Public Wi-Fi hot spots have been popular for about eight years. During that time, companies providing the service have been groping about, trying to figure out how to monetize it. The dominant model to date has been to simply charge for it. Pay us US$20 a month, and you can log in at any of our many locations.
But this week, a kind of "tipping point" has been reached, and now -- instead of being rented for a fee -- Wi-Fi will increasingly be given away to motivate customers to buy other goods and services.
Wi-Fi is now just like the free toaster that banks used to hand out for opening a new account.
The toaster model
In October, I predicted that Starbucks would start rolling out free Wi-Fi access within one year. I didn't know how it'd do it, but reasoned that it would have to because Starbucks is in a desperate competition for the morning breakfast crowd against the likes of McDonald's, which is also being more aggressive with Wi-Fi access.
Starbucks is leading a transition from Wi-Fi-for-money to Wi-Fi as a lure to get people to spend money on other things.
The Starbucks offer is a stroke of genius. In the US Starbucks and AT&T will give you two hours of free Wi-Fi per day, but only if you use a Starbucks card. If you want more than two hours, you can pay US$19.99 per month, which also entitles you to unlimited Wi-Fi offered by AT&T at some 70,000 hot spots in 89 countries. It not only trumps other sellers of sugar and caffeine by offering free Wi-Fi, but it also pushes its lucrative Starbucks card and provides an upgrade path for people eager to hand over money in exchange for unlimited access.
Starbucks cards benefit Starbucks in three ways. First, people with Starbucks cards in their pockets are probably more likely to choose Starbucks when there are other nearby alternatives. Second, by getting millions of customers to pay in advance, Starbucks gets more cash upfront (rather than waiting until people actually get their coffee). Last and best is that cards get lost, stolen or forgotten. When that happens, Starbucks gets to keep the money without supplying anything.
The TV model
Like television, Wi-Fi is increasingly given away in exchange for ads. It's an unproven model -- to the best of my knowledge nobody is making huge profits on this approach yet.
JiWire's "Ads for Access" program gives some users free Wi-Fi access at hot spots normally paid for by others, but in exchange for viewing ads over those connections. The company has recently (and wisely) started targeting iPhone users.
Wi-Fi is free at some airports. One of the largest is Denver International. In addition to advertising, the FreeFi Networks Wi-Fi access is subsidized by Disney-ABC television show rentals, which users can download over the connection.
A company called HypeWifi funds its free Wi-Fi access through advertising, but also by doing "market research" for advertisers for a fee. Users logging onto a HypeWifi access point may earn their access by answering a question or two, which is aggregated and presented to the sponsor, along with demographic information about the users.