Chapter 2

13 minutes

First-party and third-party data

If you take one thing from this book, it's this: High fit and high intent makes for a VIP customer. And if marketers and salespeople can focus their energies on VIPs, they'll get the most impact from their time.

Data is that magic ingredient that helps companies find VIPs in an automatic and scalable way.

But for now, let's start with the basics. Ma, where does data come from?

What is first-party vs. third-party data?

First-party data is what you collect from your audience directly, via your own channels.

Third-party data is collected by another entity that is entirely separate from your relationship with your audience.

So these terms are about where data comes from — how it ends up in a marketer's hands.

Each type comes with its own benefits and problem areas, but keep in mind that it's not about just having one or the other. First-party data enriches third-party data and vice versa, so marketers should combine them to get a complete picture of their audience.

First-party data: Data you collect from your audience

You collect first-party data from within your company's ecosystem through direct interactions with your audience. When we say audience, we're thinking of people who visit your website, email subscribers, social media followers, folks already using your app or product, etc.

Examples of where first-party B2B data can come from

  • Lead forms (e.g., email addresses and job titles)
  • [Behaviors or actions taken across your website](https://clearbit.com/blog/website-intent-data-marketing), app, and/or product (e.g., a prospect visiting the page for Product A three times and downloading an ebook about it)
  • Your company's social media profiles (e.g., people following your social handles and their likes, comments, shares, etc.)
  • Email communications and ad clicks (e.g., recipients of your email newsletter who click on your CTAs, or prospects that click on your ads)
  • Answers to customer surveys
  • CRM and marketing automation software (e.g., a prospect's lead score, stage in the buyer's journey, account manager, etc.)

Most companies are sitting on a gold mine of first-party data. You can dig in with analytics tools like Google Analytics, Mode, Heap, Amplitude, Mixpanel — there are many. Analytics are also built into:

  • Email marketing platforms like Marketo, Hubspot, or Customer.io
  • CRMs like HubSpot, Salesforce, and Microsoft Dynamics (it's worth mentioning that much first-party data is stored in these CRMs in the first place, such as when a lead fills out a form)
  • Social media platforms and ad platforms like Facebook, LinkedIn, and AdRoll

Remember, what makes a piece of data first-party is simply the fact that you collected it yourself as it relates to your reader, visitor, prospect, or customer.

But you can turn it into third-party data by selling it to someone else…

Third-party data: Data that other entities collect from your audience

Third-party data is collected by entities or organizations other than your own — organizations that don't have a direct relationship with your audience. For example, think of third-party data as data that's publicly available, such as records in ye olde phone book, U.S. Census data, or records from the Bureau of Labor Statistics.

But there are plenty of data processors — the "third parties" that we'll talk about most at this party — who organize and sell data. They collect it from multiple sources, make it clean and useful, and then provide it to marketers and sales teams, who can use it to create better, more targeted interactions with prospects and customers.

Examples of where third-party B2B data can come from

  • Companies that aggregate, process, and resell data from multiple sources (e.g., Acxiom, Dun & Bradstreet)
  • Companies that sell data they collect on their own sites, typically of a certain specialty (e.g., intent data from G2)
  • Public data aggregators and publishers (e.g., US Bureau of Labor Statistics)

When we think of third-party data as it relates to the B2B world, these types usually come to mind first:

  • General demographic info, like a person's first and last name, email address, phone numbers, and social media handles
  • Firmographic info, like a company's industry, revenue, and a list of their employees and their roles
  • A person's browsing activity and interactions on websites and apps outside of your own

These are typical examples of information that are collected and redistributed. But remember that if you collect some info in that list, it's considered first-party.

You may have heard of classic — dare we say, "old school"? — data vendors like Acxiom and Dun & Bradstreet. We say "old school" because these companies were providing marketers with mailing lists before Web 2.0 and digital marketing even existed. These data sets were typically built on the backs of hundreds of people calling and mailing businesses to ask for information. (Fun fact: Abraham Lincoln was a credit reporter at Dun & Bradstreet. Respect.)

In the early years of the digital age, marketers would receive a giant data download from these firms — spreadsheets or CSVs that were relatively static and needed to be refreshed manually. Now, these traditional companies are evolving to meet modern marketers' needs and to work better with their tools.

Clearbit is at the forefront of the new wave of data-driven platforms, delivering third-party data via APIs that sync right up with existing marketing and sales tools in real time. That way, our third-party data can be dynamic and automatically refreshed, saving people from the tedious process of manually updating CSVs, CRMs, and databases.

The business of data

As Business News Daily so aptly puts it, customer data is big business: "From consumer behavior to predictive analytics, companies regularly capture, store and analyze large amounts of data on their consumer base every day. Some companies have even built an entire business model around consumer data, whether they create targeted ads or sell to a third party."

Google and Facebook are high-profile examples, but similar data collection happens across many digital services, from Spotify to Netflix to other search engines like Yahoo and Bing.

Creepy? Yes. And much has been made of tech behemoths like Facebook and Google's abilities to collect user data and offer the insights to partners and advertisers. It's contested whether they sell user data or give it away. But they do track personal information such as basic demographic data, parental status, household income, "friends," location, the types of pages and groups and articles users interact with, and more.

Here's another one for you: when students take college entrance exams like the SAT and PSAT, administered by The College Board, universities can purchase a license to access that student data and use it to contact them. And send them a lot of marketing brochures and letters. For about 45 cents per student.

That data includes addresses and emails, as well as other demographic information about the student and their parents, obtained through surveys. Buried on the College Board site is this privacy statement: "Qualified colleges, universities, nonprofit scholarship services, and educational organizations pay a license fee to use this information to recruit students and manage enrollment in connection with educational or scholarship programs."

Fun, right?

Consumer data is a contentious issue, and there is active and warranted concern about individual rights when it comes to personal information. But luckily, there are ways B2B businesses can use data for good, in non-creepy ways, to improve the customer experience. B2B data often draws on publicly available company and employment information, and privacy policies offer individuals control over their data, providing options to claim, edit, and hide it.

On a broader scale, there has been a growing awareness of consumer privacy issues and new policies enacted to help individuals gain more control over their data. For example, the European Union's General Data Protection Requirements (GDPR), which went into effect in 2018, provides new rules for how companies collect, store, and use data. The list of regulations range from requiring companies to ask for users' consent to track their activities with cookies to allowing a user the "right to be forgotten" — the ability to request that all their data be erased from a company's storage. Penalties for failure are high: 20 million Euros or 4% of revenue, whichever is higher. California has followed suit with the California Consumer Privacy Act, which became effective in January 2020. More recently, tech giants like Apple and Google are stepping up their privacy game — providing more control to users over app tracking and phasing out third-party cookies.

In general, marketers carry the responsibility to use data in ways that respect the privacy of individuals. We believe that data should be used thoughtfully, that direct data collection should be transparent, and that companies can do a lot with information that's already publicly available.

Wait a minute — you skipped a number! What about second-party data?

Hold your horses, pardner! We're getting there. Second-party data is data that was once first-party and was then shared with a trusted partner.

Companies will often barter or sell the datasets they've collected because the insights they have are mutually beneficial. The dynamic is different from third-party data, where it's resold to multiple people. Even though both data types are shared, the trade of second-party data is more selective and limited.

Examples of second-party data

  • You enter a charity sweepstakes to win tickets to Hamilton and a meet-and-greet with Lin-Manuel Miranda. The list of people who entered the contest is shared among partners like the sweepstakes organizer, Hamilton's production company, and the charity they're supporting.
  • Spotify and Facebook trade data about their users so that when you go to Spotify, you can share music you like with your friends. When you go to Facebook, you can see targeted ads for concerts you're likely to be interested in.
  • As part of a partner program, a consulting firm sells a B2B SaaS company's product while providing services to its customers. The B2B SaaS company can share a list of prospects or customers to the agency, along with other first-party data, to help the agency do better marketing and outreach.

Challenges: What to watch out for with first- and third-party data

The way data comes to you can have advantages and disadvantages — although, again, it's all about combining these different data types for the most insights, rather than choosing one or the other.

First-party data requires you to correctly set up the data collection mechanisms on all your platforms. This can include creating the right sign-up forms, installing pixels on the right pages, and setting up analytics tools as early as possible to capture as much historical data as possible. Doing all that could be a time-intensive process or require technical chops, and small mistakes can lead to big data collection errors.

Collecting first-party data can have trade-offs too. Take lead forms, for example. Forms make up one major way that marketers and salespeople collect data about new prospects, but asking for lots of information in a form can often lower its conversion rates. So, marketers need to think about that trade-off and design forms carefully, optimizing for both quality and quantity in their sign-ups. There are creative solutions to get the best of both worlds, like supplementing forms with third-party data so that you don't need to ask the prospect to type it in.

Data collected through user-submitted forms also creates worries about accuracy and consistency. Plain old human error creeps in, and even worse, sometimes people just enter random or false answers to get to the end of a form and move on. Even if they fill out every form correctly, there are potential issues with data consistency. If one person enters their location as "New Jersey" and another abbreviates it to "NJ," then your systems will read that as two different states until you have a way to reconcile them.

Once you've collected first-party data, there's also the issue of making it genuinely useful to your teams. Data is a lot of work: making it consistent, analyzing it, segmenting it, documenting it, begging a data scientist to make a report for you, funneling data to an email or website personalization tool, begging someone to look into why some data looks off — these are all things that an in-house team needs to either set up for themselves or hire help to do.

Third-party data comes with challenges too. There's the good old-fashioned monetary cost of purchasing data, for one. And competitors may also be able to access or purchase the same dataset, meaning it's not necessarily a competitive advantage for you. That may not be a problem if you come up with unique and powerful ways to use the data, but it's something to keep in mind when you compare it to first-party data, which you can keep to yourself.

Then there's the inherent risk involved in choosing a third-party data provider. After all, they're only as good as the data they collect. When choosing a third-party data provider, it's important to look at these three factors: breadth, accuracy, and data decay.

  • Breadth: Typically, third-party vendor data is most useful for "standard" data types and fields; if you're looking for nuanced or unconventional details — like whether a company has Taco Tuesdays or what their marketing budget is or uses Asana for project management, for example — the third-party vendor may simply not offer them or may not have complete data for all the records.

  • Accuracy: Data cleanliness and overall correctness can vary greatly, depending on the provider.

  • Data decay: Data decay is the rate at which data about a person or company becomes out of date as their circumstances and identities change. And as it goes out of date, it introduces errors into your database and what you think you know about your prospects.

People change companies, job titles, roles, email addresses, and phone numbers. The companies they work for can change size, revenue, funding, industry focus, and office locations, among other things—and they should change if they're growing. Good third-party data sources (like Clearbit, wink wink) track all of these changes for you.

And there's a lot to track! At least 30% of B2B data decays every year—and that goes up to 70% in sectors with high job turnover, like the tech industry, according to Informatica. And in 2018, Forrester research suggested that only 12% of marketers had high confidence in the accuracy of their data, while 84% listed data quality as a top-five weakness.

Historically, marketers have dealt with data decay by receiving periodic data refreshes from the list's vendor. However, these updates frequently didn't happen often enough, and they didn't overwrite first-party data that the company had collected in the meantime, so they would have duplicate or conflicting information.

These days, third-party data platforms like Clearbit can refresh this data in real time, or at least much more frequently than every few months. They keep up with data decay automatically by tracking changes in details like job titles and company growth, which maintains accuracy ‘round the clock rather than just a few times per month or year.

RECAP: First-party, second-party, and third-party data

"First-," "second-," and "third-" party data refers to how you ended up with the data. "First" means you collected it yourself; "third" means you received it or purchased it from an aggregator; and "second" means that a trusted partner provided you with their first-party data.

Which of these sources that you use depends on what's available in your business setup and industry. For most companies, a combination of all three types of data provides the most comprehensive look into a customer base.

Now, let's look at some specific types of data that fall into two broad groups —fit data and intent data. (Pop quiz: are these first- or third-party data? They can be either, depending on how they're collected. Don't roll your eyes at us, we're just checking!)

The Standard in B2B Data

Now reinvented with Artificial Intelligence—Clearbit is the first AI Native Data Provider. Enrich your records, reveal buying intent, and connect with your ideal customers.