Data. It’s the fuel of every marketing campaign. Marketers won’t stop talking about it. First-party data, second-party data, encrypted or masked data... So much data, and so little understanding of what it all actually means.

If you advertise on Facebook or Google, you likely run remarketing campaigns. You've installed a tracking pixel on your site and show your ads to people who have visited this site recently. In other words, you’re using first-party data. W-w-wait a second. First party? Third party? Where are all these parties and how do you get invited?

Glad you asked! This article will help you learn the real story behind these parties, what they have to do with your customer data, and why marketers say that GDPR means kiss your third-party data good-bye.

1. Which Party’s Is My Company’s Own Data?

That’s first-party data. Your company's privacy policy guards this type of data: who’s visiting your website or app, how your visitors interact with your brand, and how it changes over time.  If you have an app, your users share information about their devices and operating systems. That's also first-party data. The clicks and conversions you measure in Google Analytics? First-party data. If you -- not your vendor -- are tracking data, you're dealing with first-party data.

2. How Should I Use First-Party Data?

Your company’s privacy policy and terms of use protect customer data, and you can use it in accordance with that policy. Marketers usually use first-party data to make ads more relevant through personalization and remarketing.

3. What If We Share Our Data with Partners?

That’s second-party data. If people shop with Brand A and Brand B, A and B have an overlapping marketing segment. If these businesses don’t compete, they could partner up and share data with one another. Think hotels and car rentals, airlines and credit card companies, fashion brands and media publishers.

4. How Should I Use Second-Party Data?

Second-party data can increase the relevance of your advertising campaigns and help you reach highly-qualified leads. If you find the right partner, you could benefit from enriching your first-party data with new insights for better segmentation. Second-party data is very valuable. Anyone can buy third-party data; second-party data comes from a direct relationship with your partner. Second-party data can help you understand what kinds of content your potential buyers prefer, and reach them once they’re on your partner’s website.

5. So Is Second-Party Data Basically Someone Else’s First-Party Data?

Pretty much. Second-party data is another company’s first-party data that you can use through a partnership agreement.

6. We Buy Our Data. Which Party’s Is It?

That's third-party data. This third party doesn’t really have a relationship with your audience. They collect data from multiple sources, piece it together, and sell it to advertisers. These third-party guys are data brokers. They purchase data from media that people consume, quizzes they take (“Which ‘Games of Thrones’ character are you?’”), and through other channels.

7. How Should I Use Third-Party Data?

Combining your first-party data with third-party data is where the magic happens, because you can really nail down the segment through lookalike modeling. Like if you needed to target audiences of 25- to 35-year-old women who like dogs and eat vegan. Data could be inferred. For example, Yelp recently partnered with LiveRamp to offer location and search activity for its 100 million users available to advertisers. Assuming people who go to $$$-rated steakhouses may also shop for luxury watches, you could create a custom segment similarly to Facebook and Audience Network.

First-party, second-party, and third-party data. Image source: Clearcode

8. So What’s the Deal with Third-Party Data and GDPR?

The European Union’s General Data Protection Regulation (GDPR) takes effect on May 25, 2018. Under GDRP, businesses must obtain explicit and freely given consent from users to use data. Which means, consumers will be asked to give permission to sell their data to third parties, and they don’t have to agree to access the business’s product or service.

9. Should I Care About GDPR If I Don’t Live in Europe?

Yes. GDPR applies to anyone that collects information from EU residents.

GDPR requires a person’s consent before a website can drop a cookie on his or her browser

10. Any Other Type of Data I Should Know of?

There's also self-reported data, or data your customers share with your brand proactively and intentionally (for example, through surveys or preference centers). It doesn't come cheap. In fact, you can't really buy it. But this type of data is essential because it builds trust and loyalty. Once you receive this data, it becomes first-party. I wanted to group it separately from first-party data, because there's a difference between software fetching your clicks and a human proactively saying what kinds of offers they want or don't want to see from your user acquisition team.

Imagine an online shopper who once bought baby clothes for a friend’s baby shower and instantly got bucketed into the “parents” segment by an advertiser. Now she keeps getting ads for strollers and nursing pillows, and she's not interested. If that person is a loyal customer (clicks on the brand’s  Facebook ads, opens emails, and frequently spends X amount of money on orders), she may be okay with sharing her preferences if she gets a quick survey. A little self-segmentation goes a long way!

Sum Up: What’s First-Party Data, Second-Party Data, and Third-Party Data?

Confused about all the different types of data in advertising? Here’s a quick primer:

• First-party data is data owned by your company. For example, it's the site clicks, conversions, and user paths you track in Google Analytics.
• Second-party data comes from partnership agreements where two or more partners with an overlapping marketing segment choose to share consumer data with one another.
• Third-party data is sold through data brokers to enrich first-party data for more precise targeting.

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