What is first-party data?

Behaviour analyses help companies gain accurate insights into the behaviour of existing and potential customers and leverage this data in their business processes. Modern companies will have no trouble recognising that information is playing an increasingly important role in day-to-day business. But in the age of Big Data, it is becoming increasingly complex to draw the right conclusions from the right data. On top of that, the volume of data that companies face today continues to increase. The upshot is that, more and more in today’s business world, companies with high data quality have a winning edge over the competition. Increasingly, careful data analysis is the linchpin if you wish to ensure that your company enjoys that coveted quality advantage. In this context, a distinction is made between the different sources that data is collected from. Depending on where your company sources its data, it might be first-party data, second-party data or third-party data. It’s an important classification because it has a direct impact on the quality of the data as well as the data protection requirements on how the data in question may be processed.

What is the difference between first-party, second-party and third-party data?

First-party data refers to all data and information that companies collect directly from data subjects. In other words, it is the customer information that companies collect from their online and offline sources. The source of first-party data can be the company’s website, company apps, social media sites, media or surveys.

Examples of first-party data include:

• User demographics
• User website visits
• User interactions
• User interest profiles
• Time users spend on websites

Important to note here is that first-party data is always collected free of charge. Also, users must have voluntarily provided their data and allowed the company to use it via a statement of consent. If a company is unable to prove that a given user has consented to the free collection of their data by producing a corresponding statement of consent, this constitutes a data protection violation. According to the General Data Protection Regulation (GDPR), a violation of this kind can carry severe penalties.

Data protection violations can be penalised by fines of up to 18 million pounds or 4% of the violating company’s global annual turnover. Companies will incur whichever penalty bears the higher price tag. But even if an immediate fine can be avoided, companies who violate GDPR can be ordered to undergo regular inspections. The data controller is responsible for the implementation of and compliance with data protection regulations; the data protection officer offers the data controller advice and support. Companies with 20 or more employees who process personal data are required to appoint a data protection officer.

To secure the first-party data your company needs to succeed, we recommend using the double opt-in procedure, at least as far as your online activities are concerned. Double opt-in means that a confirmation email is sent to the user’s email address, which the user must then actively accept. This process is the best way to ensure that the recipient of the email really consents to the collection and processing of their data. Although the GDPR does not clearly prescribe that companies use the double opt-in procedure for email marketing, there is a requirement that the data controller document user consent. At the same time, in a landmark 2019 decision the Austrian supervisory authority found that the absence of a double opt-in mechanism can constitute a breach of data protection law.

Second-party data is data that another company (Company B) collects directly from its target group. Another way of looking at it is that it’s basically Company B’s first-party data. To get second-party data, you’d need to cooperate with Company B. Also, Company B’s privacy policy must explicitly mention that it shares data with sales partners. If users give their consent, there’s nothing stopping Company B from sharing second-party data. Second-party data therefore affords you the same advantages as does first-party data. You know exactly where the data comes from and how it was collected. This allows you to customise your cooperation with Company B to your exact requirements. As such, acquiring data in this way is fundamentally different from trading in third-party data, where commercial data traders or data brokers sell data.

The business model of such data suppliers lies in collecting, aggregating and reselling mass amounts of data. If your company needs very specific company data or a large amount of data, third-party data can be a smart route to take. After all, the main advantage of third-party data is that it is available in large quantities and, above all, quickly.

The disadvantage of third-party data, however, is the lack of control. Since you don’t know when, how and by whom the third-party data was collected, it’s unfortunately very susceptible to errors. On top of that, you don’t have explicit user consent for the use of their data. These two drawbacks mean you should approach buying personal data with caution. In any case, before purchasing third-party data, you should get detailed information about the rights of use and compatibility with data protection law. Here are 5 tools to audit your third-party cookies reliance. 

Why should your company prefer first-party data?

First-party data is the most valuable data in your possession. The financial outlay is manageable, since you collect the data free of charge. The greatest advantage, however, is that with first-party data, you possess the greatest possible degree of control as well as independence from third parties. After all, you collect the data yourself. At the end of the day, this means that first-party data allows you to offer your target group the best possible customer experience.

Conclusion

There are a lot of pitfalls when it comes to using data properly. Only companies who are fully and exactly informed about the rights of use and data protection requirements are on the safe side. Your company must follow the guidelines set out in the General Data Protection Regulation in order to avoid data protection violations and loss of reputation.

External data protection officers ensure that your company uses all data in compliance with data protection law. DataGuard already manages this important task for a large number of clients throughout UK. Contact us now – we’re happy to help!