Verizon's Customer-Rewards Program Comes With Data-Tracking Built In

New Initiative Aimed At Keeping Subscribers Around and Beefing Up Ad-Tech Offering

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Soon, lucky Verizon subscribers may win NFL tickets -- and the carrier may tell advertisers the moment those subscribers cross the gates, and where they were before the game.

Last Thursday, Verizon Wireless launched "Smart Rewards," a loyalty program that offers its 100 million-plus subscribers discounts on retail, dining, hotels and entertainment. To sign up, customers must also enroll in Verizon Selects, the carriers' initiative that tracks subscriber's location and Internet usage on mobile apps. Enrollees can later opt-out of Selects, a company spokeswoman said.

Over the weekend, Verizon ran its first televised promotion for the program, a 30-second spot narrated by Ty Burrell, who plays Phil Dunphy on ABC's "Modern Family." (The spot also features a tablet, the device that netted Verizon 82% of its new subscribers last quarter.)

Smart Rewards is a "very unique, first-of-its-kind carrier rewards program," said Adria Tomaszewski, a Verizon spokeswoman. Subscribers rack up points by paying their monthly bill (extra points for going paperless), upgrading to a smartphone, keeping tablets connected or adding new lines (among other things). Points can be used to net discounts offered from more than 200 brands, travel rewards from over 26,000 hotels and NFL game tickets. For Verizon, the nation's largest carrier, the program is a bid to lock in subscribers in the face of peaking smartphone penetration and discounted offerings from smaller rivals T-Mobile and Sprint.

And it's a chance for Verizon to beef up its burgeoning ad-tech business. Smart Rewards users can un-enroll from Selects, through a separate web process, the company said. But they get fewer goodies: Smart Rewards members who stick with Selects receive 2,500 bonus points.

The Verizon spokesperson stressed that Smart Rewards, which is run under the marketing department, is separate from Selects, a two-year old, consumer opt-in program run by Precision Market Insights, the company's marketing arm. In May, Ad Age reported that Precision Market Insights launched a "cookie-like" tracker for serving mobile ads, in partnership with four ad-tech firms.

For now, advertisers will not receive the data from Selects, which Verizon said is not commercially available.

While the location-tracking requirement has drawn some criticism, Jules Polonetsky, executive director and co-chair of the Future of Privacy Forum, suggested Verizon's approach is more straightforward than other programs or applications that bury location-tracking notifications in terms and conditions.

"Too many opt-ins are bait and switch," he said, speaking with Ad Age at last week's Place conference which focused on location data-related topics. He also said that if Verizon offered an opt-out from the location-tracking in the same sign-up process that initially requires opt-in, it would defeat the purpose of building a loyalty program database, the main goal for the carrier. "The point of the project is opting in lets your data be used to get their deals."

In addition to the televised spots, Verizon will promote Smart Rewards with an email and direct-mail campaign beginning in August. Each will continue "for the near future," Ms. Tomaszewski said. She did not comment on the details or the agencies involved.

Verizon works with McGarryBowen, New York; McCann Erickson Worldwide; Moxie, Atlanta and New York; and several other agency partners.

In 2013, Verizon's media spending was $1.24 billion, a 12.9% annual drop, according to the Ad Age DataCenter. As a percentage of revenue, the company's total ad spend, $2.44 billion, declined to its lowest level since the company was formed in 2000.

Last week, Verizon reported sales of $31.5 billion and an additional 1.4 million contract customers during the second quarter.

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CORRECTION: An earlier version of this story incorrectly stated that Verizon Selects tracks subscriber Internet usage on desktop. The program only tracks mobile usage.

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