Third-Party Data Usage Rebounds; How Advertisers Are Ramping Up in 2019

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Last year, Facebook removed their third-party Partner Categories feature amidst a push from users for more transparency across the digital landscape. Advertisers wishing to use third-party data had to find partners to help them access it, and as a result we immediately saw third-party data usage drop to almost zero.

At the same time, we started partnering with data providers like ODC, LiveRamp, and Experian so our advertisers could regain access to third-party data without having to vet and form data partnerships of their own. Usage slowly began to rebound at the end of 2018, and in the first quarter of 2019, data usage rebounded by nearly 300%.

When advertisers took a step back in 2018, they wanted to better understand their data options and the rules for uploading custom audiences to Facebook. The process had become more transparent, but it also became more complex. The costs associated with third-party data were previously factored in as part of the overall media spend, and with the removal of Partner Categories, advertisers had to understand which audiences were accessible from which providers and what the fees were for that data.

Over the past year, CPMs for third-party data campaigns were 11% to 51% higher than CPMs for campaigns that used native or first-party audiences. Third-party costs were highest in Q4 2018, driven by seasonality and an increase in independent third-party data usage following the removal of Partner Categories.

Average CPMs for Campaigns With
Native or First-Party Data vs. Third-Party Data

Over the past six months, many questions have been answered, partnerships have been formed, and tests have been run to determine the cost, value, and impact of third-party data across the advertising industry. As a result, usage has increased, and our advertiser data shows that 20% of Facebook advertising is now purchased using third-party data.

Third-Party Media Spend by % of Total

The rising trend is driven by advertisers who’ve concluded that third-party data access is a necessary cost that ultimately pays off for their business goals. Although we’ve seen third-party data rebound at a high level, there are still significant inconsistencies in usage across different regions and industries.

The Industry Impact of Third-Party Data Changes

Readoption of third-party data strategies has not been uniform across every industry. Since the changes took effect in October 2018, three industries have led the charge in third-party data spending. Automotive, financial services, and healthcare brands have been the main spenders on third-party data, growing from about half of overall spend to over 90%.

Percentage of Third-Party Spend by Industry

The quick jump to the new data system was a result of all three industries’ high reliance on third-party audiences. For these brands in particular, the enhanced audiences available through third-party partnerships provide access that the current native options simply cannot cover, such as car ownership or lease data for automotive brands. As a result, these industries are largely driving the third-party market at the moment.

For other industries, the new data landscape has provided an opportunity for marketers to take a test-and-learn approach to understanding the impacts of third-party audiences. This has resulted in more small-scale approaches that test very specific cases. Marketers should be cautious, however, because smaller, more tailored testing can deliver results that are too narrow for broad applications.

Third-Party Data Usage Varies by Region

North America continues to be the largest market for third-party data. Regulations around the world have played a large role in the regional availability of third-party data. Europe’s GDPR (General Data Protection Regulation) restricted advertisers’ access to data, slowing the growth of the third-party data market in that part of the world. Privacy regulations in particular are making compliant third-party data sources scarcer. As the market evolves, data providers are adjusting to policy changes, which might enable third-party data to again play a role in Europe, the Middle East, and Africa.

The Continued Impact on Advertisers

Third-party data improves performance for many advertisers, but those needs vary across industries. Our research found the brands that were quickest to adapt to the new system are those that relied most heavily on third-party data to reach their target customers all along. Those advertisers – in the automotive, financial services, and healthcare industries – are currently driving the majority of third-party data usage across social platforms.

While third-party data spending is currently skewed heavily toward a few industries, the need for a new process helped data providers and data management platforms establish clearer structures around fees and delivery. And now that marketers have a better idea of what data collection options are available to them, they have more visibility and control over their data spending than ever before.

Advertisers outside of the three main third-party data industries have been slow to adapt their data strategies, but in the past few months we’ve seen more brands begin to run small-scale tests. Marketers are continuing to see the value of third-party data products and are looking for the best ways to incorporate enhanced targeting into their advertising.

As the third-party data landscape continues to evolve, so too does its place within the larger Facebook advertising ecosystem. We’ll continue observing how marketers develop their data strategies in the months to come, and we’ll share updates as they happen.