Don’t call it a comeback, it’s been here for years.
While most of the recent articles you’ve read on the topic of personalization likely center on third-, first- and even zero-party data, another data type exists that you should consider as you strategize for the imminent cookieless future.
I’m talking about second-party data, which developed a bit of a stigma among marketers who harbored competitive concerns about sharing their data. Let’s take a step back and take stock of why second-party data might actually be a viable solution for targeting and engaging with consumers in privacy-compliant ways once third-party cookies go away.
A Brief History of Second-party Data
Whether it’s JCPenney’s or Delia’s, you’ve likely gotten some type of retail catalog in the mail at some point over the last 30 years. These catalogs (which are actually making a comeback) were powered by data co-operatives in which retailers, manufacturers, or publishers share opted-in transactional and behavioral first-party data with each other — otherwise known as second-party data — plucked from places like CRM files, point-of-sale transactions, and loyalty program activity (and in today’s digital world, apps, website registrations, and site behavior data). What these companies knew back then is that while first-party data alone is fantastic because it’s proprietary and opted-in, it simply doesn’t scale enough. But when paired with another company’s first-party data, it can help in better understanding customer behavior and driving better response rates.
The Unfounded Stigma Around Second-party Data
When third-party data started to scale, marketers began preferring it to second-party data. For some marketers, the thought of data-sharing spurred fears that competitors could potentially gain access to their first-party data and, consequently, use it against them. But these concerns have been disproven by the brands that are doing second-party data wisely and well. The advertising industry has largely regulated itself to use second-party data responsibly and to create better experiences for consumers.
3 Reasons to Take a Second Look at Second-party Data
For the above reasons, it’s not surprising that all types of data are coming under greater scrutiny from all sides of the industry today. But second-party deserves a second look. Here’s why we think it belongs in your data toolkit as we enter a new digital age.
- It’s Privacy-compliant
Part of the long-standing issue with third-party data is that while the consumer may opt into it, the delta between that point of consent and where their data ends up can be huge. In the lead-up to the GDPR, second-party data was actually recognized as “a regulation-compliant way to target ads to people without requiring explicit permission for their data to be used for that purpose” according to Digiday. That’s because it’s actually far easier in a second-party environment to honor the opt-in chain around privacy. You know the source of the data, that the source adhered to privacy regulations when the data was initially collected and that the data is not being sold or cast across the ad network like it is in a third-party context.
- It’s High-quality and Performant
While second-party data assets can help you scale beyond your own first-party information, they are not about full scale. Third-party data is what you use when you want high reach and many impressions and care less about a specific conversion or action. The essence of second-party data — and where digital marketing should be headed in general — is not about reaching as many people as possible, but about the results.
Second-party assets are focused on intent signals and good predictive analytics to determine the right users for targeting — the users performing an action that puts them in the market to buy that luxury apparel item in the next 30 days. You’re not modeling out the behavior of a small group of people and predicting; the segment is being built off of observed behavior from every target user. Because you’re focused on in-market users, the metrics you want are not clicks, but response rates. And to generate high response rates, you have to be the most relevant brand to your target user.
- It’s Future-proofed for a World Without Third-Party Cookies
Third-party data will obviously be dramatically reduced once third-party cookies are a thing of the past because users won’t be as easily trackable. Consumers are now limiting the ways in which their data can be used. For example, the Apple OS 14 now asks users to opt-in for data sharing with every single app. Second-party data is collected in a first-party environment, meaning data collection becomes easier and is more insulated from the challenges of third-party cookie deprecation.
Worried About Data-Sharing? Here’s What to Look For
Second-party data gives marketers more control over the data that is used. By participating in a co-op with a small group of companies, the original brand can provide guidelines on how their users are classified and aggregated and make sure no single group of users is disproportionately targeted. Look for data partners that offer transparent rules of engagement for data sharing such as:
- Contributors are anonymous: No single brand knows who is contributing, so there are fewer competitive concerns.
- Contributing data is proportionate: Brand-level data is throttled to ensure a proportionate number of users are shared.
- Contributors are aggregated: Users are classified based on general behavioral attributes/or product categories, not based on brand.
Marketers focused on first-party data in the lead-up to third-party cookie deprecation have their hearts in the right place. However, how a consumer interacts with a single brand is not the full picture. Marketers can become more relevant by making targeting and personalization decisions based on a more comprehensive view of user behavior. Second-party data gives you control over privacy and consumer consent, allows you to operate under stringent rules of engagement so data is used fairly, and keeps you focused on performance-based KPIs over proxy metrics. Don’t leave it off the table when it comes to devising your data strategy ahead of 2022.
Revenue Vision Partners (RVP) blends over 75 years of REAL revenue leadership experience with hundreds of successful consulting engagements. We were founded to focus on the commercial challenges faced by mid-market organizations in growing their top line.