First-Party Data vs Third-Party Data: What is the Difference?

DEFINITION
First-party data is the data you directly obtain from your customers through Google Analytics, tracking user behavior on the website and your product, customer feedback, and the likes. Third-party data is data that comes from outside of your organization through web cookie tracking and third-party data marketplaces.

Understanding first-party data and third-party data

First-party data is a significantly valuable data source as your data comes directly from your customers, reducing the potential of misinterpretation and errors. 

Examples of first-party data include user activity, customer interactions, customer surveys, feedback programs, engagement, purchase history, and behavior data.

Third-party data typically involves purchasing data from another company, researching available information, or partnering with another business for a mutual benefit. You can even purchase this data from popular third-party data marketplaces like Nielsen and Acxiom. 

While you may not have to work so hard to collect this data, you can’t ensure this data’s reliability and accuracy.

Takeaway

Both first-party data and third-party data allow you to get customer information and can be leveraged to drive conversions and create a great customer experience.

First-party data has a long list of pros as it’s more relevant to your business and you can trust its accuracy. The only concern here is efficiently gathering, managing, and storing this data to help deliver sales and marketing insights to your team.

Used in conjunction with first-party data, third-party data can help you reach a wider set of audiences and help improve targeting.


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What is first-party data?

First-party data is the data that you collect directly from your customers and audience either through interactions with them, tracking user behavior on your product, or through channels like your website.

First-party data enhances, complements, or reduces the need for other kinds of data. This data can be used to create marketing content, ads, and entire experiences to personalize the user journey. Your product development relies on first-party data, as well.

Here are a few examples of first-party data:

  • Time spent on a particular feature in your product
  • Information shared by a client to your salesperson
  • Information gathered during email campaigns or during the checkout process

With first-party data, you can see how a customer moved from an email to your website to your product before making a purchase. By monitoring these activities, you can create different experiences for different segments and guide behaviors that drive conversions.

What is third-party data?

Independent researchers and data aggregator platforms run surveys, feedback forms, and interviews to gather information about a large audience. This data is then sold to organizations and becomes their third-party data.

Here are a few examples of third-party data:

  • Third-party cookies installed on your site
  • Data bought from third-party companies

Third-party data is mostly conducted on random sample sizes and as the information is given by anybody willing to fill out the form and not from certain segments, it’s tough to predict whether this data will be helpful for your business.

You should conduct proper research to understand where and how the data has been collected before you finalize your third-party data provider.

First-party data vs third-party data: which is better?

While it’s easier to buy third-party data and gather insights from just one source, it’s better to not rely on third-party data as your primary data source. Here’s why:

  • The death of third-party cookies: With changing privacy regulations, gathering and using third-party data will continue to become difficult. The iOS 14 update has already been rolled out and Google has announced the phase-out of third-party cookies on Chrome browsers by 2023. 
  • Ineffective targeting: Since the data comes from varied sources, the data gathered may not be relevant to your business. So, if you use the data insights for your marketing content you might not get the desired results.

On the other hand, making use of first-party data will benefit you on multiple fronts like:

  • Help in product development: For product-led companies, improving the product is an ongoing process. First-party data like time spent on particular features, relative usage of certain features, and other behavioral data can help you not only improve your product but effectively market to different segments using different use cases.
  • Better targeting: As this information comes straight from your customers, you can create different user personas based on the response and create targeted content that helps reduce ad waste, enhances relevancy and accuracy, and ultimately drives ROI.
  • Map customer journey: What are the steps that your prospects take on their path to conversion, and in which order? Discovering the answers to these questions helps you create effective messages and deliver them at the right time and place.
  • Analyze attribution: First-party data can be used to understand media allocations and budgets. By observing and understanding how each media and point in the customer journey affects conversions, you can analyze attribution and how budget shifts will impact online engagement and sales.

You can always go for a combination of both of these data sources to have even more effective targeting and push users down the marketing funnel.

While handling such a large set of data may seem daunting, it’s necessary for your growth. Use a platform like Breadcrumbs to unravel insights from your data sources and score leads easily to find the best revenue opportunities, and more.

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