June 24, 2024

Third Party Data Is Here To Stay

Third-party data is any data your organization uses that you don’t own and didn’t collect—basically, anything you buy or retrieve for free from a data marketplace, data exchange, government agency, or data services company (eg, Circana, Acxiom, TransUnion, Nielsen). The use of third party data is almost universal. The business case for third party data makes itself; in most organizations, there is no good business reason to collect all the data you need to run operations and generate insights. Third-party data remains the hottest game in town because:

  • Not everyone has reliable first-party data. First-party data is an asset that companies operating in environments where activity can be digitally tracked through a control channel, such as financial services, retail, e-commerce or logistics, use first-party data. Once an organization sells through a non-channel (think B2B2C, where manufacturers sell to retailers who sell to consumers), that chain is broken — there is no longer reliable data that connects a brand to its end consumers.
  • Walled gardens help companies control data sharing. Data is an asset, and companies with the most data (eg, Google, Meta, Amazon, Apple, Netflix, Walmart) are less eager to share it. Each of these data owners has created ecosystems in which they decide what you are allowed to know by tightly limiting the amount of data an organization can see, building proprietary tools that define access to their data, and setting terms of use that limit what organizations can do with data.
  • First-party data is only one piece of a data strategy. First-party data is clearly important to any data strategy. It allows insight into how customers are interacting directly with your brand. But outside of direct interactions, visibility is significantly reduced. First-party data will never tell us how customers interact with competitors, what other types of products they like or buy, or what they do when they’re not engaged with one of your experiences.

Despite this, Forrester survey data tells us that many companies (56%) would be willing to divest third-party data if there were better alternatives. Third-party data hinders organizations because:

  • Limited interoperability and operability. To make third party data useful, it needs to be linked to decisions your organization makes. However, connecting third-party data to your proprietary data is rarely easy, meaning that the resulting insights are often difficult to act on.
  • Concerns about data privacy and data collection. In a world of ever-changing regulations, relying on a third-party data provider feels risky. Every organization has been burned by data that is suddenly unavailable due to changing regulations or third-party providers that have disappeared overnight due to privacy violations or legal action.
  • A confusing ecosystem of sellers. For certain types of data, there is one provider that has a near monopoly (and pricing to match). In other areas, there are dozens of providers that may look similar but are often very different in terms of operations, experience and prices. Finding reliable suppliers takes experience and time, and most organizations do not have dedicated resources dedicated to data sourcing.
  • Mixed data quality. Not all third party data is created equal. Most datasets will have caveats and limitations. Some will have large gaps in coverage, large biases in representation, or unprecedented problems with data collection and/or processing. Most of the time, you won’t know what you’re getting until you’re on a six-month contract.

Companies are making the most of the situation, and the third-party data space is evolving some capabilities to be more transparent, more compliant, and more actionable.

This post was written by Analyst Zeid Khater and appeared first here.

Leave a Reply

Your email address will not be published. Required fields are marked *