The Demise of Third-Party Data

Third-party data used by marketers to target their media is on its way out—that may not be such a bad thing

Quite a few forces are converging to squash third-party data. Foremost is consumer concern around personal data and privacy. It’s no wonder consumers are worried about this in the wake of large-scale data breaches over the past decade. And increased regulation like the General Data Protection Regulation (GDPR) and California Consumer Privacy Act (CCPA) will continue to put more pressure on the collection and sharing of consumer data. In response, technology companies such as Google and Apple are beginning to restrict the use of third-party cookies on internet browsers.

Was Third-Party Data Really Working?

All is not lost. In fact, out of the ashes of third-party data may rise even more effective and personalized ways of marketing to consumers.

Marketers using third-party data have always struggled with the accuracy of the information they’ve used to target their media. For example, the author of this article is female, married, between the ages of 25 and 29, childfree and a homeowner. If a marketer tried to target her demographic using third-party data, they may not reach her.

That’s because the third-party demographic segments she falls into according to a popular data registry are: male; married; both homeowner and renter and ages 18-76+, with children ages 6-10, infants ages 0-2, toddlers ages 3-5 and tweens/teenagers ages 11-18 in the household. In other words, her consumer snapshot is not accurately captured with third-party data sources, which, along with contextual or interest targeting, have long been the traditional way to target media.

A Better Way

Most of the articles written on the demise of third-party data acknowledge that first-party data is key to the future of marketing and advertising. But how do consumer packaged goods companies harness scalable first-party data?

The answer lies with retailers. One of the keys to building a viable first-party database is collecting reliable and precise data. There’s no doubt that true purchase data from retailers creates a much clearer image of a consumer than unreliable third-party demographic segments or data gleaned from browsing behavior.

For example, a consumer may be watching cat videos, but if a pet food company is trying to reach consumers with pets, would they trust a cat-related interest segment built through third-party data? Or might they want to leverage accurate purchase data from a retailer, which can pinpoint buyers of cat food, cat treats and pet supplies?

In fact, retail data gets even more precise. Perhaps a pet food company might specifically want to target wet cat food buyers versus dry food buyers because it’s a strategic priority for the business. Or maybe they’re looking to drive cross-shop between their treats and food, so they want to target their media to buyers of their brand’s cat treats, but not its food. If they’re a natural or organic pet food company, they might want to specifically zero in on buyers of competitive natural or organic cat food. All of that can be done with retail media platforms built on the foundation of the retailer’s rich first-party data.

One of the other important factors in creating strong first-party data is a consumer base that believes it is getting something valuable in return for providing personal data. As consumers continue to question the sharing of their data, there needs to be a clear value exchange for them to willingly provide information. Many retailers have already created that value proposition in the form of loyalty programs and targeted offers.

Media & Advertising Targeting of the Future

National CPG brand and media teams need to reevaluate how to ensure that their advertising messages reach the right people and remain relevant to consumers in a world where third-party data is increasingly scarce.

Working with retailer partners and their media platforms, as well as using both purchase-based targeting and contextual relevance layered on top of first-party data, will be the keys to targeting media and advertising in the future.

Illustration by Bill Murphy.