The programmatic revolution in the late 2000s helped build a comfortability level for data with marketers—and once we had a taste, we wanted more. New use cases for audience data applications began to pop up, and not just for targeting ads, but for all phases of the campaign lifecycle: research, planning, budget allocation, ad creation, measurement, and optimization.
However, at the same time that audience data use was exploding, some within the industry saw the double-edged sword of the Wild West mentality and issued warnings that a carefree attitude toward the use and handling of consumer data could become problematic. They worried that one day consumers would push back and hands would be slapped…or worse.
And they were right.
The new era of respectful data usage
Fast forward a decade later and marketers now have a different attitude toward how they approach data. Major data breaches and large-scale data misuse have rightfully fired up consumers. Laws have been passed. Industry policies are in place. Watchdog groups have been set up. Chief Data Officers have been hired.
It’s a different world now.
The good news? The vast majority of marketers have become much more conscious of how they use audience data for advertising. There will always be some bad apples, but I wholeheartedly believe the industry has embraced proper permission-based data usage and that most marketers are now very careful with their data practices.
There’s also fear. Many marketing organizations have become worried about being caught in a consumer data backlash. Even something considered okay now could be considered wrong in the future, keeping marketers from going anywhere near the gray area.
I’m in that camp. When it comes to audience data, it’s better to be safe than sorry.
A brief primer on data types
Audience data is generally classified based on the relationship between the entity collecting the data and the entity using it:
- First-party data is collected by a retailer itself, such as from its own website or in its stores. An example of this would be to cookie someone who has reached the home page or to collect purchase data (item, price, etc.) from a store.
- Second-party data is like first-party data but comes from a different source. For example, Facebook enables retailers to target people who have engaged with a specific profile page. Facebook initially collected that first-party data and the retailer then uses it, making it second-party data.
- Third-party data is collected by a vendor on web properties they don’t own. For example, a vendor may strike a deal with a sports website to cookie users who reach that site and then turn around and sell that data to a consumer goods brand for its own use.
The rise (and limits) of publisher data
The public conversation around third-party data hasn’t been too flattering in the last few years due to issues around data privacy.
So, it’s not a coincidence that the biggest publishers in the world, such as Facebook, have been growing their slices of global advertising budgets by offering tremendous native audience targeting capabilities (in the form of second-party data) without marketers having to worry about managing third-party data themselves. With more scrutiny around data practices, Facebook offers a relatively safe place for brands to apply targeting data.
But as deep and wide as Facebook’s [and Instagram’s] datasets are, retailers with very specific needs have begun to realize they should find ways to supplement what is natively available. For example, there are numerous car review websites. Third-party vendors can make deals with these sites to cookie users and group the anonymized IDs based on various makes, models, and features that visitors choose to read about. This information may be incredibly valuable to auto marketers who want to push messaging to interested consumers.
Retail marketers need third-party data to target their core audiences because of the very transactional nature of their business models. Third-party data can mean the difference between wasting budgets on the wrong types of people and getting in front of in-market shoppers seeking their types of products.
Consumer packaged goods (CPG) brands, for example, generally have very small sets of first-party data because they sell through distributors such as grocery stores without consumers needing to visit the brands’ web properties [and get cookied]. Yes, Facebook can target almost every consumer worth targeting, but that’s still very chunky—advanced segmentation is needed to truly market in a granular and powerful way. There are third-party vendors whose entire businesses cater to the data needs of CPGs with loyalty card and other shopping behavioral datasets that cannot be found elsewhere.
Media and entertainment brands, such as movie studios, spend tremendous amounts on advertising and it’s hard to build up significant first-party data pools for a movie promotion with a campaign flight around three months. They need to be able to hit the ground running and have great targeting in place for the first day of the flight. There are third-party data vendors that can help target people who watch particular genres of movie trailers, which is invaluable to these marketers.
There might not be a more competitive category in advertising than financial services. Credit card brands, mortgage companies, and insurance carriers fight tooth and nail for great leads. For them, Facebook targeting data is great, but much better when combined with the right financial data that can help brands avoid wasting advertising budgets or call-center time with Facebook users that aren’t the best fit for their products and services.
Advertisers need to master third-party data
The key with third-party data is to get into the weeds and understand how to ensure it has been collected in a permissible way. Retailers should make sure they work with a data provider that is consumer-privacy complaint and ask the provider how they compile their data and how they ensure consumers are notified and provided a choice about the use of their personal information. These are all things that a reputable data vendor should easily be able to address with clear and transparent answers.
Even though much has been written and discussed throughout the industry about the pitfalls of third-party data, marketers continue to use it.
- In an August 2018 survey of 324 U.S. marketers conducted by Duke University’s Fuqua School of Business, American Marketing Association (AMA) and Deloitte, a clear majority of marketers (90.7%) have either increased or kept their third-party data usage the same over the last two years. And 86% of marketers surveyed plan to either keep their investment in third-party data the same or increase it in the next two years.
- In a big industry study done at the end of 2017, U.S. firms invested a total of $20.18 billion on third-party audience data and activation solutions that support their advertising, marketing, and media‐related data initiatives.
- According to a report by WBR Insights and Future Stores, nearly eight in 10 retailers now partner with third-party data providers to drive in-store traffic. In fact, versus all of the other data tactics in the survey—including retargeting and marketing automation—relationships with third-party data providers topped the list.
Facebook—and Facebook advertisers—win with third-party data
Third-party data seems to be here to stay, but that doesn’t mean retailers have mastered it yet. The ones who figure out how to use it properly will have a better chance to drive impactful results, and the ones who outright avoid it might not achieve the success they desire.
After all, data—whether first-, second-, or third-party—is just a tool in retailers’ toolboxes. Mastering the entire toolbox means knowing when, and how, to leverage every tool at their disposal to get the job done.
As Facebook advertising continues to grow, third-party data will enable retailers to spend even more with the social giant. By supplementing Facebook’s rich dataset with third-party data, brands will be able to target and message better, as well as better optimize their programs and measure their effectiveness.
Kenshoo is a provider of digital advertising technology.