The History, Present, and Future of Third-Party Identity Graphs

What Are Third-Party Identity Graphs? 

A third-party data identity graph (or third-party data asset) is any large data company that sells and monetizes large swaths of consumer data/PII data for a number of reasons. It could be for validation. It could be for marketing. In general, they’re in the business of monetizing the data they have collected for many years. 

The History of Third-Party Identity Graphs 

Most––not all––third-party data companies and assets typically started out as a form of email company. 

At the end of the ‘90s and the beginning of the early 2000s, as email in general exploded and everyone was using it in different ways, there were companies that collected email addresses.  

At that time (early 2009), there wasn’t privacy legislation. You could view it as the Wild West. The internet was new, regarding social media and things with data volume. As a result, these companies started collecting email addresses.  

These third-party identity graphs collected email addresses for clients and/or brands. Even though they helped these clients gain data, they also kept it for themselves. At the time, it was completely legal for them to collect that data.  

Then, over the next decade or so, they realized that the information they had was going to be a very powerful asset. As the internet started blowing up, the internet revolution began—and so did the advertising revolution. Identity graphs began to realize they owned powerful information from the email addresses they kept over multiple years.  

As the revolutions continued, third-party identity graphs started thinking about where else they could buy data. Again, this was legal at the time—consuming what we call data exhaust.  

So, there were multiple companies essentially collecting and using data in different ways. None of them really thought to distinguish themselves from being in the data business as providing a product or service, since they had tons of data sitting around. 

These data assets that started out as email list companies instead figured out where to buy more data that was sitting around. They noticed other companies had data dying on the vine. It was the perfect arrangement. Companies who weren’t using the data they had could make money by selling it to the third-party data assets.  

Strategically, this is important. This now meant that these identity graphs could build a powerhouse over the next two decades.  

For 20-plus years, they collected so much data, the industry now had five or six massive third-party data assets. These data companies  positioned themselves as third-party data identity graphs, which is now the modern interpretation of these companies.  

Who Uses Third-Party Data? 

Marketing agencies, email houses, and direct mail houses are some of the types of businesses who use third-party data.  

However, there has been some debate over the quality and precision of the data.  

This is a conversation we have with agencies, brands, and media companies all the time who are also using third-party data sources.  

What Affects the Quality of Data? 

Since there are only a few giant third-party data assets who have a high volume of data, there is a dynamic of quantity versus quality. There is so much data that getting the best third-party data has become difficult for people to do over time.  

Third-party lists may have been a hit in the 2010s. In this decade, though, it’s become harder to get recency and new data. 

No matter what product or service you sell, you’re going to look for some type of in-market data. Third-party data was accurate for its time but not for in-market.  

Lastly, the idea of attribution became more important. Attribution and return on investment were always important, to a certain extent. However––especially in the AdTech and MarTech marketing space––the way we talked about attribution in the last five years compared to the last 20 is very different. 

As a general trend––not every time and not in every case––organizations bought this third-party list of data and audiences to use for marketing purposes. However, they just weren’t getting as much incrementality out of it. 

People started noticing they were not getting attribution on the third-party data sold by these assets. They also began asking how would they actually know that the data is giving them business results. Is this third-party data actually making a business impact? 

Is There Value in Third-Party Data? 

There is valuable third-party data. However, with the changes, like the cookie deprecation, people are realizing most data has a third-party nature to it. They also began to wonder what else they could be doing and if this third-party data was really the most precise and accurate source of new in-market data. 

This is also why people ask if the data they’re being sold is cut up in different ways. There have been many instances of third-party data being cut up and thrown in with other data types, which are then sold through this company and that company and that other company before the data gets to your business. Due to this, there’s been a lot of debate and discussion around the real value of third-party data.  

Privacy Legislation Around Data 

The inability to collect more recent data and build more new data has ties to government regulation and privacy legislations. 

Cambridge Analytica and Facebook coming in front of Congress has changed the mindset and enabled people to ask about privacy legislation.  

Privacy legislation started to change the industry within the last two years. Certainly, as GDPR––which is a much more comprehensive and conservative legislation–– and CCPA rolled out, they’ve impacted a number of  state privacy legislation, which has made things a little more complicated, to put it lightly. 

One of the biggest challenges is that this legislation focused on preventing the selling of data without consent, which makes it hard to sell data. If you ask someone to sell their data, you’re not likely to get a yes in most cases, unless you’re offering a really compelling value prop in exchange. 

The Debate of Third-Party Identity Graphs Shrinking 

More or less, even if it’s not directly or explicitly saying you can’t sell data anymore, in the modern world, you can’t really sell data. As discussed earlier in the article, when these entities kept buying all the data exhaust, they became this monster entity. One of their biggest strengths was to grow and keep collecting and gathering more and more data.  

However, if the selling of data becomes more complicated and arguably not even possible at some point, what choices do these third-party assets have? How do they stay resilient?  

Since legislation is enabling consumers the right to opt out, consent, and know how their data is being used, it is reasonable to predict that these third-party assets are shrinking in nature.  

So, if you can’t buy data anymore and consumers are asking companies not to use their data and to delete their information completely from those systems, then there is constructive dialog around the assets shrinking. 

Shrinking Assets With Facebook and Apple  

Another trend we’ve seen that contributes to shrinking assets is the big changes with Apple iOS and Facebook. When Apple added the “App Tracking Transparency” policy, only 4% of users opted in to have their information tracked across apps. [1] 

A year has passed since this update first rolled out and now the opt-in rate is 30% of users. However, this has equated to lost revenue, especially for Facebook, which is estimated to be $13 billion over the year. [2] 

While the opt-in rate is slowly increasing, there is no denying that there is a shrinking third-party data set for these identity graphs.  

The Cookie Element to the Shrinking Assets 

Another element that contributes to the shrinking third-party data set is the deprecation of cookies. The loss of third-party cookies affects third-party cookie syncs and mobile ad ID (MAID) data. MAID data can include specific apps that users are looking at, ads served within those apps, and/or behavioral actions online. Cookie syncs can include the crossover from browser to device sessions.  

When third-party data assets buy up this MAID information, they are building a consumer profile and adding the information collected. If they’re starting with an email address, anytime a purchase is made using that email, it goes into the profile.  

The deprecation and changes in the cookies space are directly affecting the ability to monetize these sets of data that have been collected over the last 20 years.  

How Cookie Deprecation Will Change the Landscape 

Third-party data works very well in a cookie world. However, as cookies are phased out, how is that going to change the landscape for third-party data assets? 

There is still value to third-party data and using third-party identity graphs. It is really important to understand which data assets are going to be the most important to you as you identify companies to work with.  

The way businesses activate data is starting to change. In the past, it was relatively easy––cookies were easy to use. When you had a profile surrounding a user based on information collected by cookies, it was easy to determine which ads to serve that user, since you know they’re in the market for a specific service or product.  

When third-party cookies no longer enable a robust profile of a user, it changes how you can monetize that data. 

If you have a specific user’s mobile ID, as long as they’ve allowed apps to track some of their recent searches, then serving ads is still possible. There are some identity graphs that will allow other businesses to onboard API into their platform to find or match the audiences within the aspects of the identity graph.  

Due to the changes around cookies, it is no longer easy to collect data and the data becomes more fragmented. However, that’s not enough to disable the power of these third-party data assets and these third-party identity frameworks. What it does mean is that you as an agency, or advertiser, or media company need to think more critically about how you can strategically deploy the third-party data, knowing that it might be different going forward from how it’s been over the last 20 years. 

Right now, businesses are okay to use third-party data. However, in the future, they really need to prepare for the changes and what might evolve over time. Be receptive to using the source in a different way now. 

Companies Who Have Built Their Businesses Around Third-Party Data 

Companies who have built their businesses solely around third-party data will need to find ways to increase their data sets.  

As it becomes harder in general for everyone to buy more data, this means you need to be creative in how you increase your data and audience size. You have to collect more data to remain relevant and recent.  

Within the last five years or so, we’ve observed a number of acquisitions. Essentially, these third-party data assets are buying other companies, since those companies have data. Once they’ve bought the company, all the first-party data that the company owned is now first-party data to the third-party data assets. 

Since they’ve determined this loophole works for continuing to build their data collection, they’re continuing to buy other companies. However, there are only so many companies to acquire. What happens when the companies are all gobbled up? 

FullThrottle Leads the Way  

FullThrottle offers brands, agencies, media companies, and publishers a solution––collect and own your own data. With our technology, you never need to worry about which third-party data asset to work with, how you’re going to accumulate enough data to run efficient campaigns, or what will eventually happen to third-party identity graphs 

To discover how FullThrottle can help your business navigate the changes in AdTech, request your demo here.