The limits of third-party data, and how private advertising can help

The job of digital advertisers is about to get much more difficult, as they’re forced to deal with a cookie-less, privacy-first Internet. That shift is already well underway, and it will likely accelerate in 2024 with the phase-out of third-party cookies in Google Chrome. We’ve written about these coming changes, and the best strategies for brands to explore to survive in the cookie-less future.

Here we’ll look at some of those strategies (i.e. zero- and first-party data) and how they can actually provide more actionable data for businesses than traditional third-party data collection. With this in mind, businesses should be able to leverage privacy-first principles to increase their business intelligence.

The limitations of third-party data

Though third-party data collection is the norm in online advertising (at least for now), it’s not necessarily an accurate source of reliable user data. That’s because users’ browsing activity is at best only a proxy for their true interests, intent, and buying behavior. There are also several technical challenges involved with tracking users and building accurate user profiles. Below, we’ll look at a few of those challenges.

Data inaccuracies

At a high level, the data created by third-party cookies and cross-site tracking is mainly based on inferences (i.e. that a person’s Internet activity is indicative of who that person is, their interests, and what they might buy). Even if those inferences are sometimes correct, third-party data will never be as nuanced as zero- or first-party data that’s collected or supplied directly from consenting users.

The main reason cross-site tracking has proved successful in online ad targeting is due to the sheer volume of data it generates (rather than pinpoint accuracy, it’s about quantity over quality). Third-party data inference doesn’t need to be correct all—or even most—of the time because there’s just so much of it. If you advertise to hundreds of thousands of people whose browsing history indicates that they’re having a baby, for example, there’s a good chance that some of them actually are, even if many are not.

This inefficiency is baked into how third-party ad targeting works. You need to spend more money…to reach more people…to get more conversions…because the data you’re using to target users just isn’t that great to begin with. (And data inaccuracies are made worse when the same data is bought and sold many times over.)

Fragmented user profiles

Third-party data collection has technical challenges, too. It’s easily muddled by scenarios where multiple people browse on the same device/browser, or where one person browses on multiple devices/browsers. Profiles are also easily fragmented when users clear cookies from their browser.

Trusting third parties

Depending on the configuration of third-party data, it may only provide surface-level insights about things like page views, clicks, conversions, and attribution. In other words, it may not offer much in terms of contextual understanding, or what led a user to take certain actions. But even when third-party analytics are configured to deliver contextually rich information, that data must still be collected, classified, and stored by someone else (and brands have to trust that the results are accurate, and free from misattribution). In this way, third-party attribution systems introduce another black box to the data analytics system.

When ad platforms double as attribution platforms, they’re essentially “grading their own homework.” Even attribution platforms that appear neutral can have internal biases. To avoid these risks, advertisers should use a neutral first-party attribution system free from platform bias.

Effective only when accepted

The bottom line when it comes to third-party data analytics is this: Unchecked, it’s effective at cross-site tracking. But advertisers can no longer assume third-party data collection will go unchecked.

Software companies are changing their standards (e.g. Google’s Privacy Sandbox), and hardware companies like Apple are introducing built-in privacy features—like App Tracking Transparency—on their devices. Privacy laws (like GDPR and CCPA) are restricting the use of third-party cookies, and giving users more power to opt out from third-party tracking. And users are taking matters into their own hands by using privacy tools to avoid being tracked online. This all adds up to limit the effectiveness of third-party tracking. And as third-party data diminishes, alternatives like zero- and first-party data are taking its place.

Better alternatives: Zero-party data

Zero-party data comes directly from users. Brands often collect zero-party data via surveys, quizzes, forms, and questionnaires. It’s data that’s generated from asking people their opinions, preferences, habits, or interests, and recording their responses (sometimes—though not always—anonymously). It opens a direct line of communication between brands and users in a way that fosters community.

Many brands are integrating zero-party data requests into their sites and apps, and people are incentivized to supply the data because it results in a better user experience. Think of Yelp, for example, which asks users for their dietary preferences and restrictions, and lifestyle info like if they own a car or have a pet. This allows Yelp to recommend businesses that better fit a user’s needs using data they volunteer. Most people don’t view this as invasive, and appreciate the opportunity to freely supply only the data they want to share—in a transparent dialogue—to make their own experience better.

Some examples of prompts that generate zero-party data:

  • How much are you looking to spend?
  • How many people are you shopping for?
  • Which types of products are you interested in?
  • How likely are you to try a new product?

Users are more likely to share input with brands they trust. That means it’s important for brands to build lasting relationships with their users and customers. This takes time (it’s not as simple as buying third-party data), but the payoff is much greater.

Zero-party data supplies direct information (e.g. “I’m shopping for a family of five, prefer laundry detergent in pods rather than liquid form, and have sensitive skin”) as opposed to proxy-based information (e.g. “this person recently bought a washing machine, so maybe they’re also interested in laundry detergent”). This type of direct information is likely near impossible to obtain from third-party cookies and other tracking techniques. By and large, insights gleaned from zero-party data are much more likely to be accurate, granular, and actionable than third-party data.

First-party data: user web activity 

Companies collect first-party data when users interact directly with their own sites and apps. This type of data can be—though isn’t always—collected in ways that preserve user privacy and anonymity (e.g. first-party analytics platforms that only collect data in aggregate). First-party data includes things like:

  • Which pages you visit on a site
  • How much time you spend on a page
  • How far down a page you scroll
  • How many pages you visit before making a purchase
  • Clicks (on a page, or from marketing tools like emails)
  • Device information
  • Browser information
  • Localized data (e.g. language and region)
  • Purchase history

First-party data is valuable with users who regularly use a site or app, or who are returning customers. And because it’s gathered by a company or brand itself, it’s essentially free to collect, and often much more reliable than third-party data. It also has a competitive advantage over third-party data: First-party data is controlled solely by the company that collects it, which means there’s no third-party provider that could restrict your access, go out of business, or otherwise shut you out from your data supply. Third-party data, by contrast, is almost always leveraged by multiple parties (meaning your competitors could have the same data as you), and puts an intermediary between you and your data.

Like zero-party data, first-party data is accurate and reliable. The major difference is that first-party data doesn’t necessarily aid with community-building as it’s collected from passive user interactions rather than direct dialogues.

Note: With recent privacy legislation, some users will be asked for permission before a site can use anything other than strictly necessary cookies. These “cookie consent forms” often appear as pop-ups—and given the choice, many users opt out (or won’t see them at all, if they use the Brave browser).

While third-party cookies are still in use, they won’t be for long. And even today they’re far from the most accurate or reliable data sources available for targeting ads or gaining insights about users and customers. In the very near future, Brands and advertisers relying solely on third-party tracking techniques will be at a serious disadvantage versus advertisers who’ve diversified their techniques…and the platforms they advertise on.

The good news is that there’s still time for brands to learn to utilize zero- and first-party data. By doing so, and by building better, more nuanced ad strategies on private ad platforms like Brave Ads (that don’t rely on third-party ad targeting), brands can better position themselves for the privacy-first, cookie-less future.

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