Ad-Supported Wi-Fi: Back to Basics

Ever notice when you absolutely need Wi-Fi service, there’s none to be found — even in bustling Manhattan? Consider a visitor’s trip to Greenwich Village in mid-October; paid Wi-Fi service at McDonald’s was down, and wireless access at the Washington Square Starbucks was limited to people affiliated with New York University. Instead of a hotspot, the visitor got only a cold shoulder.

With news of several ad-supported Wi-Fi initiatives, there’s hope access will improve in metro areas. Even though it’s too soon to tell if these ventures will be viable, they show promise because they’re built on lessons learned from those who’ve stumbled before them.

CBS said last month it’s bringing ad-supported Wi-Fi to the CBS Mobile Zone, a 20-block area spanning from Manhattan’s Times Square to Central Park in a six-month trial. CBS Outdoor billboards, 5 to 50 feet above the ground, and New York City Transit-owned panels or digital signs, located above subway station entrances, have been fitted with transmitters. CBS is providing free or low-cost routers to local businesses so customers can access the Internet.

In another venture, AnchorFree, based in Sunnyvale, CA, has developed an ad network and service that enables hotels, coffee shops, and other businesses to offer ad-supported Wi-Fi service. As of early December, AnchorFree was providing its service to about 700 locations and had contracts with another 9,300 in the pipeline. Advertisers include Ford, American Express, TripAdvisor, and Whataburger.

For advertisers, these initiatives promise the ability to serve up ads based on location. It will be the ultimate in hyper-local advertising — if it works.

Plenty of skeptics wonder if it will. “CBS Outdoor is an advertising sales organization that’s using this experimental outdoor network as another means for creating electronic billboards. It’s a nice experiment. I don’t know if it’s a business,” says Berge Ayvazian, chief strategy officer at Yankee Group, a consultancy.

Recent history hasn’t been kind to large-scale community Wi-Fi projects. Most notable: EarthLink’s decision to dump plans for a Wi-Fi network it was to develop with Google in San Francisco. Google continues to operate a Wi-Fi network in its hometown of Mountain View, CA, which is free to all city residents and businesses.

A project launched in November 2006 to roll out an ad-supported Wi-Fi network in Portland, OR, appears to be at a crossroads. MetroFi, the company building out the service and an ad network, reportedly said it was seeking additional funding from its investors or the city, according to one blogger writing on OregonLive.com.

Advertising can only cover a small portion of the costs to provide high-quality Wi-Fi, says Dan Lowden, VP of business development and marketing at Wayport. The Irving, TX, company manages over 12,000 Wi-Fi hotspots, including those found at McDonald’s. “Through ads, you can cover a small portion of that cost. It helps, but in our view it’s more of a complement, not a way to fund the whole network,” he says. Wayport’s clients typically charge for Wi-Fi access, though some hotels offer it free to guests.

Why are CBS and AnchorFree still betting on ad-supported Wi-Fi despite these challenges? Here are a few reasons.

Love That iPhone

Even Lowden says more people on Wayport’s wireless network are accessing the Web via the iPhone and other devices. “We see lots of iPhone traffic on our network, plus more and more consumer devices — gaming devices, phones, cameras,” he says.

“The Wall Street Journal” backs up Wayport’s experience: iPhone owners were responsible for nearly 1 of every 1,000 Web page views last month, the newspaper said.

As such, CBS and others are anticipating outdoor mobile use will increase. “We’re preparing ourselves for the future,” explains Cyriac Roeding, EVP at CBS Mobile.

Updating Approaches

Ad-supported Wi-Fi networks typically serve an ad on the landing page. “Our brief history doing this reveals that ‘landing page’ advertising alone simply doesn’t even get close to paying for the infrastructure/maintenance costs associated with supporting Wi-Fi access,” writes Mark Smith, AnchorFree’s EVP strategy and products. As a result, the company inserts ads on subsequent pages as well, showing 60 ad pages on average to each user.

In another twist, CBS designed its landing page to look like a social network and city guide. It’s partnered with Ning to create a social network and with Yelp to obtain user-generated reviews of restaurants and other businesses in the mobile zone.

Smaller Is Better

While the San Francisco project’s troubles have gotten lots of attention, far smaller endeavors in suburban downtown areas are taking off with modest price tags, some as low as $15,000 to $20,000, says Joanne Hovis, president of Columbia Telecommunications Corp. (CTC), a consulting firm that provides communications engineering services to public sector and nonprofit clients. “In a targeted, small-scale way, [Wi-Fi] is a very flexible, inexpensive, and quick technology. Targeted hot spots or hot zones that build incrementally are one of the directions we see in the future,” she says.

In launching its mobile zone, CBS maintained a tight budget and a six-month schedule to roll out 20 hot spots. “We’ve done this on a start-up budget,” Roeding says, declining to disclose costs for labor, hardware, and software.

It’s All About Location

The value of commercial and residential real estate is tied to its location. So too are ad-supported Wi-Fi projects.

Take CBS Mobile Zone in midtown Manhattan. “That’s probably one of the most desirable markets in the country, if not the world,” says Hovis. While an ad-supported model shows potential for this region, Hovis is skeptical about its viability if it were to be rolled out citywide.

Challenges persist. “Like any emerging ad network, we have all the same challenges in third-party measurement and accountability,” says AnchorFree’s Smith. Plus, Wi-Fi providers must compete with an increasing — and perplexing — number of advertising venues, from social networks to the digital displays now found in taxi cabs.

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