Spending on programmatic advertising has exploded in the past three years–in 2013 marketers spent $4B on programmatic; in 2016, this number will top $20B [eMarketer]. The key behind programmatic advertising’s growth lies in its ability to target. Programmatic offers advertisers the opportunity to automatically run an ad campaign in real time to reach the right consumer with the right message in the right context.
To target so effectively, programmatic advertising relies on a large volume of data. This data can come from different sources, so understanding these sources is a great first step to understanding programmatic advertising.
First party data
First party data is data collected by a publisher or advertiser through a direct relationship with the user or consumer.
Here’s an example: A sneaker brand wants to market a new type of running shoe. So they develop an app that helps its users train for marathons. Let’s say Kathy is running a marathon early next year and downloads the app to help her prepare. Because she downloaded the app, the brand is able to gather user data about Kathy. Because the brand itself owns Kathy’s user data, this is an example of first party data. In this case, the brand would be able to use Kathy’s user data to target ads about the running shoes to Kathy (a likely buyer considering her marathon plans) in other apps on her phone.
Second party data
Second party data is when the owner of first party data gives access to another entity with which they have a relationship.
Here’s an example: A rental car company wants to target people who’ve traveled domestically within the last year. The rental car company makes arrangements with a travel-booking site to get access to the booking site’s domestic travelers user segment. The next time these users enter the web environment, the rental car company can identify who they are and is able to target its products to them.
This is known as second party data because the advertiser got the data directly from a second party–the travel booking website.
Third party data
Third party data is data collected by an entity that doesn’t have a direct relationship with the user or consumer. Data Management Platforms (DMPs) often buy data, from a variety of sources, and make that data available to their clients.
Here’s an example: A pharmaceutical company wants to target people who’ve purchased an allergy product in the last year. The pharmaceutical company contracts with a DMP who gives the pharmaceutical company access to their segment of allergy product purchasers. Where did the DMP get this data? From a drugstore chain who sells their loyalty card data.
First, second, and third party data are just the first (and second and third?) step. We wrote a primer to help advertisers, publishers, and curious laypeople understand what programmatic advertising is, and how it can be beneficial for them. Our Programmatic Primer uses simple language to explain the complicated details.
Read The Programmatic Primer–the most comprehensive guide to the most loaded term in digital advertising