Why Are We Collecting Data?

Before we break down the types of data, we should briefly point out why so much of online business depends on this information.

In the real world, it’s easy to know where to place your advertisements. If you’re running a gas station, renting billboard space a few miles ahead of the nearest highway exit is a sensible choice. If you’re selling luxury furniture, you can send catalogs to the nice part of town.

But online, your customers could be anywhere. Collecting data on audiences is how advertisers know how, virtually-speaking, to put their ads in places where their customers can see them.

What Is First-Party Data?

First-party is any data that your company collects, on your own customers. As governments worldwide begin to crack down on data collection, first-party data has some tremendous advantages. For one, you gain the consent of your users to collect this data — it’s often in a pop-up when you first enter a website, or part of the terms & conditions when setting up an account or making a sale. 

Types of first-party data include:

• Demographics: User locations, age, devices, gender, etc.
• Purchase History: When a customer buys from you, that goes on the record.
• Website Behavior: Websites they’ve visited, actions they’ve performed on your page, etc.
• Time On-Site: A basic site metric that can nevertheless tell you a lot.
• Interests: As your customers “like,” “dislike,” and look into various categories on your site, you’re building a profile of their interests. That profile is first-party data. 

What Is Second-Party Data?

Believe it or not, there is such a thing as second-party data, though it’s not talked about nearly as much as the other kinds. That’s because second-party data is just someone else’s first-party data. 

If you’re partnering with another company, for example, you might pool your data insights together. Alternatively, if you’re looking to expand your product footprint into a new area, you might purchase someone else’s first-party data. Say your company sells beverages, but you’re looking to branch out with some alcoholic offerings: you might buy first-party data from a company that specializes in alcohol sales to get better insights off the bat.

Second-party data is often considered reliable, because you’re dealing directly with the company that originally collected it, compared to aggregated datasets collected from a number of places. Though the uses of second-party data are narrower, it can be great under the right circumstances. It’s also an important reminder that your own first-party data could be incredibly useful to someone else.

What Is Third-Party Data?

This is the big one.

Third-party data is data that’s not collected by the publisher or the user themselves but by a (you guessed it) third party. This data is collected from all over the Web, aggregated together into datasets, and then sold to companies in the advertising ecosystem who need it.

If dozens of different companies sell their first-party data to a data firm, they can bundle all that data together to create a third-party dataset for sale. But generally speaking, when people talk about “third-party data,” this isn’t what they’re talking about. Usually, they mean third-party tracking cookies.

With third-party tracking cookies, bits of JavaScript code are deposited on a user’s computer, accumulating browsing and behavioral data as a user roams around the Web. If, for example, you find yourself looking at camping equipment online, you may find that the ads you’re served as you browse around the web may start showing more tents. That’s the third-party data being passed from one site to another as your browsing session continues.

Data And The Law