What is Second Party Data and How Can You Use It?

Second party data is one of the most valuable yet underutilized data types for today’s marketers. As companies aim to better understand their customers and deliver more relevant, personalized experiences across channels, leveraging different data types can unlock new opportunities.

In this article, we’ll break down what second party data is, where it comes from, and how you can start using it to benefit your marketing strategies.

What Exactly is Second Party Data?

Second party data refers to first-party data that is shared from one company directly to another company.

First party data is any data that a company collects directly about its own customers This could include things like

• Contact information
• Demographics
• Purchase history
• Website behavior
• Mobile app usage
• Survey responses
• Social media engagement

Second party data takes this concept one step further – it’s when one company shares its first party data directly with another company, for mutual benefit.

For example:

• An airline might share customer travel data with a hotel brand to help the hotel target relevant audience segments.
• A clothing retailer might share customer purchase data with a footwear brand to help them market complementary products.

The key distinction is that second party data is shared directly between two companies, rather than being accessed via a third party data broker. This helps ensure the data’s accuracy, transparency, and control.

How is Second Party Data Different from Third Party Data?

To fully understand second party data, it helps to contrast it with third party data.

Third party data refers to data that is collected and aggregated by a third party, then packaged up and sold to advertisers and marketers. For example, data brokers like Acxiom and Experian gather data from public records, website behavior, purchase history, surveys, and more. They curate this data into segments and make it available for companies to license and use for ad targeting.

The benefit of third party data is scale and reach. Marketers can access massive datasets encompassing millions of consumers. However, there are some downsides

• Lack of transparency You don’t know exactly where the data originated from or how it was gathered

• One-size-fits-all: The data segments are relatively generic and may not align perfectly with your specific audience needs.

• Little control: You simply license the third party data as-is, with no ability to customize or filter it.

• Privacy concerns: Data gathered without direct consumer consent raises potential privacy issues.

Second party data offers an alternative model that helps address many of these challenges:

• Transparency: You know exactly where the data comes from.

• Relevance: Data is shared between complementary brands to enable better targeting.

• Control: You can negotiate specific parameters for sharing data.

• Privacy: Data is shared directly rather than via a third party.

5 Benefits of Using Second Party Data

Here are some of the key benefits that make second party data so valuable for today’s marketers:

1. Gain New Insights on Your Customers

Second party data gives you access to new attributes and insights about your existing customers and audience segments. This supplemental data can unlock new understanding of your customers’ behaviors, interests, and preferences to help you serve them better.

For example, an airline might match its customer email lists against hotel loyalty program data to identify patterns in accommodations on certain routes.

2. Discover Valuable New Audiences

Looking beyond your existing customer base, second party data enables you to discover entirely new, complementary audiences to target.

A clothing brand could leverage customer data from a beauty retailer to find new audiences interested in fashion and personal care.

3. Enhance Targeting and Personalization

Second party data can power more granular, precise ad targeting and content personalization. Matching data between brands means you can isolate the customers most likely to be interested in your products and serve them highly tailored experiences.

4. Measure Cross-Channel Impact

By matching customer data across brands, second party data allows for better cross-channel measurement and attribution. You can see how exposure to one brand’s ads or content influences engagement with another brand across websites, stores, apps, and more.

5. Build Valuable Partnerships

Beyond the data itself, second party partnerships enable both brands to become more valuable to each other over time. As you continue collaborating and sharing data, it unlocks new opportunities to drive mutual growth.

Real World Examples of Second Party Data in Action

To make second party data more concrete, here are a few real world examples of brands putting it to work:

• Retail brands sharing customer purchase data from loyalty programs, allowing each brand to better understand shared customer behaviors and preferences across their product categories.

• Travel sites like airlines, hotels, and rental cars pooling their first party data to identify traveler personas and coordinate more targeted cross-channel marketing.

• Auto manufacturers sharing customer data with insurance companies to help inform risk models and allow insurers to identify potential new customers aligned with certain vehicle types.

• Consumer packaged goods brands exchanging retailer loyalty card data to collaborate more effectively with retailers on promotions, product availability, supply chain, and more.

• Entertainment studios sharing audience data with streaming platforms to collaborate on targeted content recommendations and improve viewer retention.

The applications are endless. Virtually any two businesses with complementary audiences can explore second party data exchanges to power mutual growth.

Challenges and Considerations with Second Party Data

While second party data brings significant advantages, it also comes with some challenges and risks to consider:

• Identifying the right partners – You need to find partners where data sharing will be impactful and mutually beneficial. Not all partners are created equal.

• Balancing value exchange – There must be a fair value exchange for both parties. This requires compromise and negotiation.

• Data compatibility – Partners’ data may be managed on different platforms, requiring work to connect and match datasets.

• Data privacy – You must ensure proper notice, consent, security and governance to be good data stewards.

• Contract complexity – Data sharing agreements must establish compliant, ethical terms for ongoing management.

With careful planning and trusted partners, these risks can be navigated. But they warrant upfront consideration to set your second party data collaborations up for success.

Best Practices for Getting Started with Second Party Data

If second party data seems valuable for your organization, here are some tips to get started:

• Take stock of your first party data – Catalog customer attributes, analyze for gaps, and determine partnership opportunities.

• Prioritize goals – Be clear on the business questions you’re trying to answer so you identify optimal partners.

• Consider partnership potential – Look across your business ecosystem for natural data sharing opportunities.

• Perform cost/benefit analysis – Weigh the incremental value of new data vs. costs of integration and partnership.

• Evaluate data platforms – Assess capabilities to connect with partners for sharing and activation.

• Create data sharing frameworks – Develop policies, consent mechanisms, contracts, and processes.

• Start small, scale thoughtfully – Run controlled pilots to demonstrate value before expanding partnerships.

• Measure results – Analyze performance on KPIs to guide partnership evolution and growth.

The Future of Data Collaboration

Looking ahead, second party data represents an increasingly important part of the data landscape. As third party data faces growing regulation and privacy pressures, direct collaboration between brands offers a more sustainable model.

Companies recognize the value in sharing data to unlock mutual benefits – be it ad targeting, attribution, personalization, or broader business efficiencies. With the right partners, data practices, and technology, second party data delivers significant advantages.

The future is in cooperation and collaboration, not competition. Brands that effectively leverage second party data will have an edge. Are you ready to explore the potential?