How Verizon Will Use Targeted Ads and ‘Non-Subscription Access’ to Power OTT Product

Verizon will rely on targeted advertising to offer consumers who order the over-the-top video service it will launch this summer discounts on both wireless data and video programming, a patent application obtained by The Donohue Report indicates.

“An advertising-based access model, which is referred to herein as ‘non-subscription’ access to the network, permits sponsors to pay for a user’s access to a wireless network instead of the user. Thus, non-subscription access grants the user free (or reduced cost) network access, and in return the user agrees to accept advertising and/or to an advertiser’s terms prior to gaining access,” Verizon states in a patent application that appeared in the U.S. Patent & Trademark Office database on Thursday.

The Vertere Group CEO Tim Hanlon said Verizon could be poised to use loyalty programs such as Verizon Smart Rewards (available to Verizon Wireless subscribers) and Verizon My Rewards+ (for FiOS customers) to offer discounts on programming to subscribers who opt in to receiving advertising based on usage data.

Verizon currently offers subscribers that register for its My Rewards+ program points that can be redeemed for prepaid Visa gift cards, along with gift cards from advertisers such as Starbucks, Macy’s, Target, L.L. Bean, Exxon Mobile and Dunkin Donuts.

According to the patent application titled, “Content Supported Wireless Communication Service,” Verizon wants to use loyalty programs to subsidize the cost of both data and multiscreen video content.

“The user may also be presented with options for selecting from multiple sponsors, choosing among various Over The Top (OTT) services and their corresponding sponsors. Selection of sponsors associated with network carriers may provide tie-in benefits, such as being placed on a ‘Preferred System Access List,’ or a ‘Hierarchal List of System Access.’ Alternatively, selections may be based on QoS [quality of service] considerations, where different levels of QoS may be provided based upon the amount of advertising the user is exposed to, and/or the amount of activity the user partakes with interactive advertising content of a particular sponsor,” Verizon states in the patent application.

Verizon has made several acquisitions in the last three years that could help it deliver targeted advertising and programming to subscribers watching video on mobile devices and IP-connected TVs, including America Online, Edgecast, upLynk and Intel Media’s OnCue platform. It is expected to deliver video programming using LTE broadcast and unicast delivery to Verizon Wireless subscribers, and the company has said it will also sell subscription video content over the top of broadband networks owned by cable rivals such as Comcast and Charter Communications.

The Carmel Group CEO Jimmy Schaefler said he expects that other pay TV distributors will adopt similar strategies to Verizon involving ad-supported subsidies for content and access.

“Verizon seems to be pushing the future trend evolvement once again,” Schaefler added.

Patricia Chang, Verizon Wireless associate director of West Area digital planning, is named as the lead inventor on the patent application. Verizon profiled Chang in this YouTube video that it posted earlier this year.

While officials at Verizon declined to discuss whether rewards programs could be used to subsidize costs for its OTT product, spokesman Alberto Canal noted that the rewards programs are popular with subscribers. “We won’t speculate on what we might do, but I can tell you that we regularly examine the program, study customer feedback, etc. and the feedback to date has been overwhelmingly positive,” Canal wrote in an email to The Donohue Report Friday afternoon.