First party Data Versus Third-Party Data

For years, customers have been demanding control of their personal data and a pivot to relationship or personalised marketing, which cultivates deeper, more meaningful relationships to ensure long-term association and an enhanced customer experience.

(The End of Third-Party Data – Finally Forbes.com)

It would be a challenge to find a company today that didn’t see data as a prized asset. The more you know about your customers, the more you can target them, and sell to them. However, there is a big change coming.

Google is planning to stop supporting third-party cookies. This could happen as early as the end of 2022, and once it does, any business that is unprepared for the change could be in serious trouble.

We will drill down into the potential catastrophe ahead later in this post. But first, let’s take a look at the two main kinds of data (first and third) that are so fundamental to successful online marketing.

Third-party data

Third-party data is data that a company purchases from another company or provider. Using data on the visits and actions a person may make online, collected by cookies, third-party data is able to build audience segments at scale.

There are numerous benefits attached to third-party data, but perhaps the most obvious one is the scalability. Having a wealth of data on potentially thousands of users means that this model suits companies up to enterprise level.

Third-party data is presented in audience segments too, so companies can target their marketing and advertising accordingly. Again, if a company pays for third-party data (such as when you advertise through Google Ads, for example) it can reach a huge number of people in a targeted way.

However, there are drawbacks to this approach. Third-party data is probabilistic. It is anonymous, and is created as a ‘best fit’ model, as a result of behaviour online. There is always the possibility that, as a provider tracks behaviour, it assigns ad preferences to someone who isn’t interested. That someone may have visited a site briefly, and have lost interest in booking a holiday for example, or may even have been looking for travel insurance rather than accommodation.

It’s not quite the same as targeting someone who has purposefully come to your website or app and is looking for the product you are selling.

Third-party data collection uses cookies too. And that tracking of behaviour can be subtle (hidden) and even unwelcome. Privacy is important, after all.

Which leads us on to first-party data.

First-party data

First-party data is data that a company collects itself. It does this through email capture, tracking on its own website, and purchase information, to name just a few ways. The company owns it, and it is essentially ‘free’ as well as accurate (since the customer submitted the data through direct interaction with the company and its assets).

There are benefits to this kind of data too. First up, it is free. If a customer uses a brand’s app, and submits payment details, the brand knows how much has been spent, and on which product. It hasn’t had to pay money to Google or other third-party providers to find this out.

The brand is also asking for consent to use that data. Remember the concern with third-party data and privacy? That’s no problem when it comes to first-party data.

This kind of data also enables arguably better marketing all round. It is accurate and reliable, and submitted by the customer. For marketing campaigns, there is less work involved when you know exactly what your audience is interested in.

So why not use both?

That’s the thing. Soon, the landscape is going to change. Google is going to stop supporting the cookies for third-party data collection. This means companies can no longer pursue that particular avenue.

Google isn’t the first of course. Apple stopped supporting cookies on Safari in 2017. And Mozilla cleared out the cookies in 2019 (on its Firefox browser). But Google is huge, and accounts for 60% of online browsing.

With third-party cookies effectively dying off, where does this leave brands that want a reliable, accurate and regulation-proof method of targeting and reaching customers?

First-party data is relationship-based, and it can lead to personalised marketing. Due to the lack of third-party cookies, getting access to first-party data is more crucial than ever. Any brand that does the legwork in accumulating first-party data will meet the privacy requirements that customers have, as well as find that their marketing is hyper-targeted.

The direction of travel

Google has said that it looks like the removal of cookies will happen in 2023, giving time for brands and publishers to adjust to whatever alternative might be developed. Google wouldn’t leave brands high and dry, but it’s going ahead with its plans. We can probably expect some kind of alternative that may well cost more.

Now is the time for brands to focus on their first-party data efforts. The ability to understand how your current customers use your products or services gives you an edge. First-party data helps you identify patterns and predict future trends to create highly effective targeted campaigns.

In other words, engage your audience, build a relationship, and gather first-party data.

Blog and social post version

First-party data versus third-party data.Third-party data is dying a slow death, and brands need to rethink their campaigns. Are you up to speed?