Verizon to focus on ad-based business model for OTT video offering

Verizon will employ an advertising-based model for its planned over-the-top mobile video service, which CFO Fran Shammo could become a multibillion-dollar business over time. And that's the major reason why the company just spent $4.4 billion to buy AOL.

Verizon will continue to offer on-demand video offerings that count against customers' data buckets, and Verizon will, over time, transmit more video content using LTE Broadcast technology (which Verizon calls LTE Multicast), mainly for live sporting events. The carrier's third business model for video will let Verizon monetize video content via targeted advertising. "People will enjoy that product and they won't necessarily enjoy that through their data bundle," Shammo said during an appearance at the J.P. Morgan Global Technology, Media and Telecom Conference. He noted that in some ways the video product will be similar to sponsored data plans, but at its heart it will be advertising-based. Verizon has spent the past few years building and buying video assets, including the content delivery network, EdgeCast Networks and the OnCue interactive TV platform from Intel. "The piece that we were missing was the ability to have an ad-tech platform to insert the advertising," Shammo noted. He said that when Verizon surveyed the market, it felt that AOL had one of the best-in-class ad-tech platforms available.