Third party data has historically been a valuable asset for ecommerce marketers. By incorporating customer data from other sources into their marketing campaigns, businesses can improve their effectiveness.
However, there are also some drawbacks to using third party data. Most notably, recent consumer data privacy updates are making third party data harder to come by. So what does that mean for the future of third party data? Will ecommerce brands have access to any at all?
We'll get to that. But first, let's take a step back and unpack the basics of third party data, so you understand how it works and how it's used.
What is third party data?
Third party data is information about customers or potential customers that comes from sources outside of your business. This data can include details like:
Demographics (age, gender, income, etc.)
Interests (travel, food, etc.)
Buying habits (thrifty, high-spender, etc.)
Life events (recent graduation, moving, etc.)
Brands can purchase third party data from a data provider to reach new audiences or fill in gaps in customer profiles for better personalization and targeting.
What is the difference between first party and third party data?
While third party data comes from external sources, first party data is information about your customers that your business has collected directly. It includes customer actions that you observe, like browsing, clicks, and purchases, on your owned properties (such as your website, app, email, and SMS). And it includes zero party data -- customer data that the customer has deliberately given to you, like their email address, survey responses, and product reviews.
For example, if you collect email addresses when customers sign up for your email list, that's first party data. On the other hand, if you purchase email addresses from a data provider, that would be third party data.
What are the benefits of third party data for ecommerce marketers?
There are several ways ecommerce businesses can use third party data to enhance their marketing efforts.
Market to a narrowed audience
Third party data can help you better target your ads. For example, if you purchase an audience segment that has recently bought engagement rings, you can target them with ads for your wedding registry.
You can make audience segments as specific as makes sense for your brand. For example, if you're a high-end retailer, you might target a certain income bracket. Or if you sell winter boots, you might target specific geographic regions based on the climate.
Grow your audience
First party data only allows you to target audiences you've interacted with directly. So it can be hard to grow your business based on first party data alone.
You can use third party data to find new potential customers and build your audience. For example, if you sell office desks, you might use third party data to identify business owners who live or work near your brick-and-mortar store. Or, if you sell luxury jewelry, you might target affluent consumers interested in high-end fashion.
Enhance your first party data
Third party data can enhance the first party data you've already collected. For example, you might use third party data to learn more about the demographics and interests of your email subscribers or website visitors. This can help you create more personalized emails or retargeting campaigns that appeal to your audience.
The drawbacks of third party data
While third party data can be an important tool for ecommerce marketers, it does have some drawbacks.
Privacy laws are making third-party data obsolete
Increasingly stringent privacy laws around the world are making it more difficult to collect and use third party data. For example, the EU's General Data Protection Regulation (GDPR) limits the types of personal information businesses can collect about their customers and how they use this data. The California Consumer Privacy Act (CCPA) followed suit to give consumers control over their personal data.
In light of these privacy laws, major software providers like Google and Apple have announced stricter privacy updates. Google will be doing away with third-party cookies in its Chrome browser. Apple has already blocked third party cookies in Safari.
While this may be annoying to advertisers, it reflects consumers' desires to have more control over their data and transparency with brands they engage with. Marketers will need to be more thoughtful and strategic in their marketing efforts by relying more on first party data and earning customer trust. Overall this will lead to a better customer experience.
Third party data can be low quality
While third party data can provide valuable insights about potential new audiences, it is not always accurate or reliable. Because scale is often the name of the game for third party data providers, accuracy can get left behind.
Former CMO of third party data provider ChoiceStream, Matt Rosenburg, says, "If you can get 300,000 people in a group with 95 percent confidence that they belong there, or 30 million people in a group with 60 percent confidence, well, it might not be such a hard decision to relax your model a bit, especially when no one is set up to audit you."
So you have to make sure the data vendor you use has high-quality data and can deliver accurate insights about your potential customers.
Less trust with customers
When shoppers see hyper-personalized advertisements from a brand they've never heard of before, it can feel creepy. Or if they receive direct mail or an email from a brand they didn't give their information to, it can feel like a violation.
As a result, you start customer relationships on the wrong foot and you've created an even bigger hurdle to winning their trust.
Will ecommerce brands be able to use third party data at all in the future?
While it's still unclear how consumer data privacy laws will evolve over time, it's likely that third party data will become increasingly difficult to come by. This could mean big changes for ecommerce brands that rely on third party data to power their marketing campaigns.
However, it's important to note that third party data is not essential for your marketing efforts. There are many ways to achieve successful results without it. So don't panic.
You'll still be able to use demographic and interests information collected by your ads platforms, such as using Facebook audiences. So you can still reach targeted audiences with ads to grow your business. And Google's Topics API aims to replace third-party cookies by tracking Chrome users' interests and showing relevant ads, with much more control given to the consumer.
Aside from that, you'll want to develop strategies to collect first party data and double down on your owned channels.
It's time to collect and use more first party data
Moving forward, keeping the attention of shoppers who click on your ads will be all the more important. With less efficient ads, you'll need to focus more on getting your audience to opt into first party cookies and your subscriber list -- and then maintaining their attention once you've earned their contact information.
That means you'll need to focus on building a direct relationship with customers on your owned channels -- your website, blog, app, email, and SMS. Evaluate your software stack to make sure you can get the most out of each channel.
As you evaluate your SMS channel, consider using Emotive to power your SMS marketing program. Emotive is an SMS marketing software made for ecommerce. Use automated two-way conversations to recommend products, recover abandoned carts, and 10x your conversion rates. Integrate Emotive with the rest of your marketing stack to funnel in first party data for better personalization. And use SMS to gather first party data to fuel your marketing efforts on other channels.
Want to learn more about how Emotive can be your partner in a world without third party cookies? Sign up for a demo.