The Limitations of Third-Party Data - the future of marketing data

Older techniques within marketing and sales are shifting, especially in regards to data, specifically Third-Party Data. What are the limitations of these older ways of data collection like Third-Party Data? What needs to change? 

We’ll take you through the current approach to collecting marketing data and then help you go deeper into the changes coming through a series of great articles.

What is “Party Data”? 

What is referred to as first, second, third or zero party data is first and foremost customer data. These terms are used to describe the source of customer data, specifically how and where you first encountered the information.

There are four different ways that a business can collect data. Let’s break them down: 

First-Party Data: this is first-hand collected data. Data that is collected from the customer through its visits of sites, its purchases, its interaction with a service like a social media platform or an app. It can be a mix of behavioral data (what they did), and what they explicitly told you about themselves. While they might not realize that this data is collected and stored, customers are typically willingly sharing it through the use of a website or service. This can be used to, for example, re-target the audience through advertising or email nurturing sequences. 

Second-Party Data: this is also known as second-hand data. When a partner shares with a business the first party data it has collected about a customer. For example, the information you can collect from a social media profile or a customer survey run by a partner. Or if a business within your niche shares data with you from their database. While customers should be aware that this data exists, they don’t necessarily know it is available to a business through partnership.

Third-Party Data: this is the data collected by a “third-party” business that is not directly linked to the customer. We will explain this more within the article to dig deeper into the limitations. Customers are most likely unaware that this data is collected or shared.

Zero-Party Data: this is the data that the customer has willingly shared with a business in a transparent collection process. It typically goes further than a name and an email. It is when the customers give more information about who they are. This enables brands to tailor the experience and make it more personal, while ensuring that the customer is fully aware of the information it hands over to a business. 

What is Third-Party Data ?

As we mentioned, Third-Party Data is the information collected by companies that do not have a relationship with customers, visitors or users, directly.

Third-Party Data is information collected away from the data a company can generate themselves from purchases, email sign ups, visits or the website etc. When businesses want more information about their audience than they already have, they will go to a third-party source for more. 

Third-Party Data is collected from a data-based company and is available for businesses for a fee. This amount of data has a bigger scope than collected from in-house. It is also different from First-Party and Second-Party Data because it is research that is taken from a random sample size. 

Anybody willing to fill out a form is used to formulate the data. Some of it may not be useful for your business. 

With the change in privacy laws and protection of user information, Third-Party Data is a data collection method that businesses are starting to see as limited and produced in an unpersonalized (and maybe unethical) way. Let’s explore why:    

1. They collect information (often) without the knowledge of the consumer 
2. They give this information to multiple businesses (including competitors) 
3. The data is a large quantity that is not specific or niche (making some of it useless) 
4. The accuracy of the information is not high, nor is it tailored to what a business might need 

The new kid on the block.
How Zero party data differs from the rest.

We can understand that First-Party Data is whatever you can obtain in your own business. Second-party data is about building relationships with other customer-facing brands to obtain their own data. But what about the future? The past? How do they all differ, and what should we be focussing on? 

As we see it, First-Party Data is the data all businesses should have. It is the data collected from website visits, purchases and firsthand interactions with your business. When we think of Third-Party Data, it is an investment. Something you must pay for directly. Data you get from the masses. 

Let’s compare them all and prepare you for the future. What is to come?  

Below is a table to help you understand how they differ (inspired by Treasure Data). 

It is time to start thinking more about the future. But there is still more to learn about Third-Party Data before you can take the next step. 

How marketers use Third-Party Data

Marketers use Third-Party Data in combination with the data they already have. All the data together paints a bigger picture of the audience. While there might be more Third-Party Data it doesn’t mean it is all relevant to your business and the exact people you serve. 

The data can be used to create more aligned and targeted marketing campaigns. You can use your First-Party and Zero-Party Data to look for trends and any other stories within the data. Then you can compare it with your Third-Party Data to get the complete picture. 

You can also create location-based campaigns. Third-Party Data provides you with the locations and other deeper demographic information that First-Party Data may not provide. Allowing you to create some customized marketing campaigns. 

However, as we mentioned, with the rise in other methods of collecting data, Third-Party Data collection is becoming too broad, too general and not aligned with what businesses need to create more personalized marketing campaigns. 

What are the privacy limitations of Third-Party Data? Why does it need to change? 

Third-Party Data is limited. It is conflicted by privacy laws. There is often no transparency with this type of data collection; it is even unknown whether consent (or ethical consent) was given to obtain the data. 

Within this collection of Third-Party Data, it can often be low-quality as it is collected from a broader scope of people and it might not align to the First-Party Data you already have within your business and systems. 

It is not only limited because it is from the masses, it is also not as authentic as obtaining your own data. This can make your marketing campaigns, customer service and sales techniques untailored to your ideal clients or customers. 

Plus, your competitors can also have access to the same data. Not making it unique to your business. 

This needs to change because for multiple reasons: 

1. Customers can often feel like a robot is selling to them 
2. Customers feel like their experiences are not personalized or special 
3. The wrong assumptions can be made about your audience 
4. Privacy laws are forever changing 

There are better ways to collect data than through a Third-Party. We are here to guide you on that journey. 

What is next for Third-Party Data?  

Changes are happening to the way we go about our online activity. 

With the debate around privacy and giving the consumer the power to have more control over the type of information they give. 

Third-Party Data is a form of data collection strategy businesses have used for years. It has allowed them to learn more about their broader demographic, which has helped reach colder leads. 

This is the type of data collection that comes at a cost. A business must pay a third party for this information. It is a business deal. 

While it is still used within larger companies, with the rise of technology and the power of the consumer, Third-Party Data will become more challenging to source. These data providers will find it more difficult to source data with changes to privacy laws (Apple’s 2021 iOS update, for example), making Third-Party Data collection businesses almost obsolete over time.  

While the consumer will begin to have more power over their information (with the rise of Web3) and the information provided by Third-Party Data will not be enough to give businesses and marketers the information they need. Making it limited. 

As we have seen, Zero-Party Data is becoming the most preferred method of data collection by many businesses. A method that not only allows us to learn more about consumers but it also allows us to tailor experiences to build better relationships. 

Upflowy is a business here to help you collect more Zero-Party Data transparently and engagingly with our simple to create signup flows that allow you to connect with your customers and gather more information to personalize their experience with your brand!