What is Third-Party Data and How Does it Fit into Today’s Marketing Landscape?

Published: September 23, 2019 Updated: September 24, 2019 Author Category Data Management, Data Privacy & Security

The more data the better, right? User data is the information that helps you make decisions about your online marketing ventures, but not all data is equal. Data comes from different parties: first party is the stuff you collect yourself with analytics, CRM, and other tools. Second party is someone else’s first party data that’s been sold or traded. Finally you have third-party: data from sources who collect it externally from websites. We’ll be talking about third-party data in this post.

What is third-party data?

Third-party data is:

  • collected from users by one website while they are visiting another (for example, while you’re visiting “xzy.com” a cookie sends data to “adsenz.com” about your actions)
  • data that you use in your marketing efforts that is not directly from your sources (like data you buy from other sources)

Any data that is collected/distributed by entities other than the website being visited is third-party data.

In most cases, this kind of data is related to user behavior (web pages visited, purchases made, links clicked, etc.) and demographics (age, location, sex, etc.) data.

This information will be very useful later for retargeting users with advertisements.

Data is collected from millions of users across different websites.

Third-party data providers offer targeted advertising opportunities for marketers. Imagine being able to say “You’ve got a camping equipment store. How would you like to display advertisements only to people who have shown an interest in camping?” This in a nutshell is the strategy of implementing third-party data for serving ads or selling ad space.

Where does it come from?

Third-party data is collected using cookies from ad serving services like DoubleClick by Google, OpenX, or Epom. When added to a website, cookies track users’ behavior and then employ this information to retarget them on different domains.

Find out more about cookies and how they work here:
First-Party vs Third-Party Cookies: Why First-Party Is the Way to Go

When you visit a webpage that uses third-party cookies, it records your actions: products you browsed, articles you read, social media buttons, etc. This is then sent to an ad serving service where it’s used to recognize you on other websites and retarget you with ads from the first site.

How first, second, and third-party data is collected.

To offer ad placement, the ad service needs to track people on websites that have established a partnership with them. The wider the scope of data, the better. It allows ad services to make pairings more accurate and serve advertisements more strategically.

How is third-party data used?

Third-party data is used within an ad network to sell advertising opportunities targeting specific audiences.

Here’s an example: A company selling supplements and a men’s health site both have the same third-party cookie from an ad service. You go to the supplement website, browse multivitamins, then leave. Later that day you visit the health site. This site has ad space to sell, and the advertising service recognizes you from the supplement shop. You are served ads for the same multivitamins that you looked at on the previous site.

There are three main parties involved:

  • Advertisers looking to retarget potential customers
  • Publishers wanting to sell ad space
  • Ad serving services that connect the first two parties

Things are, of course, a bit more complicated. Websites don’t need to use the same ad service to “match” and serve an ad. There is a massive ad network comprised of supply-side platforms (SSP) and demand-side platforms (DSP) and an ad exchange all running programmatic advertising.

If you’re looking for information about how ad networks work read this Clearcode’s post:
What Is an Ad Network and How Does It Work?

Third-party data is also used by marketers to extend the reach of their outbound efforts. You can take observations from analysis of your super accurate first-party data and then apply them to remarketing campaigns taking advantage of the huge scope of third-party data.

Here’s a quick example: After an analysis of your (first-party) analytics data you build several audiences, each with accompanying strategies. You discover that audience A is most likely to buy product A, while audience B usually leans towards product B, etc. By exporting these audiences into ad platforms and setting up retargeting campaigns, you can provide audience A with ads for product A, and audience B with ads for product B, instead of a blanket marketing campaign with the same ads for everyone.

Benefits of third-party data

The biggest advantage third-party data has over first-party is its scope in both information and the number of touchpoints across the web. Third-party data is also segmented in advance for categories such as demographics and behavior, saving you time and money that you would spend analyzing and organizing data.

Companies can use ad services to easily and cheaply retarget users on the web. The system isn’t perfect (see next section), but marketers can feel reasonably secure that their ads will land in the right place thanks to the huge amounts of data that ad networks share.

Your first-party data can only tell you about people who have already visited your website. This is effective for optimizing your customer experience and setting up audiences, but it’s not as useful for outbound efforts. It’s great to use first-party and third-party data together – for example, in learning about your website users’ demographic characteristics to improve your third-party ad campaigns.

Due to the huge scale of third-party data collection, marketers can find and retarget existing visitors as they navigate through different domains as well as target new visitors that fit into their existing audiences.

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Privacy concerns and other downsides

The ethicality of third-party data collection has recently been called into question. Public outcry claiming these tracking methods are intrusive has led to responses from both governments and tech communities.

Third-party data and privacy regulations such as the General Data Protection Regulation, ePrivacy Directive, Brazilian General Data Protection Law (LGPD), India Personal Data Protection Bill, and other regulations around the world aren’t perfectly coordinated. Websites that want to be compliant need to obtain user consent to use third-party tracking cookies. If someone doesn’t consent, then third-party cookies cannot legally be used.

More and more web browsers block third-party cookies by default, implement anti-tracking measures (see: Safari’s Intelligent Tracking Prevention), and allow users to easily disable third-party cookies. Efforts to limit third-party tracking have seriously reduced the value and effectiveness of ad services.

Another negative aspect of third-party data is the lack of exclusivity. The data used to serve your advertisements is accessible to your competitors as well. The playing field is level and you gain no advantage over your competition.

In addition to saturation, there’s the issue of reliability. You have no way of verifying where the information came from and how old or accurate it is. There’s no way to confirm that your ads are being served to relevant users. For example, someone looking for a picture of running shoes on the internet may not be interested in running or buying shoes, but they will still be served an ad for your website’s running shoes.

Conclusion

It’s a popular opinion that third-party data-based advertising has gone as far as it can and is now in decline. With the migration of a large segment of internet users to mobile, some would even argue that the age of cookie tracking has ended.

While it may not be what it once was, retargeting using third-party services still has its place in a well-blended marketing strategy. Third-party data is best when used to enrich first-party data you’ve gathered from your website. It’s crucial that you can confirm third-party data has been obtained in compliance with global privacy regulations and that consent was given from users providing this data. If you need more information about third-party data or how you can use it in your efforts, reach out to us!

Author:

Peter Curac-Dahl, Content Marketer

Dog petting Wikipedia peruser bound by the universal laws of coffee. Consumer of all info tech and business related. Producing useful insights with concise thought-provoking material.

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