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Verizon Wants You to Have Free Data, But There Is a Catch

By Daniel B. Kline - Jan 26, 2016 at 10:00AM

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The company is trying a new marketing program that might be good for subscribers and advertisers if it's handled well.

In recent years, the line between content and advertising has blurred.

For example, because Americans are tuning out or skipping traditional television ads, companies have moved into more subtle ways of putting products in front of the masses. In some cases it's subtle, like the car that James Bond drives being a paid product placement in some films, and in others it's really obvious, like the prominent branding on the soda cups sitting in front of the American Idol judges.

It's a slippery slope, which has savvy TV viewers wondering if Sheldon inherently loves Mr. Spock or the producers of the latest Star Trek movie simply paid for the character quirk. This type of ad buy has made it harder for viewers to know when they're watching an ad or a paid placement, and that type of native advertising has made its way into other media as well.

It pops up on the Internet sometimes in the same way it does on TV, and other times in the form of sponsored content. These articles look like the rest of the content on a given site and may even be written by its writers (or someone who can mimic their style), but they are ads, not content.

Now, this type of sponsorship is finding its way to the wireless world, with Verizon (VZ 0.83%) pioneering a new type of sponsored content.

What is Verizon doing?
A big opportunity exists for wireless providers to exempt certain content from their subscribers' data limits. T-Mobile (TMUS 1.98%) has done this well with its Music Freedom program, which allows users to stream from a number of popular services without counting against their data cap. The low-priced wireless carrier has attempted to bring the same thing to video with its Binge On service, which offers DVD-quality video, but not HD, also not counting against data caps.

In both of those cases, T-Mobile's offer is open to any music or video carrier that wishes to participate, which means meeting delivery standards the carrier sets. What Verizon is doing is something else entirely. It's giving people free data, but it's much close to the paid placement model.

Called FreeBee Data 360, the program allows sponsors to pay for consumers to get access to their content without having it count against their data allotment. Under this model, advertisers pay on a per-gigabyte basis and give consumers access to all or part of their content. Think a recipe site giving free access to holiday recipes or a news site paying to let users sample its entire product.

The FreeBee icon. Source: Verizon.

In addition, Verizon is making a second model available that's more of a directed-content approach. In this case, "content providers can sponsor specific consumer actions on a per-click basis, free of data charges for subscribers -- including mobile video clips, audio streaming, and app downloads. " the company wrote in a press release.

This could be as clever as a broadcast network that makes a pilot available to users with no data use incurred, or as clumsy as a company that pays for people to get data-charge-free access to their new deodorant commercial.

Both plans are designed to push Verizon customers into looking at ads, or sampling products, websites, or apps, based on what the content company has paid for. 

It's a smart system, and Verizon is even marking the pay-per-click campaigns where content companies give access to their own content with a bee icon. That serves to tell users that they won't incur any data charges by clicking on the content and in a de facto fashion lets people know the content is sponsored.

Is this a good thing?
Just like on television or the Web, this is a good thing, as long as it's clear to consumers what it is. Verizon is giving users free access to content they may actually want, but it's also enticing people into clicking on paid content, as FreeBee only works for advertisers if people actually use it.

This is not T-Mobile offering full access to a slew of audio and video services. It's very targeted advertising that may not look like that to consumers. There are ethical lines here, but the real question comes down to transparency. Ads should be marked, and sponsored content is advertising.

Verizon may potentially have a service where consumer and advertiser needs line up. It can charge money to give people content they're willing to sample because it doesn't count against their data cap or they may have consumed it anyway. That's a win for everyone involved, as long as what's happening is very clear to subscribers.

Daniel Kline has no position in any stocks mentioned. He is mildly afraid of bees. The Motley Fool recommends Verizon Communications. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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