Taking a Second Look at Second-Party Data
This Is Not Your Father's Second-Party Data
Second-party data is on the rise. Expanding digital media channels are creating new sources and increasing volumes of first-party customer data. Since second-party data is essentially someone else’s customer data, the rise in first-party data is dramatically increasing the availability of “Other Peoples’ Data” as well. Marketers are taking a second look at how new second-party data sources, in conjunction with new data technologies, can be leveraged to increase customer insights, identify critical in-market behaviors, and scale marketing programs.
The Growing Appetite for Data
A 2015 Econsultancy study found that seventy-seven percent of brand marketers reporting having the highest returns on their data-related investments were currently leveraging second-party data. About thirty percent of respondents indicated that second-party data provided the highest increase in lifetime value and the highest lift among data sources. Although first-party data was clearly the data type of choice with eighty-two percent of surveyed marketers indicating they plan to increase their usage of it, sixty percent of marketers surveyed said they would increase their use of second-party data. Marketers are planning to increase their usage of third-party data by forty-four percent. *1 Marketers’ overall hunger for data and data-driven solutions is increasing and second-party data is occupying a growing portion of their plate.
Evolving Second-Party Data Models
Traditional, “direct” second-party data relationships have been around for a long time and maintain an important role within today’s expanding “Datasphere”. These relationships typically include some variation of a retailer-to-retailer, retailer-to-manufacturer, or retailer-to-publisher partnership. Although direct, one-to-one relationships enable the exchange of valuable customer information, they have limitations, requiring an inefficient use of time and other resources to uncover, negotiate, set-up and administer on a one-off basis.
Leveraging growing volumes and varieties of digital data, data technology companies are redefining second-party data delivery models by creating data management platforms which provide companies in search of second-party data with easy, one-to-many access to the consumer data of hundreds of brands and other potential data providers. These new, highly efficient marketplaces provide data users with real-time access to in-market customer data for use in analysis and advertising. On the other side of the coin, the new platforms offer retailers, manufacturers, and publishers more effective means of monetizing their customer data.
OwnerIQ’s Qniverse programmatically connects retailers with the anonymous second-party shopper data from more than 500 brands. Earlier this year, Media Math launched Helix, which brokers the second-party data of a third of the nation’s top 100 retailers. At its Summit in Las Vegas, Adobe announced the beta-launch of the Adobe Marketing Cloud Device Co-op with the participation of leading brands such as Disney, Coca-Cola, Comcast, and McDonalds. Built around Adobe’s Analytics and the Audience Manager Data Management Platform and in partnership with ComScore, this second-party data cooperative promises to give better reach across and beyond Web screens into television.
First- and Second-Party Data: Kindred Benefits
Since second-party data is essentially another company’s first-party data, there are key similarities between the two. Both are chiefly comprised on transactional and behavioral data culled from CRM files, point-of-sale transactions, loyalty program activity, apps, website registrations and site behavior data, and in some cases credit card data. Among its greatest benefits, first-party data is proprietary, giving companies exclusive access to their customer data. Depending on the exclusivity of a partnership, second-party data can be quasi-proprietary as well, as in the case of an airline and hotel chain who exclusively share customer data. As second-party models evolve into high-volume data cooperatives, the potential for exclusivity diminishes. First- and second-party data are both highly transparent, providing clarity as to how they are compiled and where they are sourced.
Second-party data which is matched to existing customer data can be used to better understand customer behavior and to expand engagement channels. Second-party data which is additive can be used to scale promotions beyond existing customer bases and drive acquisition. A growing number of marketers are also using second party relationships as an alternative to the costly, inefficient and fragmented continuum of ad technologies, by circumventing agencies, DSP’s exchanges, SSP’s and ad networks for more direct marketer-to-publisher relationships.
Considering the Role of Third-Party Data
With the rise of second-party data and its inherent attributes, where does third-party data fit into the picture? Third-party data plays a considerable role within the larger Datasphere and the broad spectrum of data sources, bringing valuable advantages to the “party” that include: variety, accessibility and scalability.
Compared to first- and second-party data sources, the variety of third-party data is vast. Consider the thousands of reported and inferred demographic, psychographic, and geographic attributes available for millions of individuals and households. To that mix, add the many sources of mover and other life stage data. The totality of available lifestyle and life stage data creates unprecedented capabilities to profile and segment customers, model and predict behavior, and fine-tune marketing strategies and messages.
First-party data is obviously the most accessible data type. But third-party data is highly accessible given the wide-variety of third-party data providers and liquid market in which third-party data is brokered. Third-party data is already resident on most ad technology platforms and is used in modeling, data segmentation, and audience creation. Even with the rise of new delivery models and data coops, second-party data is most often the least accessible data type, requiring the development of one-off partnerships in the majority of cases.
Finally, third-party data is scalable. Modeled third-party data offers population coverage approaching 100 percent. Using cloning and look-a-like models, third-party data can be used to efficiently scale promotions by identifying prospective customers who will behave like top-performing customers.
Three’s the Charm
There is certainly growing interest regarding second-party data. But new data sources, data technologies and marketing paradigms are dramatically changing the landscape for marketers across all data types – first-, second- and third-party data. So which type of data is better? Which data should marketers use more or less of? These are complicated questions. The answers ultimately concern the unique situations of individual marketers, their access to different data, their ability to utilize data, and the specific marketing situations they are attempting to address. Across the different data types, the quality, volume, variety, exclusivity, applicability, accessibility, and other important attributes vary greatly. Each type of data has its inherent strengths and weaknesses. The simple answers are that certain data is better in some situations, no data type is better than another in every situation, and a combination of data most often yields the greatest results. Marketers need to utilize an optimal mix of data types based their unique situation. The playing field for all data is rapidly changing, and in order for brands to maximize their return marketing investment, they need to take a second look at all potential data sources.
- Marketers Put First-Party Data First; eMarketer; June 2015; http://www.emarketer.com/Article/Marketers-Put-First-Party-Data-First/1012663
- Data Triangulation: How Second-Party Data Will Eat The Digital World; Chris O’Hara; Ad Exchanger; January, 2016; http://adexchanger.com/data-driven-thinking/data-triangulation-how-second-party-data-will-eat-the-digital-world/
- Is Second-Party Data Worth a Second Look?; Al Urbanski; January 2016; DMNews; http://www.dmnews.com/dataanalytics/is-second-party-data-worth-a-second-look/article/467852/
- Second-Party Data About To Go Mainstream; Mike Sands; AdExchanger; June 2015; http://adexchanger.com/data-driven-thinking/second-party-data-about-to-go-mainstream/