Understanding Third-Party Data: Definitions, Benefits & Challenges

Industry trends and evolving data privacy regulations are driving changes in marketing strategies, prompting businesses to adapt their data collection and use to remain effective and compliant.

This guide examines third-party data in its current form, explaining its role, the reasons behind its decline, and the strategies businesses are adopting to address these issues. It also offers a roadmap for marketers preparing for a future where first-party data, zero-party data, and privacy-preserving technologies take precedence.

The challenge for businesses today is not only understanding third-party data but developing a sustainable data strategy that balances effective targeting and personalisation with respect for consumer privacy and regulatory requirements, while aligning marketing strategies with industry trends and compliance with data privacy regulations.

Companies adapting their data strategies now will gain a competitive edge, while those relying on outdated methods risk falling behind in a privacy-focused digital environment.

Key Takeaways

• Third-party data, collected from external sources without a direct customer relationship, is increasingly supplemented or replaced by first-party and zero-party data due to privacy regulations and the decline of third-party cookies.

• Developing a robust first-party data strategy and partnering with trusted second-party data providers are essential steps for businesses to maintain effective audience targeting, gain actionable insights, and enhance customer experiences.

• Adopting privacy-compliant data governance, investing in direct customer engagement, and exploring alternatives like contextual advertising and data clean rooms will help marketers navigate the evolving data environment and prepare for a post-cookie future.

Understanding the Data Environment

A System in Transition: Shifting value and availability of data types

The value and availability of different data types are shifting, with a growing emphasis on the need to collect first-party data directly from consumers. Businesses are prioritising their own customer data to improve data quality and audience targeting. The digital ecosystem is shifting away from reliance on broad third-party data toward owning data sources.

Key Data Categories

Third-Party Data

Third-party data is information collected by entities that do not have a direct link to the customer or organisation. Examples of third-party data include demographic characteristics, user feedback, website interactions, and purchase history. Data aggregators and data providers compile third-party datasets from various external sources.

Marketers obtain third-party data by purchasing it from data providers and data partners, who pull data from multiple sources. Party data encompasses numerous data points and audience segments, enabling the identification of potential customers and new audiences with similar characteristics to an existing customer base.

Third-party data is often utilised to enhance ad campaigns and marketing efforts by providing valuable insights and enriching customer profiles. Integrating third-party data into a central platform can help marketers maintain high-quality data and improve audience targeting.

First-Party Data

First-party data is information a company collects directly from its customers or audience through its websites, apps, or customer relationship management systems. It includes email addresses, contact details, purchase history, website behaviour, app usage, shopping preferences, and behavioural data.

First-party data is often collected through customer surveys and other direct interactions, providing insights into demographics, preferences, and behaviours.

First-party data is important because it provides valuable insights into existing customers and their experiences, enabling businesses to tailor marketing strategies and enhance customer satisfaction. This data is accurate, current, and based on explicit consent.

To maximise the value of customer data, organisations should implement a strong first-party data strategy.

Zero-Party Data

Zero-party data is a type of consumer data that customers intentionally share with brands, such as preferences or purchase intentions, often collected through surveys, quizzes, or preference centres. This data supports personalised experiences without privacy concerns.

Core Principles

Several key ideas are shaping the development of new marketing and advertising technologies. Data privacy and compliance with data privacy regulations are crucial to these new marketing technologies, shaping how data is collected, managed, and utilised.

In the post-cookie world, adopting a data-driven marketing approach and developing a robust data strategy are essential for effective audience targeting and long-term business success.

Key Governance Principles

• Consumer Consent: Obtaining explicit permission from users to collect and use their personal information is now a central requirement.

• Data Anonymisation: Emerging technologies aim to group users into interest cohorts without revealing individual identities.

• Interoperability: New identity standards are being developed to enable seamless functionality across platforms, eliminating the need for third-party cookies.

• Direct Relationships: Building strong first-party data assets through direct customer engagement is a primary objective.

• Trusted Partners & Second Party Data: Collaborating with trusted partners enables secure and privacy-compliant sharing of second-party data, expanding audience reach and strengthening data governance through verified business relationships.

• Integration of Second and Third Party Data: Combining second and third-party data improves governance, audience targeting, and analytics by providing richer customer insights and supporting more effective personalisation strategies.

• Customer Data Platform: Utilising a customer data platform helps manage consent, link customer preferences to unified profiles, and simplify regulatory compliance, data governance, and auditing.

How to Prepare Your Data Strategy

Adapting to changing rules around digital identity and advertising requires a forward-looking approach.

When preparing your data strategy, it is crucial to select a reliable data partner to ensure data quality, ethical sourcing, and effective marketing activation.

Practical Steps for Data Governance

• Audit Your Data Sources: Identify how much your marketing depends on third-party data and cookies, and evaluate the data you have on your existing customer base to understand consumer behaviour better and improve targeting.

• Invest in First-Party Data Collection: Develop clear strategies to encourage users to sign up, create accounts, and share preferences.

• Test Contextual Advertising: Allocate a portion of your advertising budget to campaigns targeting webpages based on their content rather than user history.

• Explore Data Clean Rooms: Use secure environments to match your first-party data with partners’ data without exposing raw information.

The Future of Audience Addressability

The market has not settled on a single replacement for third-party cookies. Multiple identity solutions and advertising methods will coexist. Similarly, these different approaches can guide potential customers through the decision-making process and help maintain engagement across various marketing channels.

The industry is shifting toward advertising models that are more transparent and provide consumers with greater control over their personal information.

FAQ

What is third-party data?

Third-party data is information collected by organisations that do not have a direct relationship with the customer or business. It is typically aggregated from multiple sources by data providers and sold to marketers to enhance audience targeting and customer insights.

Why is first-party data important?

First-party data is crucial because it is collected directly from your own customers and audience, making it highly accurate, relevant, and compliant with privacy regulations. It provides a holistic understanding of customer behaviour and preferences, allowing for more personalised marketing efforts and better campaign performance.

How can businesses prepare for the decline of third-party cookies?

Businesses can prepare by investing in robust first-party data strategies, partnering with trusted second-party data providers, adopting privacy-compliant data governance practices, and exploring alternatives such as contextual advertising and data clean rooms to maintain effective audience targeting and customer engagement.