Second-Party Data About To Go Mainstream

mikesandsupdateData-Driven Thinking” is written by members of the media community and contains fresh ideas on the digital revolution in media.

Today’s column is written by Mike Sands, CEO at Signal.

For two decades, ad tech has heavily depended on third-party data, collected and aggregated by vendors across multiple websites or offline sources. It’s plentiful, but often based on inferences about intended behaviors rather than facts derived through firsthand customer relationships.

First-party data collected directly from customers is more valuable and accurate than third-party data, but it’s scarce and can be hard to interpret. And unless you are an Internet giant, such as Amazon or eBay, your first-party data will likely fall short of the scale needed for sophisticated targeting and personalization strategies.

Choosing between first-party and third-party data has been a constant dilemma forcing marketers to compromise between data quality and scale. Now I’m seeing the conversation shift to second-party data, which is essentially someone else’s first-party data.

For instance, a trusted supplier, retailer or publisher may allow access to its customer data, most likely in exchange for a partner’s first-party data. Like first-party data, it is high quality and exclusive. Like third-party data, it can help amplify and extend the limited supply of first-party data.

Growing Interest

Today’s emerging audience recognition technologies are taking second-party data to the next level while addressing the privacy and security concerns that has deterred many marketers from using data co-ops. Companies with complementary customer sets can share audience data and extend the insights they’ve derived from their own customer engagement data to enrich customer profiles, stitch together cross-device identity, reach audiences at scale or help with ad targeting. All companies must maintain control of their data, adhering to consumer privacy best practices and addressing security concerns.

Sophisticated data-driven marketers have already caught on to the benefits of second-party data. A 2015 survey of brand marketers by Econsultancy found that 77% of marketers that reported the highest returns on their data-related investments are currently leveraging second-party data. And 60% of marketers across the board say they will increase their use of second-party data, suggesting that many marketers are catching on to the value second-party data can provide.

Big Benefits

I see several reasons why I’m beginning to see greater adoption of second-party data. For starters, it can help marketers address one of today’s biggest marketing challenges: gaining a holistic view of customers across devices and channels. Marketers can leverage second-party data to build deep and rich cross­channel profiles at scale to stitch together data and identity to fuel better marketing.

Second-party data can also help marketers glean better insights. By sharing data, each marketing partner can target marketing activities more appropriately. For example, if an auto brand partnered with a publisher, the publisher could target relevant ads to car owners, while the auto brand could market to audiences based on their search behavior on the publisher’s site.

With second-party data, marketers can activate unique brand experiences. In today’s competitive race for consumer attention, unique brand experiences are a must. Brands can cooperatively exchange exclusive second­party data to add personalized elements and relevant messaging to advertising creative, product offers, email marketing and customized content.

Finally, second-party data can help brands monetize their data. Brands can add a revenue stream by sharing anonymized data with trusted partners. There are many high-value examples of this in today’s marketing landscape. For example, telecommunication companies have rich first-party data about their users, and in turn can share the data with marketing partners to supplement geotargeting efforts and enhance customer profiles across online and offline channels.

It’s time for marketers to focus on ways to leverage the wealth of firsthand knowledge they have about their customers. By sharing this data in private, secure networks with intelligently chosen trusted partners, they can scale it without the risks involved in turning their hard-earned data over to walled gardens, including Facebook and Google, which eliminate the opportunity to engage with consumers across devices and channels.

Ultimately, leveraging second-party data will enable marketers to drive deeper customer engagement, unify cross-device identities and create the robust personalization that creates loyal consumers.

Follow Signal (@Signal) and AdExchanger (@adexchanger) on Twitter.

8 Comments

  1. Mike -- Great stuff. I've been thinking about this a lot as well.

    How do smaller brands find the bigger brand with (a) the right data for their use case and (b) the willingness to share it?

    Is it all via offline relationships?

    Thanks.

    Reply
    • Thanks for the feedback, Steve, and great question. For a small brand to find the right data-sharing partners, I think they need to start with understanding their customer. By profiling their best customers and enriching their first-party data with syndicated lifestyle segmentation data they can discover important attributes such as demographic, psychographic, lifestyle, income, discretionary spend, shopping and brand preferences.

      With these insights, the small brand can identify other brands or businesses that share this audience. From there, they should contact the cooperative advertising or media sales team at the bigger brands with shared audiences. If no co-op advertising contacts are available, the small brand can also reach out to an executive that manages display advertising for the bigger brand's website.

      Reply
  2. Great article! 1st party data can be applied integrating a DMP to the DSP and 3rd party through data exchanges, but how does 2nd party data work on a technical level?

    Reply
    • Hi Jesse,
      Your DMP could be a perfect solution to set up 2nd party data partnerships. We helped a French big CPG player to collect 2nd party data with a cooking recipe website by setting his DMP tag on the partner website. We collect huge amount of data directly in the DMP which allows us to better qualify our customer (by using first party data) or prospect.

      Reply
  3. Mike - really enjoyed this article. We're actively exploring ways to partner w/ brands to do bigger and better things w/ data. While this 'concept' is on the rise, i dont see many brands either having the itnernal capabilities to execute these programs or the application to do so either. Where/how have you seen this applied successfully?

    Regardless, 100% onboard with your vision. Well written. Thank you.

    Reply
    • Hi Mike,
      As I told Jesse, we did set a 2nd data partenership for a big CPG brand with a big cooking website. The technology we used in that case was a DMP (we put our tag on the partner website), but you could use other ways (set a pixel of your DSP for instance). A DMP allowed us to cross the second party data with our client's first party data and do some look alike ad targeting on prospects.

      Reply
  4. JP Emery

    most 2nd party data providers are large scale solutions that track IP addresses, contact information and the like. Mr. Sands do you think a company could interject themselves into the 2nd party data space and be successful if they were just tied to the few but important anchor interactions that customers engage with every day?
    Using facebook as an example. could they be a successful 2nd party data provider if they ONLY were tied to the Likes people espouse over the internet?

    Reply
  5. Jesse

    Really just an extension of the offline co-ops. There are some players like owneriq and adroit digital that help scale the process and plenty of digital marketers cutting individual deals like this with other brands.

    Reply

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