Third-Party Data Remains Even as Cookies Deprecate
Lotame, a data enrichment platform, manages what it calls the “world’s largest second- and third-party data marketplace.” This gives the company among ad tech’s best views into how companies are deploying data and what they’re buying.
Lotame found that third-party data sales skyrocketed 117% from Q2 to Q3. They jumped 76% from Q1 to Q3.
A world without third-party data?
Advertisers and publishers love first-party data. It’s information about customers that they directly gather and own — for example, Nike knowing that I bought sneakers on their website.
By contrast, third-party data is information the advertiser did not collect themselves. Much of it is also probabilistic. This means it’s a prediction of what the targeted user will do or what they’ll be interested in, typically based on how similar users have acted. (On the contrary, deterministic data is based on surefire information that the user has provided about herself.)
Amid increased concerns about data privacy, one might wonder whether we’re headed toward a world without third-party data.
However, first-party data is necessarily limited in scope. If Nike wants to target New York Times readers potentially interested in Nike sneakers, the brand will need data on more folks than those who have directly purchased its products.
This is where third-party data comes in. Lotame, which obviously has a dog in this fight, says “Third-party data thrives as a necessary complement to first-party data that simply doesn’t scale.”
On privacy, Alexandra Theriault, chief customer officer at Lotame, said “Advertisers should hold providers accountable by asking whether they use and how they use privacy by design.”
In other words, third-party data is fine as long as those collecting it got permission to do so in the first place. It is also incumbent upon advertisers to make sure their data providers are getting consent for the information they have collected.
Whether this actually happens is another story.
Enter the third-party cookie debacle.
As Lotame’s former chief growth officer Adam Solomon argued in Street Fight, third-party cookies and third-party data aren’t the same.
Third-party cookies are tracking devices on a site that belong to an entity other than the site. For example, if Nordstrom placed a cookie on the New York Times site, it would be a third-party cookie. Thereby, Nordstrom would get access to New York Times reader data without the user going straight to the retailer’s site or store.
Sounds a bit sketchy, right?
Third-party cookies are an endangered ad tech species. Safari and Firefox already block them by default. Google has said it will phase them out by next year.
But Lotame’s contention is that the fates of these two ad tech entities differ. While cookies are going, third-party data will, they say, remain.
Alternatives to third-party data
As Lotame argues, the problem with relying on first-party data, or even second-party data — when one entity directly shares first-party data with another — is scale. Is there enough non-third-party data to make advertising effective?
To this question, I’ll provide two alternatives we have covered at Street Fight.
StatSocial CEO David Barker claims the future is earned data. This is data about consumers’ preferences that they willingly put in the public sphere. Examples include raving about a brand in a public online forum or following a company on Instagram.
Another is simply contextual ad targeting. Unlike behavioral targeting, contextual ads are not based on user data. They are served based on the contents of the user’s search or activity. So, if you’re reading about running, you might get a sneaker ad.
This year will see ad tech firms do battle over what solution works best.