purchasing factors.

From there, machine learning algorithms and other forms of AI take that information and further break it down into smaller segments and actionable insights. Companies can then either purchase these segments or focus on enriching their own first-party data to improve their marketing and sales efforts.

But not all data is made equal.

As a result, third-party data can be hit or miss, depending on who you’re buying it from, what type of data you’re buying, and how useful that data actually is.

Common data sets include:

Declared data – Information that users willingly provided through channels like online surveys.
Inferred data – Information about non-demographic data like preferences discovered by analyzing a user’s online activities.
Observed data – Richer information gathered by analyzing specific online user activities.

How Can Third-Party Data Elevate Your Marketing Campaign?

Third-party data has several tangible benefits that can be used for online marketing purposes. Here are a few ways you can use third-party data to enhance your strategy:

#1 Improve The Customer Experience

One of the most fundamental reasons why a company seeks out third-party data is to better comprehend their customer’s needs and then respond. This analysis of consumer behavior in conjunction with other data can help a company modify its product, service, or messaging around it to better fit the marketplace.

This allows a marketing team to create customized promotions, offers, or ads—based on consumer data—that speak directly to that particular buyer segment.

In doing so, you can personalize the messaging to an individual’s preferences.

And personalization in marketing is a decisive factor—just look at the data³:

71% of consumers feel frustrated when a shopping experience is impersonal.
70% of millennials are frustrated with brands sending irrelevant emails.
91% of consumers say they are more likely to shop with brands that provide offers and recommendations that are relevant to them.
80% of consumers are more likely to purchase from a brand that provides personalized experiences.
90% of consumers are willing to share personal behavioral data with companies for a cheaper and easier experience.

#2 Market to a Narrowed Audience

Third-party data can help marketers save time and money by defining and segmenting audiences. Similarly, businesses can find data sets on their target demographic and then curate messaging specific to those people.

Wharton School of Business uses the following example:⁴ “If you want to show your ads to families in a certain ZIP code who have actively been researching kitchen remodeling sites (and have been for the past three months), you can. This type of third-party data usage means you can get your ads in front of the eyes you want when you want.”

This allows for precision targeting of a sub-group, which can optimize your marketing campaign.

#3 Drill Down Insights

While your team can look at the numbers and gain valuable insights about larger or more general trends within your existing customer base, it’s much harder to narrow down specific, predictable behaviors. But with third-party data, you can glean more granular insights relevant to your business and its audience. This helps you allocate your marketing spend in a much more organized fashion.

#4 Enrich Your First-Party Data

The utility of your first-party data is limited to the interactions with the customer and voluntary divulgence of information by the customer. Unless you’re an enterprise organization, your first-party data often lacks the scale you need to produce actionable insights.

By adding third-party data to your first-party data, you experience data enrichment that helps you learn even more about your target customers’ demographics, behavior, and purchasing patterns.

This helps you reach new potential customers while learning more about the type of person who would be interested in your goods or services.

#5 Discover New Audiences

Third-party data can also help you discover gaps in your current user base. The delineation of who is and who is not interested in your offering makes it easier to uncover new, untapped demographics that might also be interested. Or, you can leverage this data to develop new products aimed toward those audiences.

#6 Refine Your Marketing Strategy

All of this data helps you better understand what makes your target audience tick.

You can see how they’re engaging with and responding to your marketing campaigns. This lets you lean into what’s working and change what’s not. You can market to the people who are most likely to engage in a way that’s most likely to incite that engagement.

Over time, your marketing ROI can dramatically increase as a result of optimization.

**Use Data to Power Your Marketing Strategy**

In the digital age, data makes the world go round. And the right data can transform an impersonal and ineffective marketing strategy into a winning one. But with so much data in the digi-verse, you need to be able to sift through the mountains of scraps in order to find gold.

Fortunately, you don’t have to do this yourself.

Here at Power Digital, we support all our marketing campaigns with data-driven insights and powerful analytic platforms that ensure we’re making strategic moves for your brand.

Ready to leverage the data universe and fuel your marketing efforts? Contact us today.

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