Commentary
The Advent Of Second-Party Data
- by Philip Rosenstein , Staff Writer, August 15, 2016
We’ve all heard of first- and third-party data, the bedrock of the data marketing landscape. Second-party data is a bit more obscure, but if the initial apprehension about sharing private customer data can be overcome, marketers could unleash an entirely new dimension to their data-marketing practices.
Think of second-party data as first-party data acquired from another firm, or a brand using some other brand or retailer’s first-party data for its own marketing goals. The way in which this data is shared between parties varies; there are often constraints that prohibit data being shared with competitors, and other particular revenue-sharing procedures.
“Brands are often worried about losing control of their proprietary data if they share with too many third parties. The lack of understanding about the structural constraints when using second-party data is hampering the growth of such data-sharing initiatives,” said Steve Ustaris, CMO of OwnerIQ, a company that provides a platform for second-party data solutions.
Firms like OwnerIQ aim to make it easier to obtain second-party data by providing a marketplace where retailers and brands can make connections with each other in a transparent and accelerated fashion.
Despite barriers to the wholesale adoption of second-party data usage, Ustaris believes that a majority of retailers and brands will be party to some sort of second-party data-revenue-sharing relationship by 2017.
While large companies the likes of Oracle and Adobe are moving into the business of developing second-party data relationships, there are often arguments over compensation models, noted Ustaris.
Legal restrictions and technical requirements when sharing proprietary data between companies can get complicated. As more second-party data sharing platforms emerge, the value of using these approaches will become clearer as data becomes an increasingly central component of programmatic marketing practices.
“All it will take is one big marketing agency to embrace second-party data and the market for it will explode. We may be two to three years out for such adoption, however,” Ustaris said.
This is already happening, with growing scale, right now. Marketers and publishers are doing peer-to-peer data sharing--both for targeting and modeling/analytics use cases--today by leveraging the data pipes of DMPs. Happy to tell you more. This is happening now, and in 2 years will be the defacto methodology for buying data.
Lets be clear here. We're talking here, really, about a different kind of third party data. First party data is mine...whether I am an advertiser or a publisher. Second party data is that owned by 'the other" company I am doing business with; either the media company if I am an advertiser, or if I am a publisher second party data is that owned by my advertiser. Third party data is everything else.
No advertiser can get a competitive advange by using the same third party data their competitiors have access to. I'm not saying don't use third party data. But lets be clear. If Chevy Trucks and Ford Trucks are both buying third party truck intender data, how is one goiing to win an edge? They might win an edge by focusing on unique and exclusive ways to leverage their media partners second party data.
Programmatic advertising is like the stock market. If everyone has the same information, no one beats "the market." Having proprietary information is the way to win. That does not mean "inside information." It means doing hard work of store-checks, or competive analysis that puts an investor ahead of the market.
Krux is a good solution to bring first party and second party data into the same room so unique solutions can be formulated.
This is what we teach in Masters of Media Selling: How to Sell Programmatic.
I totally agree. this is happening at scale. Slightly different from Krux's experience, at ownerIQ we see mainstream adoption mainly within business and orgs where there is an existing and symbiotic business relationship; i.e. retailers and suppliers, grocers and suppliers, manufacturers and OEMs. The same co-operative infrastructure, processes and culture they've created to historically share marketing assets has become the foundation for launching their second-party data strategies. However, I believe agencies are a bit behind. They still view the world of second-party data at the tactical level; i.e. - it is not a strategic channel, it is an advertising line item . They haven't created a system where they, on behalf of a brand, can identity potential data partners, develop and negotiate compensation packages, recruit and onboard these brands, measure and refine their brand's partner portfolio - and do it across their client portfolio at scale. But I believe eventually one large agency will embrace second-party data as a channel- then it'll accelerate within the other agencies.
Your definitions are spot on. But just for clarification - ownerIQ's solution is aligned with your definition of second-part data, i.e.- DIRECT and TRANSPARENT access to other advertisers/marketers data for marketing activation (see our published case studies here: http://www.owneriq.com/case-studies). There are cases, however, where our advertising clients are less interested in reaching the audience of one particular brand or retailer, and more interested in leveraging our entire "cloud" + decisioning engine to help them hit some backend conversion metric. We accommodate these use cases as well.