The Second Party Data Opportunity

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joannaoconnelrevised"Marketer's Note" is a weekly column informing marketers about the rapidly evolving, digital marketing technology ecosystem. It is written by Joanna O'Connell, Director of Research, AdExchanger Research.  

I had an interesting conversation about the “second party data” opportunity with some senior level publishers not too long ago, and it got me thinking about this subject anew.

I’ve always seen these kinds of relationships – where a marketer (or agency on a marketer’s behalf) has a direct relationship with a publisher where data is the thing being negotiated over (e.g. second party data… Get it? The marketer is the first party and the publisher is the second party) – as a huge opportunity to be explored. Back in the early agency trading desk days we had the idea that, within the walls of our agency, we could create symbiotic marketer to marketer data relationships (in this case the second party provider is another marketer, rather than a publisher). Think of a travel company with flights to tropical locales and a retailer selling resort-wear. But at the time, the tools that would enable such relationships just weren’t there.

Today, they are, at least if leading DMPs are to be believed. Just look at the recent panel I moderated, during AdExchanger’s inaugural Industry Preview conference, where second party data was heralded as the big opportunity to be explored in 2014. (Side note: AdExchanger got in on the fun just about one year ago today, with this comic strip on the subject: “Come on in to the data party, publishers!  It’s great in here!”)


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Certainly, it feels like a cool development for premium publishers looking for new ways to create value and strengthen relationships with their key customers – it’s a new set of parameters on which to negotiate. It’s data that may be proprietary to that publisher and therefore highly valuable to certain buy-siders. And it creates a nice bypass for those, on both the buy and sell sides, feeling burned by - or simply suspicious of - the third party data ecosystem, increasingly under fire over questions of data quality and uniqueness, the sourcing of the data and more*.

I’ve always wondered about the structure of these deals, however, as well as the practical implementation of them.  I’m thinking about questions like this: How is the application of the data prioritized? If a cookie meeting a certain set of data parameters becomes available out in the programmatic ecosystem, who gets the right to show that cookie an ad?  Is it the marketer with whom the publisher has a data relationship? The audience extension buy the publisher is running? What about in the case of two marketers with a data relationship? How is the data prioritization set?  There may be some seemingly simple answers from a technical standpoint; I think the more complex answers are in the business decisions made which dictate how the tech is set up to behave.

All that said, these are by no means insurmountable questions.  In fact, the more publishers, marketers and their platform partners raise these questions on the ground every day, the sooner the second party data opportunity will approach market maturity – a good thing!

On that note, I’d love to hear from the community – marketers, agencies, publishers, tech providers – how are you tackling these questions? How are your second party data relationships going? Are they as fruitful as we all want them to be? What challenges are you running into, and how are you addressing them?

Joanna

*A conversation for another day: what IS the state of the third party data ecosystem? How are buyers (and sellers for that matter) assessing data providers, and what are they finding?  I plan on looking at this more closely!

Follow Joanna O'Connell (@joannaoconnell ) and AdExchanger (@adexchanger) on Twitter. 

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2 Responses to “The Second Party Data Opportunity”


  1. Ramsey McGrory says:

    This has been a really interesting area. Advertisers have been asking for rights of usage. Most have refused b/c of a) privacy policy reasons and/or b) revenue concerns. In the case where the advertiser and publisher are co-creating, there's an argument that both should have rights. The hard part is having any technical means to confirm that any agreement is being adhered to.

    BTW, is there actually such a legal term as '2nd party?' I thought the two transactors were the 1st parties...the buyer and seller. An intermediary such as an ad server would be 3rd party.

  2. Tom Chavez says:

    Encouraged to see Joanna calling out this important distinction. DMP has evolved way beyond the segmentation-for-retargeting and 3rd-party-data-overlay use cases of 2010 to enable many more sophisticated possibilities for segmentation, analysis, and connection of 1st-party data. Peer-to-peer, or 2nd-party data exchange, is one of the more exciting possibilities publishers and marketers are pursuing because it allows the marketer to bring the peanut butter, and the publisher to bring the chocolate, to deliver cooler content or higher-value ads.

    It's not ubiquitous, but it's spreading fast. As Joanna suggests, the publishers who are doing it are finding that it makes their relationships with key marketers stickier and much more durable. And because it's the bottle service of data-sharing, the price points certainly reflect a major premium.

    I think Ramsey is right to highlight the privacy and control aspects. Data governance is an essential precondition for 2nd-party data exchange. DMP for peer-to-peer needs to enable both parties to share data according to their chosen times, terms, and conditions.

    On the prioritization question: Data glistens because its marginal cost of application is zero. Once it exists, it can be put to use millions of times without wear or tear. So, once a publisher decides to share it with a 2nd-party, I don't perceive a prioritization challenge per se, at least on the technology side of things. Technically it's feasible for 'collisions' or intersections to occur, where the marketer could gain access on a 2nd-party basis to the same data a publisher is already using to run an audience extension campaign. If the marketer wants to negotiate for exclusivity, presumably she could do that.

    What this calls attention to is the need for publishers to manage data in an intentional way, as opposed to casting it to the winds. At the top of the pyramid, there will be data that they likely never make available to any 3rd- or 2nd-party because they want to induce scarcity and maintain the very high value of that data tied to their own media. At the bottom of the pyramid is a broad swath of data that others could find value in, but perhaps the publisher doesn't, which is where 3rd-party data aggregators are likely to dwell over time. There's a broad spectrum of 2nd-party opportunity in between.

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