Third-party data have been much maligned recently as the ugly stepchildren to their "hot" programmatic sister. Critics say they're inaccurate, overpriced and have performance issues. Yet the data business and the programmatic industry it fuels continue to grow at a breakneck pace.
Ranting and raving against them won't change the fact that since the earliest days of direct marketing, the marketing industry has run on third-party data. Let's look at some of the misperceptions and realities.
Start with the name. Third-party data are first-party data. It's not some mysterious information that evolves from the nether regions. True purveyors of third-party data, capture information directly from first-party sites, directly measurable panels (of real people, no less) or compile direct transactional data from retailers themselves. They then clean and compile the data to make them more effective and usable. It's hard to run your car on crude oil, that's why there are refineries. Nielsen, IXI, MasterCard and numerous others have built billion-dollar businesses refining data in the offline world.
If you want to talk to the same people over and over again, first-party marketer data are great. But how do you attract new customers? Conquer competitors? For years, direct marketers have been buying lists of potential new customers to target with their offers, and this has been key in growing their footprint (I know, my first job was in the catalog business). Appending first-party data with third is an essential component of building reach.
In addition, first-party data give you one view of a consumer. If I am an auto company, how would I know what TV you watch, the number of kids in your household, the retail stores you shop in, or how often you fly to Europe? All of these could be key reasons you might buy a minivan as opposed to a sports car, and all are supplied by appending third-party data to first. To get a full 360-view of a consumer, one must have the full data assets of a Nielsen, MasterCard Advisors, Equifax, or eXelate, or you will risk missing key behaviors of your likely audience.
Another issue is that first-party data aren't objectively validated. The best third-party data are subjected to rigorous validation standards established by objective, blue-ribbon rating companies such as Nielsen and comScore. How many marketers really clean and validate their data before using it? How many data management platforms have this feature available? Better standards yield better results.
Third-party data make first-party platforms run better. Whether the platform is independent or part of a management system, data are an essential component. Take a look at any DMP/DSP website partner page; it is filled with data-company logos. Why? Because branded, third-party data make data engines run better. Tech companies are rational; platforms wouldn't go through the expense, integration time and effort if the data didn't work. It's also the reason why you see data companies (Neustar, Acxiom, eXelate, etc.) getting into the tools business; they know how to make machines that work better.
Discussions regarding how third-party data are applied and paid for are certainly valid. What isn't up for debate is their efficacy, scale or validity. Many factors go into effective marketing -- insights, creative, media, planning, technical execution, etc. Data are another critical piece of the puzzle.