First-Party Data vs. Third-Party Data
Data increasingly fuels the marketing industry, yet not all data types are perceived as equal. Many want data to be labeled very specifically as “first-party” or “third-party”, but there are many nuances that can cloud the discussion.
First-party data is data that you’ve collected about people with whom you have a business relationship. For example, LinkedIn collects first-party data about its users and how they interact with each other. LinkedIn essentially “owns” that first-party data and can analyze it to send offers to its users or show them content it predicts they will like.
Third-party data is data that someone further upstream has collected and that you’ve purchased. For example, a data broker or data aggregator buys data from other companies, which constitutes third-party data. Every company that buys data from a broker or aggregator is buying third-party data.
Is first-party data better?
Many in the industry generally consider first-party data to be superior. One reason is compliance: If customers share their information with a company, they must have given it voluntarily. However, the consent options provided by companies seeking personal information aren’t always transparent or easy to understand, so this can be a bit of a gray area.
Some also assume that first-party data is more accurate. But there can be a selection bias as to who visits a website or signs up for a newsletter. The data that is analyzed by a company for its own business purposes before it’s sold may also be skewed or unhelpful for other businesses.
We have a different view here at NetWise. We typically gather information by crawling the web and collecting data from a huge range of sources, including state and government agencies, partners, company websites, job postings, business directories and social websites. Many would consider this raw data to be third party, but after we perform a ton of analysis, merge it and edit it, I would argue that the proprietary data sets we create are a form of first-party data.
We also know that third-party data that is collected from valuable sources can create an incredibly holistic view of people, businesses, transactions and relationships. If done right, third-party data can be extremely accurate and functional as an analytic resource.
Privacy: The elephant in the room
Based on our own experience and track record, we also believe that it is entirely possible to work with third-party data in a privacy- and compliance-first way.
We wouldn’t, however, call it easy. A compliance-first approach requires a sophisticated supply chain and data purchaser. For example, we have a licensed attorney who manages our data supply and all of our data contracts. This ensures upstream compliance. We audit our data suppliers, and an independent party also audits us every year to confirm that every piece of data has been provided with consumer consent and meets all compliance requirements.
The bottom line is that first-party data is a step in a better direction in an industry where data isn’t regulated well. Many data companies don’t bother to be compliant. That’s why we welcome regulation and believe it will make us better as an industry. With proper regulation, it will matter less whether data is first party or third party. But until we have a federal data protection and privacy framework, let the buyer beware.