First-Party Data is the new Gold
Navigating the future of digital advertising: how first-party data, privacy, and innovation are changing the industry.
In the rapidly evolving world of digital advertising, first-party data has emerged in the last few years as a pivotal element. As privacy concerns intensify and cookie-based tracking faces scrutiny, first-party data offers a promising solution that balances effectiveness with user trust. And just when we thought we had it all figured out, Google’s latest twist about postponing its plan to phase out third-party cookies from Chrome, has sparked fresh conversations in the industry.
This shift underscores the growing significance of first-party data, highlighting its potential to reshape the whole ad tech industry.
From Third to First-Party data
Traditionally, advertisers have relied heavily on third-party data.
As a reminder, third party data is information collected and aggregated by entities that don’t have a direct relationship with the users the data is about. This type of data often includes demographic information, browsing behaviors, purchase history, and other consumer insights. While it can provide broad insights, third-party data is often less accurate and raises more privacy concerns than first-party data.
For example, Facebook collects extensive data from its customers on the platform and then resells it to brands looking to reach specific audiences. However, the quality and accuracy of third-party data can vary significantly.
Moreover, using third-party data raises numerous privacy concerns. Adhering to data protection regulations when acquiring, storing, and using such data is far more challenging compared to first-party data. Often, individuals are unaware that their data is being collected by third parties or what specific information is being accessed.
In contrary, first-party data is harvested directly from user interactions, whether they’re exploring your website, engaging with your app, or making a purchase. Unlike third-party data, first-party data is all about direct, transparent connections with your audience.
This direct approach offers several advantages:
Enhanced targeting precision: it allows for more accurate audience targeting, improving campaign performance. Instead of making guesses about what might interest your audience, you’re using actual insights from their interactions.
Personalisation: It enables the creation of tailored content that resonates with individual preferences and behaviors. It’s like customising a product to fit perfectly—it feels personal and relevant, making your audience more likely to engage and making the experience even better for them.
Improved customer relationships: by using data collected directly from interactions, businesses can foster stronger, more meaningful connections with their audience. This loyalty translates to repeat purchases, higher lifetime value, and even word-of-mouth referrals, which are invaluable in the marketing world.
Better performance measurement: more accurate tracking of customer journeys and campaign effectiveness. This transparency helps in understanding which touchpoints are most effective and allows for optimisation of the marketing mix, leading to more efficient use of marketing budgets.
Privacy compliance and gaining customers' trust
One of the most significant advantages of first-party data is its alignment with current privacy regulations. As laws like GDPR and CCPA reshape the digital landscape, first-party data collection methods often already comply with these stringent requirements. This not only keeps businesses on the right side of the law but also helps build trust with users who are increasingly concerned about their privacy.
The shift towards stricter privacy measures has been further accelerated by tech giants like Apple, whose App Tracking Transparency (ATT) feature, introduced in iOS 14.5, requires apps to obtain explicit consent before tracking their data across other companies' apps or websites. This move has significantly disrupted the ad tech industry, limiting access to third-party data and pushing advertisers towards first-party data strategies, as well as being more creative in their advertising.
While initially challenging for many businesses like Facebook, but also all the mobile games & apps developers, Apple's initiative has been largely viewed by the public as a positive step, enhancing user privacy, fostering transparency, and encouraging innovation in privacy-compliant advertising methods.
As a result, companies that effectively leverage first-party data are better positioned to navigate this new privacy-focused landscape, meeting both regulatory requirements and evolving consumer expectations.
But when we thought we were going in right direction, Google has taken a different approach. Despite pledging to phase out third-party cookies, the company announced in July 2024 that third-party cookies would remain in Chrome, the world’s most popular browser, after facing pushback from advertisers. These advertisers, who rely on cookies for personalizing ads, expressed concerns about losing a vital tool for tracking users and targeting ads effectively. Google’s decision highlights the complex balance between privacy and the needs of the advertising industry, making companies even more dependent on Google’s own user databases.
Ultimately, the companies that prioritise privacy compliance and earn consumer trust through first-party data strategies are the ones best equipped to thrive in this evolving digital ecosystem. They offer a clear value exchange: transparency, security, and personalised experiences, all while staying compliant with privacy laws.
Real-world applications of collecting first-party data
The gaming industry always ahead
The gaming sector has been innovative and particularly adept at leveraging first-party data. By analysing in-game behaviors, developers can fine-tune placements and enhance user engagement.
Take Nefta, for example. They’ve mastered the art of integrating ads into games using first-party data. Their strategy blends precision targeting with privacy, monetising seamlessly within gameplay. By comparing anonymous customer profiling with traditional fingerprinting methods, Nefta finds a sweet spot between effective targeting and respecting player privacy, as well as preserving the experience. They’re proving that ads can be relevant and respectful, without compromising anonymity.
As gaming continues to set the standard for how data can drive effective strategies, it provides a clear blueprint for sectors eager to capitalise on similar opportunities.
“Everything is an Ad Network”
Mobile & advertising expert Eric Benjamin Seufert famously declared in a 2021 article, "Everything is an ad network", encapsulating a profound shift in the digital ecosystem. This statement reflects the growing trend of different platforms evolving into networks, leveraging their vast troves of first-party data. We're witnessing this transformation across various industries:
Netflix, once ad-free, has recently started to monetise its audience differently, aiming to create new revenue streams while potentially risking the loyalty of its subscriber base.
Similarly, Uber has introduced very recently ads into its app, reaching passengers during their rides. This move leverages the captive attention of riders but also raises concerns about experience and potential distractions.
Even neo-banks like Revolut are leveraging their customer data to deliver targeted ads. This trend signifies a broader shift where customers attention is monetised across various industries, redefining how brands connect with their audience.
First-party data allows for more precise ad targeting. Publishers can tailor advertisements to align with the specific interests and behaviours of their audience. This method eliminates the need to rely on third-party cookies and guarantees that ads are more pertinent and less intrusive.
This trend underscores the growing importance and value of first-party data across diverse industries. As traditional advertising channels become less effective due to privacy regulations and changing consumer behaviors, companies are turning their own platforms into ad networks.
The “everything is an ad network” phenomenon is not just about creating new revenue streams; it’s a strategic response to the changing landscape of digital advertising. It represents a move towards more integrated, permission-based marketing that respects privacy while still delivering personalised experiences.
As this trend continues, we can expect to see more companies across various sectors exploring ways to transform their digital properties into sophisticated ad platforms, further blurring the lines between content, service, and advertising.
Conclusion
The digital advertising landscape is undergoing a profound transformation, driven by the rise of first-party data and advancements in technology. As marketers shift their focus from third-party data to first-party insights, they gain the ability to deliver more personalised, relevant, and effective advertising experiences. This change not only enhances marketing performance but also aligns with growing privacy concerns, offering a more transparent and trustworthy approach to data usage.
As we look to the future, building sustainable advertising strategies that prioritise privacy, transparency, and value will be crucial. Marketers who invest in ethical data practices, stay informed about emerging technologies, and continuously refine their skills will be well-positioned to thrive in the evolving digital landscape.
In summary, first-party data is not just a trend but a fundamental shift in how we approach digital advertising. Embracing this change, along with ongoing education and adaptation, will empower marketers to navigate the complexities of the modern ad tech world and deliver impactful, user-centric marketing strategies.