First Party Data

The Perils of Third-Party Data

In a perfect world, we marketers would know everything there is to know about our customers. Name, age, contact information, preferences, purchase intent, and more.

The majority of that information can be captured from our own first-party data sources. However, there are often some missing pieces, especially early on in a customer relationship. In a desire to fill those gaps, marketers have long been seduced by the promises of 3rd-party data. It seems like the perfect solution: pay some money, reach the right people, sell more products. And while there’s a time and a place for a balanced approach to using 3rd-party data, there are some critical drawbacks. Here we discuss the top three.

1. It’s Inaccurate

Have you ever looked up one of your own 3rd-party data profiles? Mine says I’m both a “female head of household” and a “male head of household”. It also thinks I’m single and married. Under interests it claims I’m shopping for a new car. I’m not. It also listed my net worth as every value between $25,000 and $999,999. How’s that for accurate targeting?

How does this inaccuracy impact your return on ad spend (ROAS)? It’s massively lower because you’re paying to target people who aren’t actually the people you think they are. Instead, if you use your first party data (which is infinitely more accurate), and apply lookalike modeling to reach new target customers, you’ll see huge lift.

2. It’s Shared

This one is simple: if you can buy access to 3rd-party data, so can your competitors and everyone else. If you’re a car company trying to reach luxury shoppers with ads for luxury vehicles, other luxury car companies are doing the exact same thing. It’s not a competitive advantage if everyone’s doing it.

3. GDPR

The only way you’ve missed GDPR is if you’ve been hiking the PCT Cheryl Strayed-style for at least a year. For the rest of you, this one’s obvious. Governing bodies like the EU are cracking down on non-consent based marketing practices. 3rd-party data is shadiest realm of consumer data usage. This may be a bark-is-worse-than-its-bite scenario, or it could be just the tip of the iceberg. No matter which analogy comes true, big investments in 3rd-party data aren’t safe bets in the short or the long term.

So what should brand does about it? Investing in first party data is the clear answer. Gather more, connect more, and use more of your known customer data. To dive deeper, read this AdWeek article written by Amperity Co-Founder and CEO, Kabir Shahani: It’s Time to Stop Relying on Third-Party Data and Prioritize Consent-Based Marketing

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