It’s a regular data party in marketing these days with all sorts of data party terms being bandied about, like first party data, second party data, third party data, and the new entrant, zero party data. What exactly do these terms mean, and why should we care?
First, let’s understand what a party refers to. In the context of data, a data party is a person or entity from whom we are obtaining data.
Second, what differentiates the different data parties is informed consent. When someone knows how their data is being used and gives it anyway, that’s informed consent. It’s a legally critical concept.
What is First Party Data?
First party data is data given to us by the customer, and comes in two flavors: passive and active.
Passive first party data is data we collect, given by the customer passively but with their consent. For example, when you browse the Trust Insights website, you’re leaving a trail of data like what pages you visit. You do this without active intent on your part. By reading this blog post, you’re submitting first party data to us. (thanks!)
Active first party data is data we collect, given by the customer actively; consent is implied because they literally had to submit it themselves. If you’re on our website and you fill out a form to download an eBook or watch a video on demand, you are actively, intentionally giving us your data. That’s active first party data.
In the consulting world, some folks have started to refer to this as zero party data, which seems like a silly distinction.
What is Second Party Data?
Second party data is data given to us by another party with the consent of the customer. The customer is still giving us their data, but doing so through an intermediary of some kind.
For example, suppose you use a service like Typeform, which allows websites to make fancy forms. Typeform is the collector and processor of the data, but it’s then handed over to us. That’s second party data.
Or, suppose you use a marketing automation system like Hubspot. Hubspot powers a website and the forms on it, and Hubspot collects data from the customer and presents it to us. Again, that’s second party data – a vendor is doing some of the work, but with the consent of the customer.
You rarely see the term second party data used much because to a lot of folks, it’s a meaningless distinction; if you pay for Hubspot, the data is effectively yours with them as a service provider, so marketers think of it the same as first party data. However, legally it’s distinct because the service provider is required to obey the same regulations (like GDPR, CCPA, CPRA, PIPL, etc.) as the buyer – and trouble can arise if that’s not the case.
What is Third Party Data?
Third party data is data given to us by another party, often without the consent of the customer. The customer has given their data to someone else, and that data is then reshared to marketers.
For example, if you buy an email list (never do this), you are acquiring third party data. (and probably violating multiple terms of service)
If you use Facebook Ads, and you specify an advertising intent like wanting to target people who identify as female between the ages of 25-40, you are using third party data.
If you use Google Analytics with Google Signals turned on, the demographics and interests data shown in Google Analytics is third party data.
Third party data is in the crosshairs of regulatory agencies around the world precisely because so much of it occurs without consent. A customer who visits a website like CNN and browses through articles about a health condition does not want CNN aggregating that data and putting them in a bucket of people with that health condition, then selling that data to an advertising service without their consent – and rightfully so.
Why Do The Different Types of Data Matter?
So why do we care about first, second, or third party data? For two reasons: accuracy and liability.
Data accuracy tends to improve the closer we are to the customer. When someone fills out your contact form, there’s a good chance they want us to actually contact them, which means presumably they’ll provide correct, accurate data to do so. Now, there are exceptions, of course – we’ve all filled out a gated content form with [email protected] at least once in our careers – but on balance, data the customer provides to us directly tends to be more accurate.
Conversely, data that’s further away from the customer tends to be less accurate. Are we really certain that a customer segment labeled Men, Asian, 25-34 is filled with only people who identify as male, Asian, between the ages of 25-34? No. And moreover, because it’s third party data, we have no way of validating whether or not that’s true.
As with accuracy, the closer the data is the customer, the lower its liability. If a customer willingly gives us their data, it’s then difficult for them to challenge that we obtained that data improperly. We have evidence that they did so, and as long as we’re good about keeping records of consent (because a customer may withdraw consent at any time), we are at low risk.
The further the data is from the customer, the more they can challenge its use, and hold us potentially legally liable for misusing their data. In the EU, citizens can sue companies for mishandling their data, often with substantial penalties under the EU’s GDPR (General Data Protection Regulation).
So What?
The ongoing trend in marketing is reducing our reliance on third party data as much as possible. Doing so improves our accuracy and reduces our liability. First party is the best party when it comes to customer data, so focus on acquiring first party data as a top marketing priority.
How do we do this? The short answer is that we must provide enough value to our customers-to-be that they willingly and eagerly give us their data. Exchange of data is a kind of sale: the customer is buying something from us for the price of data instead of money.
Here’s an easy test: take any given piece of content that you’d want to collect customer data for, like an eBook. If you charged money for it, how many people would buy it? If the answer is none or not many, then your content isn’t valuable enough to ask someone to trade their data in exchange.
Pivot your marketing strategy to make your less valuable content completely free (like this blog post) and your more valuable, data-for-sale content so valuable that you could charge money for it and people would buy it.
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Trust Insights (trustinsights.ai) is one of the world's leading management consulting firms in artificial intelligence/AI, especially in the use of generative AI and AI in marketing. Trust Insights provides custom AI consultation, training, education, implementation, and deployment of classical regression AI, classification AI, and generative AI, especially large language models such as ChatGPT's GPT-4-omni, Google Gemini, and Anthropic Claude. Trust Insights provides analytics consulting, data science consulting, and AI consulting.
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