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What is first-party data? (And why does it matter for marketers?)

In 2017, companies invested $10.1 billion in data activation.

And it’s no wonder. With 70% of IT execs saying data technology contributes to revenue growth, data has become a vital, foundational part of any good marketing strategy.

But what is the data everyone’s investing in? Data terms get thrown around a lot—but what do they mean? What is first-party data? How is it different than third-party data? And what does it all mean for marketers?

Here at Lytics—where data is our business and our passion, the thing we think about, work with, and dig deeper into every day—we asked our experts to shed some light on these core questions.

Here’s what they had to say.

What is first-party data?

First-party data is information you collect directly from your customers.

This includes behavioral data (for example: What emails does Customer X open? What blog posts do they read? What campaigns do they engage with? How often do they visit your site?) and information customers provide directly to you through forms, surveys, conversations with your sales team, purchases, etc. (for example: email address, login, name, or mailing address).

The benefits of first-party data include:

:: A deep, accurate, real-time understanding of individual customers.

:: Ability, through a CDP like Lytics, to segment and personalize for customers based on their interests and behavior.

:: Easier compliance with GDPR and other privacy laws.

:: The confidence of knowing exactly where you data comes from, how you got it, and how accurate it is.

What about third-party data?

Third-party data is customer data collected by (no surprise here) a third party. It’s anonymous, often centers around customer interests, and is almost exclusively used for advertising to new prospects around the web.

With first-party data, because you collect it directly from your customers and prospects, you know a lot about it—where it came from, how recently it was collected, how you collected it—but with third-party data, it’s a bit trickier.

Why?

One reason is that for third-party data aggregators, there’s no difference between an accidental click and an intentional one. So, if you slip and click on a diaper ad even though your kids are all already in their teens? Too bad. Now, you’re on a list of people interested in diapers and advertisers are going to treat you accordingly.

Another reason is that third-party vendors are incentivized to put customers in as many segments as possible (after all, that’s more people to target!). But where with your first-party data you might wait until someone has opened two golf emails or signed up for golf offers before you advertise to them as a golfer, a one-second accidental click is enough for a DMP using third-party data to add someone to a list of people interested in golf and all the ads that go with it.

This is likely part of the reason 82% of marketers say third-party data is unreliable.

Now, does that mean third-party data is always a bad idea? We don’t think so. We’ve seen clients use it in large ad campaigns to good effect.

But it does mean that our use cases for third-party data are more limited. It means third-party data is best with quantity, not quality. It means if your goal is to advertise far and wide, third-party can be a benefit. But if your goal is personalization or a deep understanding of customers, first-party data is what you need.

Privacy, the GDPR, and first-party data

Okay, so we get the core difference between first- and third-party data. But how do they both factor into the new regulations around data privacy? Is one better than the other? Does the GDPR or California Privacy Act impact which data we should gravitate toward and how we can use it?

The answers are yes and yes.

When it comes to compliance with the GDPR, CPA, and other privacy regulations, first-party data is much better than third-party. And with both types of data, privacy regulations should guide how you collect, store, and use customer information.

So, why is first-party data better than third-party when it comes to privacy? The first reason is simply that customers are more comfortable sharing data with brands they trust.

In fact, in one survey, 80% of respondents said they’d happily share personal data with brands they trust in order to get more personalized marketing offers and messages. Compare that to just 17% who said they were okay sharing the same data with third parties and it becomes clear that third-party data with true user consent is harder to come by.

This means that companies using third-party data will have to be on the ball about vetting their DMP or other third-party data partners. You need to know how they got user consent and make sure their practices match up with the law.

Making sure first-party data is compliant

Now, while first-party data is easier to come by with true customer consent, there is still an extra step if you want to make sure you’re compliant with the GDPR and other data privacy regulations. Because making sure you have consent is only half the battle. To stay compliant, you also have to give users a way to edit or delete the data you’ve collected on them.

This means first-party must be centralized and accessible to be compliant. Which is one of the reasons it’s important to use a Customer Data Platform (CDP).

Why is compliance so tricky without a CDP? Because if your data is stored in 10 different places across 10 different teams, a single opt-out request from a user means changing or deleting information in 10 different places. That’s 10 possible points of failure. 10 chances that you could miss an edit. 10 chances for a mistake that could get you reported.

Not to mention nine extra tasks for the poor person responsible for opt outs.

First-party data drives exponential marketing growth

Of course, compliance isn’t the only reason to prioritize first-party data and get yourself a CDP. The reason they’re so valuable in the first place is that they improve your marketing—exponentially.

First-party data means understanding your customers. Understanding your customers means better targeting, more personalized offers, and big wins for your business. Like when Agora Financial increased their monthly average revenue by 167%. Or when The Economist grew digital subscriptions by 300%. Or when Dr. Martens increased order value by 20% and conversions by 60% with hyper-targeted, personalized campaigns.

Is your company harnessing the power of first-party data?

If results like those above intrigue you, we’d love to hear about your business goals and show you how Lytics can help you reach them and make the most of your first-party data.

Reach out today to chat with an expert. Or grab a copy of our CDP and DMP guide to learn more about the different data types and the technologies that support them.



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