Blog January 23, 2023 |

A Beginner’s Guide to Second-Party Data & Its Growing Relevance

In workplace environments where terms like “cookies” and “first-party data strategy” are tossed around with nearly the same frequency as “hello” and “goodbye,” it’s easy enough to forget about first- and third-party data’s decidedly less fancy sibling: second-party data.

Don’t worry. It’s not just you overlooking second-party data: 88% of marketing, analytics, and tech executives say “collecting more first-party data is a high priority in the next 6-12 months.” At BlueConic, we agree: finding innovative ways to collect zero- and first-party data should necessarily be a top priority. Yet, given that we’re all facing a privacy-centric, cookie-less future, supplementing zero and/or first-party data aggregation efforts with second-party data is increasingly becoming a way to get ahead of the competition. This is especially true for direct-to-consumer (DTC) brands and those companies looking to match their ad spend with their consumers’ changing behaviors— e.g., via harnessing the power of retail media.

Quite simply, the best companies today — not just in terms of revenue, but also reputation — are the ones that prioritize the customer experience. This simple fact demands that businesses get serious about the role that second-party data will inevitably play in their data strategy.

In today’s digital-first customer landscape, every business leader — no matter their area of functional expertise — must understand the basics of second-party data and why this oft-overlooked form of consumer data is destined to play a critical role in the data strategies of organizations that are looking to future-proof their marketing efforts.

What is 2nd party data, exactly?

If all the fanfare around third-party data has made the concept of second-party data a bit murky, you’re not alone. Here’s a quick breakdown of the different types of online consumer data, as it’s easiest to understand second-party data in relation to first- and third-party data.

First-Party Data

First-Party data, as Neil Patel puts it, is “information companies collect from their own sources about their customers.” That is, first-party data is information you collect from your own brand’s audience members, known or unknown.

  • Example(s): the data collected directly from your website, CRM data, loyalty IDs, transactional data, and customer scores calculated from analytics.

  • Bonus: You may have also heard the term “zero-party data, ”which is essentially a subset of first-party data, as it’s data that consumers intentionally share with trusted brands in order to bring about a desired outcome (e.g., a customer shares their clothing size to find the best fit, or their zip code to enable buy online, pick up in store options). Zero-party data is consented data that is typically used for marketing preference-match purposes.

Second-Party Data

Second-party data is “data that is shared between two parties who have a direct relationship with each other.” Essentially, second-party data is someone else’s first-part data. Businesses often share or receive second party via a trusted business partner to garner audience insights in a mutually beneficial relationship.

  • Example(s): a business that shares its customer data with a partner brand to improve marketing efforts or bring new, joint products to market.

Third-Party Data

Third-party data is, as HubSpot writes, “any data collected by a business without any direct link to your business or audience. Its scope is much wider than first- and second-party data.” Third-party data can be collected and managed by places that do not directly interact with the consumers whose data is being collected. As such, multiple data sets from different sources are often stitched together, bought, and sold.

  • Example(s): purchasing information on the media preferences (e.g. magazine subscriptions, video purchase histories, etc.) of existing and prospective business customers or demographic or psychographic data (e.g. income, age, location) from a third-party data aggregator.

2nd party data sounds a lot like 1st party data, doesn’t it?

While first- and second-party data are very similar, the primary difference boils down to one key word: trust. Ensuring that stakeholders within your organization trust both how the business you’re sharing data with got the data it’s sharing, and how both businesses will share data between one another is of the utmost importance. There are countless tactics, both legal and technological, that can be employed to increase confidence in second-party data-sharing processes. Ultimately, while no single second-party data-sharing method is 100% foolproof, the right combination can get you pretty far, and 2nd-party data remains, on the whole, far less opaque and more reliable — not to mention, privacy-compliant — than third-party data.

If 2nd party data isn’t new, why am I just hearing about it?

The arrival of GDPR and the proposal of ADPPA, alongside similar legislation around the world, has forced companies that have long been reliant on third-party data to consider alternative options to fuel their growth objectives. Major companies are scrambling to catch up with the 120+ countries that have now instituted national privacy laws.

As such, Big Tech is adapting to meet consumers’ privacy preferences. As BlueConic’s CEO Cory Munchbach wrote in Forbes recently: “These developments represent a profound shift in how companies use data to understand and interact with consumers. Meanwhile, consumers want control over who has access to their data and how much they're willing to share.”

At BlueConic, we’re confident that determining just how businesses can comply with ever-changing data privacy legislation will rank among the top business challenges of our time. Finding solutions to this global challenge means thoroughly investigating the few transparent and privacy-compliant solutions that exist in the marketplace today — including those that center the sharing of second-party data.

To learn more about how BlueConic’s CDP can help usher your into the privacy-first, cookie-less world, check out this explainer on how we enable our customers to share their first-party data with others.

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