The Battle for Data is Over. Everyone Wins with Zero-Party Data (ZPD)

By Paul Neto, Measure Protocol

Consumer data is the latest battleground for companies to win dominance over their competition. They are clamoring to build honeypots of data that can be leveraged for their own benefit and purposes. In general, today, data is owned and controlled by companies. It is frequently unclear to consumers when and where data about them is being captured or used. Even when they are aware of its usage, they are being compensated poorly or not at all and have to trust the companies using it to keep it private.

Jones and Tonetti observe that data is nonrival. Unlike most economic goods, data is not depleted through use. Because of this, there are large social gains to sharing data. Many companies, however, are generally incentivized to hoard the data they (ostensibly) own. For many, proprietary data is the basis of their business model and a key competitive advantage. This is increasingly changing as new paradigms and legislation around data ownership and usage are making it into the mainstream.

The emergence of zero-party data is the next step to bringing this concept of data sovereignty into practice. The depreciation of cookies accelerates the importance of zero-party data as marketers, advertisers and technology providers scramble to future-proof their businesses.

But what is zero-party data exactly and why does it matter? As first described by Forrester, Zero Party Data is “data that a customer intentionally shares with a brand, which can include preference center data, purchase intentions, personal context, and how the individual wants the brand to recognize her.” This comes down to situations in which consumers willingly share data directly with a brand.

How can we categorize different data types?

This scenario brings a few key concepts at play, including things like clear consent, trust, and data ownership. Before we delve into these, let’s look at how the world currently thinks of data.

First-party data is what most websites, applications and other systems collect directly from a user as they engage across the digital ecosphere. Think of first-party data as that which a company can collect from their own proprietary sources (e.g. website traffic, sales data) and may be used for customizing experiences. Second-party data is user data (typically sourced from other first-party data) that an organization buys from another party – mailing lists, for example. Third-party data is typically data that is bought and sold by organizations that have no relationship with the consumer.

On the other hand, as mentioned, zero-party data is data that the consumer willing to share. Ownership is the fundamental difference between zero-party (owned by consumers) and first-party data (owned by companies). Companies own first-party data, though consumers own the zero-party data. This notion is further supported by legislation around the globe that protects an individual’s personal data by enforcing things like the right to have data collected only by consent, the right to correction and erasure, and real penalties for non-compliance.

Why is zero-party data important right now?

Consumers are tired of giving away their data for free. They are worried about how it is being used and if it is remaining secure and private. Our recent research shows that an overwhelming majority expressed that they “are wary of how organizations and corporations are collecting their data” (91%) and that they “pay more attention to privacy risks today than compared to a year ago” (85%). This is backed up by other secondary research, which indicates that 71% of U.S. consumers worry about how brands collect and use their personal data.

They are also waking up to the fact that their data has real value, and are demanding fair compensation for its use. In fact, our research showed that 85% of people prioritize compensation – such as fair rewards and incentives – for sharing information.

Couple this consumer awakening with the looming “cookiepocolypse” and you have an environment in which zero-party data has become essential. Many businesses rely on collecting third-party data about consumers via cookies, which act as “trackers” monitoring activities such as shopping, video consumption and browsing the internet. As cookies phase out, so too will this passive form of third-party data collection.

Then how do you get zero-party data in this kind of environment?

Trust, transparency and accountability are the essential ingredients for the future of zero-party data collection. In fact, we found in our research that 77% of people would share more data if they felt that the organization asking for information was more transparent.

We have also seen how this paradigm works in real life when these principles are prioritized. As we build relationships with consumers in the trust-centric MSR app – our own proprietary consumer data marketplace- we have seen a drastic increase in their willingness to share new forms of data, and data of increasing sensitivity (e.g. purchase data), increases as well. In a recent study, 78% of MSR community participants said they were likely to share account-level data with brands and researchers in this kind of trusted environment. This contrasts with other studies that indicate a full one-third of people won’t share any data at all from their internet-connected devices.

While many industries and companies are trying to figure out what to do about the looming cookie crisis, it may already be too late. Those who have adopted a consumer-first approach, implemented privacy by design, and adhered to unprecedented levels of transparency, all while compensating consumers with value for their data approach, are well on their way to the next generation of embracing data in an ecosystem where everyone wins. While we “industry-ites” call this zero-party-data, it’s just consumer data in its purest form or natural state.

About the author: Paul Neto is currently Chief Marketing Officer at Measure Protocol, a blockchain-powered economy for human-generated data. With a background in market research, digital advertising, data technologies and consumer insights, Paul is passionate about how technology can change the consumer data landscape.