The Identity Crisis: First-Party Data’s False Promise to Advertisers

As the cookie crumbled and privacy walls rose, advertisers scrambled to find a new solution to replace their dependence on third-party tracking. Enter first-party data: the supposed savior of targeted advertising. Brands turned inward, convinced that collecting and owning their own customer data would solve everything.

It seemed like the perfect answer. After all, what could be better than building direct relationships with customers and cutting out the middleman? But the obsession with first-party data quickly created a new set of challenges, some of which were even more problematic than those it was meant to address.

The Allure of Ownership

On the surface, first-party data offered everything advertisers wanted:

• Control: Unlike third-party cookies, first-party data is collected directly from a brand’s own customers, giving them full ownership.
• Accuracy: Because it’s gathered from direct interactions — like purchases, newsletter sign-ups, and app usage — it seemed more reliable.
• Compliance: Since customers voluntarily share this information (at least in theory), it appeared to align with new privacy regulations.

The idea was simple: if you could collect enough data about your customers, you wouldn’t need cookies or walled gardens. You could create personalized experiences, target ads effectively, and measure success — all within your own ecosystem.

But first-party data is not a one-size-fits-all solution. While it holds tremendous value in certain verticals, for others, it is more of a burden than a benefit.

When First-Party Data Works (and When It Doesn’t)

First-party data can be a goldmine in industries where customer relationships are long-term or require personalization:

• Travel & Hospitality: Airlines and hotels use it to manage loyalty programs, customize offers, and predict travel patterns.
• Healthcare: First-party data enables sensitive, personalized outreach to patients within strict privacy guidelines.
• Automotive: Dealers and manufacturers rely on it to guide high-value purchase decisions and service reminders.
• Media & Telecom: Subscription-based models thrive on first-party data for retention and upselling.

In these cases, first-party data creates value by fostering deeper relationships, improving customer experiences, and driving incremental revenue.

But what about brands in consumer packaged goods (CPG), where customer interactions are fleeting and often mediated by retailers? Does anyone need an email from Oreo or Campbell’s Soup? The truth is, for many brands, the cost of acquiring and managing first-party data far outweighs its benefits. Without a direct customer relationship or a recurring purchase cycle, first-party data often ends up being more of a liability than an asset.

The Real Costs of First-Party Data

For brands that rely on first-party data, the promise of efficiency can quickly give way to an expensive reality. Collecting, storing, and managing this data is not free. It requires significant investment in:

• Data Infrastructure: From customer relationship management (CRM) systems to cloud storage, the technology stack can be prohibitively expensive.
• Media Execution: Using first-party data to target ads often requires integration with platforms that charge higher CPMs (cost per thousand impressions).
• Non-Working Media Fees: The additional costs of activating first-party data — such as platform fees and data onboarding — are rarely factored into return on ad spend (ROAS) calculations, but they can significantly impact the bottom line.

While first-party data can improve targeting precision, this efficiency comes at a price. CPMs for campaigns using first-party data are often inflated, and the process of activating that data eats into ad budgets. These “hidden” costs may not show up directly in performance metrics, but they are very real for brands managing tight margins.

For industries where margins are already thin — like CPG or retail — these costs can make first-party data strategies unsustainable. Worse, they can distract from more effective, less costly approaches like contextual advertising.

The Email Problem

One of the most visible byproducts of the first-party data obsession is the flood of marketing emails. Brands that capture email addresses lean heavily on this channel to re-engage their audiences.

This works well for subscription-based services or high-consideration purchases, but for low-touch products like snacks or canned soup, the result is often frustration. Inboxes are cluttered with irrelevant offers, and customers tune out.

This over-reliance on email marketing illustrates a broader issue: first-party data is only as valuable as the strategy behind it. When the focus is on collecting data for its own sake rather than building meaningful connections, it creates noise instead of impact.

A Narrow Focus on “Who”

At its core, the problem with first-party data is that it perpetuates the same flawed thinking as cookies: an overemphasis on identity. The obsession with “who” a customer is leads to transactional relationships, where brands focus on demographics and past purchases rather than context and intent.

This identity-first mindset creates blind spots. It assumes that knowing a customer’s name or email address will automatically reveal what they need or want. In reality, it’s often more valuable to understand why they are engaging with your brand and what they’re doing in the moment.

What Comes Next

First-party data isn’t useless, but its limitations and costs should force advertisers to think more critically about how and when to use it. For some industries, it’s indispensable. For others, it’s an expensive distraction.

The solution lies in shifting the focus from identity to context. Rather than chasing data for its own sake, brands can find success by delivering relevance in the moment. Contextual advertising offers a path forward — one that respects privacy, reduces costs, and prioritizes the customer experience.

In the next article, we’ll explore how contextual advertising is stepping into the spotlight as the solution to these challenges. Stay tuned for “The Identity Crisis: Contextual Advertising as the Privacy-First Solution.”