Third-Party Data is Dead, Long Live First-Party Data!

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Lytics CMO Darren Guarnaccia on why third-party data is yesterday’s news…

It’s funny how you undervalue the things in your own backyard, yet covet what is across the street. It is something so fundamentally human. We’ve always had access to data about our customers, and for that very reason, we tend to discount it. It’s understandable though; data about the people outside of our customer base is so alluring. As marketers, we always want to attract new customers, and having data about those persons yet known is attractive. Thus, we’ve collectively sailed down the third-party data road, and promptly gone too far.

One can argue that the reason we’re seeing the backlash from customers, and this increased regulatory stance (e.g. GDPR) is overuse of this third-party data. I’d also suggest we’ve used it poorly. Either way, it’s gone too far, and the pendulum is now swinging away from the use of third-party data to using first-party data.

Choosing privacy

In this new Trust economy, consent makes getting and using third-party data increasingly difficult. Between GDPR, Cambridge Analytica, and the steady stream of news about the latest breach or privacy scandal, consumers have woken up to the fact that their data is a valuable thing. Consumers today now know they have a choice, and many are exercising their right to not be known. Even in the US, where consumer data protection hasn’t been fully regulated yet, consumers are taking steps to be invisible to brands through ad blocking, cookie clearing and other tactics.

This trend will only grow over time, as customers continue to get pounded with messages and advertising they don’t want, or care about. This will in turn undermine the quality and quantity of available third-party data. I would not be at all be surprised if the selling of your data becomes illegal before long, especially from financial institutions like credit bureaus and credit card companies. In short, it’ll get harder and harder to get less and less.

Third-party data, flawed data

The second issue with third-party sourced data is that it doesn’t have the right precision or accuracy for the job. Once upon a time, directionally right data was good enough, especially if all you were doing was broad display advertising. For a good laugh, go check out your data on Oracle’s Data Cloud Registry (formerly the Blue Kai registry). Mine says all sorts of fun things; like I’m an 80-year-old person, as well as a Gen Xer and a millennial, too. I also apparently like hatchbacks (no way), minivans(oh hell no), luxury cars (ok maybe) and trucks (sure, but even a blind squirrel finds an acorn sometimes). Plus six other types you wouldn’t catch me dead in. 

I could go on and on, but this data is so inaccurate, it’s humorous. You couldn’t possibly have a conversation with a customer using this data. One of my favorite customer stories is about Dr. Martens, who realized the perils of demographic targeting when they discovered the number one buyer of their famous men’s boots was... women. Needless to say, they pay a lot more attention now to other signals about the customer than just demographics, especially third-party sourced demographics.

This level of precision and accuracy was fine when the stakes were low as they are with display advertising. But that’s not good enough anymore. With the convergence of martech and adtech, the level of precision required by marketers is much higher. Customers get actively irritated and distrustful when you get it wrong, which is why this is propelling the shift to more accurate data sources. 

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“The power of earned audiences is more valuable, because information is freely given due to the value exchanged between brand and consumer.”

Providing real value

If not third-party data, then where will we get information about customers? In your own back yard, of course. Brands have been moving towards consumer direct relationships for years, so this isn’t exactly a surprise to anyone. The largest brands have been shifting this direction because they need to know more about their customers. This is why brands like General Mills, Heineken and Nestle Purina all have customer-first initiatives to build relationships and data about their customers. They all understand that the power of earned audiences is more valuable, because the information is freely given due to the value being exchanged between brand and consumer.

For Nestle Purina, it’s about helping prospective pet owners find their new fur baby on Petfinder.com. For Heineken, it’s about connecting their brand fans to amazing experiences like festivals and events. And for General Mills, it’s about helping their customers eat and live healthier, richer lives.

In every case, the amount of freely shared data has helped these brands grow their audiences and customer bases massively – while cutting the costs of acquisition (CPA) significantly.

Why is that you ask? Because the nature of the relationship has given the brand permission to engage, and the data has allowed the brand to say the right things to the right people, in the right way, with a level of precision they’ve never had before. That’s the power of first-party data and relationships.

What about attracting new customers though? How will you target folks elsewhere? Now that you have a good idea of who your customers are, across the channels you own, you can use that data to find similar people elsewhere. Using tools like Facebook match, and Google’s Customer Match, you can leverage these walled gardens to find similar people to your best customers. I’ve seen, time and again, massive lift in conversions and similar decreases in CPA using these approaches. 

Considering Google and Facebook combined drive a majority of the total ad spend, this alone can largely replace what third-party data was doing for you, only better. For a bonus, use a technology that can actually progress what a customer sees between your owned properties and advertising to reflect what they’ve done with you. Extra bonus points if you create the engagement around what the customer is trying to accomplish,instead of what you’re trying to sell them.


Darren Guarnaccia

Darren Guarnaccia is CMO at Lytics, the first customer data platform that helps brands orchestrate relevant marketing with built-in data science

Darren has been working in the marketing technology world since the original dot-com boom and is a champion of building experiences customers actually want.

Read more about Darren here


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