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What the Tech is second-party data?

What the Tech is second-party data?

Illustration by Ollie Catton / The Current

First- and third-party data are commonly used terms in the digital advertising industry, but there’s another kind of data that is often overlooked: second-party data.

It’s more than a little ironic that second-party data is third in people’s minds, but just because it’s less prominent doesn’t mean it’s not valuable. Second-party data can be a vital resource for marketers looking to run sophisticated digital marketing campaigns, and it’s become increasingly important in recent years due to privacy restrictions.

Here we break down what second-party data is, how it helps digital campaigns, and why there’s been renewed interest in the category.

What is second-party data?

To understand second-party data, it helps foremost to understand what first- and third-party data are.

First-party data is the data marketers collect through a direct relationship with their customers. This usually comes in the form of email addresses, account profile data, purchase histories, email campaigns, and actions taken on the brand’s owned web properties. It’s information that’s volunteered and provided by the customer to the brand.

Third-party data pertains to interest-based segments of consumers derived from their actions on other websites. The segments are often sold to marketers to help inform their ad campaigns. This data is collected by ad tech companies and data providers using third-party tracking cookies — or small snippets of software that are placed on a person’s web browser and that track the websites they visit.

Second-party data is the information a publisher collects about its users, such as information users put in their registered profiles and the webpages, product listings, and various actions they take while on the site. This data is then aggregated, anonymized, and sold to brands to help them build audiences and execute targeted ad campaigns.

So how is this any different from first-party data?

Fair question.

Second-party data is nearly identical to first-party data, in that it’s data a company collects through a direct relationship with a user. In the case of first-party data, it’s the relationship between a brand and the people who buy that brand. For second-party data, it’s a relationship between a web publisher and its readers, viewers, visitors, users, or customers.

In both cases, it’s a one-to-one relationship. The difference is merely a matter of perspective. When advertising executives talk about first-party data versus second-party data, they’re assuming the perspective of a brand marketer. The brand, the first party, supplies its own data, and combines it with data supplied by a publisher, the second party.

Of course, from the publisher’s perspective, its data is first-party data. For the sake of simplicity, though, the publisher provides the first-party data and the publisher’s data is second-party data to brands that choose to purchase access to its segments.

Why is second-party data important?

Any data that can be collected through a direct relationship with consumers is generally considered high value because it’s reliable, it’s tied to a specific identity, and it’s usually processed in a privacy-conscious manner.

In fact, privacy concerns have likely increased the value of second-party data. Third-party data is increasingly hard to come by due to Apple making it easier for iPhone users to turn off cross-app tracking and Google planning to phase out the use of third-party tracking cookies on its Chrome web browser. With third-party data limited, brands are searching for other data sources, and marketers are hoping second-party data can help fill the void.

How will second-party data work with other identity solutions?

With the demise of cookies in the near future, many brands and publishers have decided to join data cooperatives, in which brands and publishers bring their respective data together, giving all the participants insight into one another’s data. It’s the same concept as a first- and second-party data transaction between one brand and one publisher, but at scale. By having numerous brands and publishers in the same data co-op, the participants can operate at a scale and visibility that would be unattainable otherwise. These data co-ops are typically member-owned and member run — meaning they are managed collectively by the parties who are pooling their data assets. As far as where and how data co-ops happen? That’s clean rooms and there’s another explainer for that.