1st-Party Data vs 2nd-Party Data vs 3rd-Party Data: What's the Difference?
by Brenna Dilger, on October 6, 2021
Data is the fuel that powers a successful brand strategy in today’s constantly evolving digital landscape; without data, a brand can't lift too far off the ground. Since data contributes significantly to accelerating a brand's growth, it’s critical to master the fundamentals. There are three types of data that are important to understand in order to drive forward an efficient data-driven brand strategy: first-party data, second-party data, and third-party data. Learning to differentiate, collect, and apply these types of data can make or break the future of your brand.
What is first-party data?
First-party data is data that comes straight from the source: your brand’s unique audience and customers. Any information your business collects from its own online and offline sources (your website, app, social media, surveys, etc.) would be considered first-party data. If you owned a coffee shop, collecting first-party data would be like harvesting your own coffee beans. You have complete control over where and how the beans are grown, so you can trust that your coffee beans will make a great cup of coffee (i.e. your homegrown data will filter into a robust brand strategy).
First-party data is considered the “king” of data, since it is fairly easy to collect, is available to you for free, and is the most relevant to your business. Because there is no question as to where the data came from or how it was collected, first-party data is typically considered to be the highest quality.
How do you collect first-party data?
Many companies collect first-party data by adding a pixel to their website, social media, or product pages to track customer behaviors, preferences, and interactions. Brands often also will prompt customers to fill out web forms or complete online surveys in order to gather even more detailed information.
How can marketers use first-party data?
Because first-party data is the most relevant data to your business, it can be used to gain detailed insights to your specific audience in order to create tailor-made experiences for them, display targeted ads, and predict their future patterns. Your customers are directly giving you the information you need to customize their buyer journey and retain them.
However, first-party data rarely gives you enough information to get a full understanding of your target audience. It is only a small portion of a grander network of data that is available to marketers. That’s where second-party and third-party data come in!
What is second-party data?
Second-party data is, in a nutshell, someone else’s first-party data. The seller collects data straight from their audience and then allows another company to purchase that first-party data from them directly.
It’s like purchasing coffee beans from a coffee roaster instead of growing your own coffee beans. As a coffee shop owner, you would reach out to a coffee roaster and negotiate a partnership so that your shop could shelve their coffee beans. Though you wouldn't have been able to oversee the harvesting of the coffee beans yourself, you would still have direct access to important information about where the beans were grown, the conditions they were grown in, and the process they went through before ending up on your shelf.
How do you collect second-party data?
To get raw second-party data, brands must seek out companies that have data they need, build a relationship with them, and negotiate a transaction. Though second-party data can be extremely useful, the drawback to collecting this type of data is the time-consuming and labor-intensive process of finding the right companies, forming secure relations, and finalizing purchases.
This process of selecting a partner is often referred to as a data bake-off. Brands must compete against each other by sharing sample datasets, which will be tested for accuracy, match rate, overlap, and scale. Once a data supplier is selected as a “winner,” legal, finance, and engineering teams must then allocate time and resources to negotiate terms and pricing, draft contracts, and integrate systems. This process can take months or even years to complete. Additionally, when a brand inevitably wants to purchase a new data type from a different supplier, the process must be repeated all over again.
How can marketers use second-party data?
Second-party data allows your brand to access insights you couldn’t get from first-party data alone. With second-party data, you can increase the scale of your data, reach new audiences, and gain a broader understanding of your targeted buyers. Partnering directly with a data originator also gives brands the peace of mind of knowing exactly how and when the data they are buying was collected.
What is third-party data?
Third-party data is data that you buy from a source that is not the original collector of the data. It is often also aggregated data (i.e. instead of getting single origin coffee beans, you're getting a blend). Collecting third-party data is essentially the equivalent of purchasing a multitude of generic coffee blends from a grocery store. The quality of the beans may not be as high as if you had purchased directly from a specific coffee roaster and you won’t be completely sure of the origin of your coffee beans or the journey they went through before arriving at the grocery store you purchased them from. However, you can instantly and easily purchase a large variety of beans, thus appealing to more flavor profiles and developing a well-rounded selection of coffee beans.
Collecting third-party data is like making a visit to a data grocery store: it's easy and doesn't take much time. However, brands sacrifice the transparency of knowing exactly how third-party data providers are classifying their consumers, what the source of each data point is, and how they are testing the data for accuracy. Often, third-party data lacks the quality and reliability that brands need in order to confidently use it.
How do you collect third-party data?
To obtain third-party data, you need to purchase it from a data broker. These data brokers pay for access to first-party data from a variety of sources and then aggregate this data into large data sets that they then resell to others based on target audience characteristics. While this maximizes scope, there is no way to know the full backstory of third-party data, making inaccuracy a huge concern.
How can marketers use third party data?
While first-party and second-party data are considered more valuable types of data, third-party data provides a large volume and breadth of information that an individual entity simply can’t match. You can use third-party data to vastly expand your audience and gain even more profound insights into the behaviors and interests of a specific customer profile. The downside to third-party data is that you don’t usually know the original source of the data and therefore can’t determine the reliability or accuracy of the data you are applying to your customer profiles.
How does Narrative create the best of all worlds?
Narrative is a data collaboration platform which directly connects data users to data originators and gives both buyers and sellers the best tools to make data transactions transparent, fast, and cost-effective. With Narrative, companies can acquire valuable second-party data directly from numerous data originators all at once. We give you the quality, transparency, and control of second-party data with the ease and scalability of third-party data providers.
Essentially, we are the artisan coffee supplier of data - we acquire quality coffee beans directly from several trustworthy roasters and deliver those coffee beans straight to the coffee shops that need it without either side having to negotiate. We provide neatly packaged second-party data from a variety of quality sources and make it as fast and easy as possible to purchase and use that data.
With Narrative, a single integration can give you direct access to tens of billions of quality raw data points. You’ll be able to filter through a wealth of data to find the most relevant and actionable data for your brand, and you’ll be able to determine the exact source and accuracy of each dataset. The best part is that Narrative provides the tools and workflows that transform a historically time-intensive and difficult ordeal into a quick and intuitive process that benefits both data users and data suppliers.
