What First-Party Data Can and Can’t Do For Agencies

There’s been a lot of discussion of the ecosystem turning to first-party data in response to the loss of the third-party cookie. In May, The New York Times announced it was phasing out use of third-party data to focus on its first-party data marketplace. Business Insider and The Guardian have also gone that route, touting first-party data and contextual targeting as the future of advertising in the post-privacy world.

Make no mistake, first-party data will play a critical role in the future of marketing, as it always has. But agencies as trusted advisors, and the industry overall, need to be realistic about what first-party data can and can’t do for clients, especially in the face of a global pandemic that has upended everything we thought we knew about consumer behavior.

The value of first-party data

Of course, brands and publishers consider ownership of their own data to be an invaluable resource. They collect it directly from the source, so they are confident that it’s relatively accurate. Additionally, because it comes straight from their audience, they know it’s relevant to their business.

First-party data enables them to understand how their actual customers and site visitors behave and what they prefer. The data is also readily available and affordable since customers leave behind valuable information every time they visit a site, and gathering it is often easier than working with many other types of data.

More importantly, during this new privacy era, agencies that use their clients’ first-party data know directly where it’s coming from and presumably will have followed all necessary regulations and will have been respectful of user privacy in collecting the data. However, it is a mistake to think that solely relying on first-party data is the solution to navigating this new world, and agencies would be remiss to lead their clients down that path.

First-party data can’t do everything for you

While first-party data does tell an important story about the customer, it’s rarely the whole story. Even if a brand’s customers are willing to tell them their name, age, gender, and location, very few customers are going to fill in a form that discloses how many people live in their home, what products they are in the market for, or whether they are debating cutting the cord.

For the sake of the argument, let’s say a brand is able to gather all that information. They still have a potential problem of having gaps in their data without being able to identify them. A brand could make assumptions about their best customers using first-party data but get it wrong because they are missing information, or they simply won’t have enough data to segment audiences in a usable way.

For example, we worked with an omnichannel brand that was selling the same products direct-to-consumer as well as on partner sites and through partner retail stores. Only once we added supplemental data did we learn that cohorts of consumers who prioritize sales and discounts and like to write reviews themselves had a much higher preference and were more likely to buy from sites with which they already were familiar and wanted to “feel” the product before making the purchase.

These insights resulted in a significant shift in our persona and messaging targeting approach across several of our campaigns, which drove a significant lift in sales and a lower CPO thanks to our ability to deliver more relevant messaging to the consumer.

Furthermore, not every brand has the ability to scale their first-party data. For instance, CPG brands reach huge customer audiences, but they do it primarily through retailers’ shelves, giving them very limited opportunities to collect data via owned properties. Combine that with the fact that customers are increasingly wary of sharing first-party data unless they see a direct value exchange, and it’s easy to see why even many major brands would struggle to gather enough data to build robust customer profiles using only first-party sources.

So, what’s the solution?

While first-party data lacks scale and depth, those qualities happen to be third-party data’s specialties! By identifying their client’s core audience through collecting first-party data and building on that audience through the use of third-party data, agencies can reach new potential customers and learn more about the people that are interested in their products or services.

The real value of third-party data was made even clearer during the Covid-19 pandemic: the power to reduce blindspots and guesswork. Even if agencies were able to collect an incredibly detailed customer profile in January, they can be almost certain that much of it has changed dramatically in the last nine months, and few of these changes will be reflected in the first-party data collected. Even I can’t believe how different my life is from the beginning of the year. Marketers and publishers need every available privacy-compliant data point at their disposal to build a panoramic picture of customers that’s both reliable and relevant in the moment.

First-party customer data will always be the foundation of agency marketing efforts, but enhancing that asset with third-party data will allow agencies to answer the questions first-party cannot, while also making sure that your client’s customer profiles stay current instead of falling behind every time the world, or even just the customer’s life, changes. Feliks Malts, VP of Decision Sciences at agency 3Q Digital

Feliks Malts is VP of decision sciences at 3Q Digital.