What Is First-Party Data?

Definition:

First-party data is the information that businesses collect when they engage directly with their customers, users or audiences.

Origin:

First-party data has long been vital for digital content delivery and marketing purposes, including the tracking of website visits, app downloads and product purchases by both publishers and advertisers.

For decades, marketers have collected first-party data in many forms to better interact with customers, track the effectiveness of various advertising channels and, naturally, build a database that can be used to advertise to these same customers down the road. This first-party data can include credit card data, customer service phone support information, shipping addresses and, of course, email addresses.

Advertisers typically use customer relationship management (CRM) platforms, data warehouses or customer data platforms (CDPs) to house first-party data. CDPs are the newest of these technologies, organizing first-party data into encrypted profiles that enable brands to develop a centralized view of their customers across all touch points while claiming to preserve customer privacy. Marketers then work with publishers or adtech companies to activate the first-party data stored in these systems to target these audiences with specific messages.

Publishers have a variety of use cases for first-party data. First-party data, above all, helps publishers deliver a better experience and more relevant content to consumers. Companies with subscription paywalls may also use first-party data to upsell or reward their top customers. Many publishers look to use first-party data to better understand who consumers are and what type of content and products they are interested in to deliver targeted ads. And publishers‘ first-party data can be valuable for proving that ads are driving purchases or actions too.

What‘s next?

Given the macro changes impacting the broader digital ad ecosystem, including Google‘s forthcoming deprecation of third-party cookies, recent limitations imposed by Apple in mobile advertising and increased privacy regulation, first-party data has suddenly shifted from important to essential for many within the digital ecosystem.

As the traditional means of targeting digital consumers become less available and effective over time, expect more brands and publishers to lean into collecting first-party data. Companies that can either help brands obtain more consumer information or help them better leverage it through database matching or sophisticated targeting will also become increasingly valuable.

Marketers and publishers that possess first-party data will likely be able to thrive without third-party cookies for ad targeting. For example, a clothing brand may want to send news about its summer clothing line to customers most likely to buy it. It could use its CDP to connect first-party data with individual email addresses in order to determine which customers should get the email, and then track email engagement and conversions. In fact, when third-party cookies go away, it‘s likely we‘ll see more first-party data-matching as well, to allow for some level of user-level targeting.

Advertisers can also work with publishers to leverage their first-party data in order to show ads to likely in-market consumers. Publishers have been investing in building their own first-party datasets for years, using intent signals to personalize content, ads and experiences. For example, a home publisher might see consumers reading articles about the best vacuum cleaners and ascertain that they are in the market for a new vacuum cleaner. Content consumption patterns like these can be used to find and serve ads to consumers who have demonstrated specific intent — the kind of data that is typically only available to walled gardens. Leveraging this data will become even more important to publishers (and to the advertisers they work with) in a world without third-party cookies.

Walled gardens will continue to be the internet‘s largest first-party data collectors, given their large, authenticated user bases. The big advantage for walled gardens is that every action and interaction on their platforms is collected and tied to an individual account (since all their users are signed in with an email), often with permissions for advertising.

Finally, a new breed of walled garden has emerged from retailers like Walmart, Target, Walgreens and Kroger, which are now enabling online targeting using their first-party data. While Google or Facebook may have deeper behavioral data and targeting capabilities, these retailers have transaction data, so they can help marketers close the loop and attribute online ad campaigns to in-store sales or sales lift.

Supporting Views:

The increased reliance on first-party data is a win for brands that have already established a direct relationship with consumers through sales channels, email newsletters, subscriptions, etc., as well as for publishers and platforms that boast a sizable number of logged-in users or have a robust first-party dataset. In other words, if first-party data is the gold of the new cookieless future, those that have already amassed a pile of gold will be well ahead of those that are starting from scratch. Plus, this new era should be revealing, as it will favor brands and publishers that have truly cultivated a direct and unique relationship with consumers versus those that merely exist.

Lastly, the less brands rely on third-party data sources, the better — since marketers were often left blind to the sources of such data — which was often of questionable value to begin with.

Opposing Views:

First-party data is not necessarily easy for brands to obtain — at least in terms of directly providing personal information such as email addresses and phone numbers. Given the swirl of noise around data breaches and digital privacy, many consumers are reluctant to share their information with a large number of advertisers. Plus, some platforms are building in features to help people obscure first-party data-generating mechanisms, such as their email addresses. For example, Apple‘s mobile email app offers a Mail Privacy Protection tool built to prohibit the collection of personal information by third parties.

Indeed, many of the world‘s largest and highest-spending advertisers have minimal first-party data streams. For example, Oreos may be one of the world‘s most popular cookies, but they are sold through retailers, so consumers don‘t have to visit Oreo.com or sign up for the Oreo newsletter to buy cookies.

That said, first-party data goes beyond personally provided identifiers. For example, a retailer or publisher can directly collect information on consumers based on their shopping or reading patterns that is “first party” without any personal identifiers. However, it remains to be seen whether “contextual” first-party data will prove as effective for ad targeting as cookies have been for so many brands.

Thus, many packaged goods brands are looking for creative ways to ape the DTC brand playbook and connect with consumers one on one. In the case of Oreo, last year MondÄ“lez launched OreoID, which allows people to order customized cookies after setting up an account and providing an email address. It remains to be seen how many consumers are willing to engage in this kind of brand relationship. Either way, the first-party data is likely to represent a small minority of Oreo‘s customer base — most of which will remain unknown to MondÄ“lez.

It‘s worth noting that even as brands move away from specious sources of data and focus on collecting more of their own, first-party data isn‘t risk-free. Data breaches are still a possibility — and may become an even greater worry over time. And consumers‘ comfort with personalized advertising can vary widely. People like personalized content when it delivers value — but don‘t love the feeling of being “tracked” — regardless of whether the data being used to track them is “first party” or not.

Bottom Line:

Two types of companies are likely to emerge as winners in a world that emphasizes first-party data for advertising: walled gardens and [some] publishers.

Walled gardens, with their large logged-in user bases, will continue to have an advantage with marketers seeking 1:1 targeting at scale. With the ability to match emails, plan, activate, measure and optimize all within a single platform, walled gardens will position themselves as the easiest option for marketers seeking precise targeting.

Large publishers are also likely to benefit as advertisers move to leverage publisher first-party data to enrich their campaigns. (At Insider, for example, revenue tied to first-party data has quadrupled this year alone.) Publishers with large subscription businesses can continue to carry on as usual, as can those with intent-based datasets — which large publishers say perform better than cookie-based approaches anyway. Still, without third-party cookies or an email-based ID, marketers won‘t as easily be able to track individual users across sessions, cap frequency or easily close the loop on conversions that take place elsewhere — mechanisms marketers have grown accustomed to and will need education to move beyond.

Further Reading:

Ad Age: Bloomberg Readies First-Party Data Play

AdExchanger: Heineken USA Launches First-Party Data Strategy To Prepare For A Cookieless Future

Digiday: WTF can advertisers actually do with first-party data in Google‘s Privacy Sandbox?