Boingo's Cloud Nine deal shows how public Wi-Fi is changing

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Wi-Fi service provider Boingo Wireless' acquisition of Cloud Nine Media is part of its ongoing effort to make a bigger play in delivering sponsored Wi-Fi service for free to end users.

The transaction, whose value was not disclosed, reflects the Wi-Fi industry's evolution into a service used by consumers as much as businesspeople. As Boingo has extended its managed Wi-Fi service into fast-food restaurants, shopping malls and related venues, the company has seen a rise in the expectation of free-to-the-consumer Wi-Fi, said Christian Gunning, Boingo vice president of corporate communications.

"Sponsored-access is going to be an increasing part of how we deliver service in any number of venues, whether it's the only type of access or one of several types of access in that venue," he told FierceBroadbandWireless.

Free Wi-Fi is a misnomer, as the necessary network equipment and service provision are far from free. In order to deliver Wi-Fi service at no cost to customers, venues must either pay for the service themselves or find sponsors and advertisers to fund the costs.

There has even been a shift in the airport Wi-Fi space, long occupied by business travelers willing to pay for Wi-Fi access. Now the expectation is that there will be a free component—such as 30 minutes of gratis basic service that may be sponsored—followed by a charged-for premium service after the free period expires, said Gunning.

Cloud Nine, which has eight employees and will operate as a wholly owned subsidiary of Boingo, provides Wi-Fi sponsorship opportunities and location-based advertising at more than 6,000 sites, including airports in Seattle, Charlotte, N.C., and San Jose, Calif., as well as hotels, bars, restaurants and recreational areas in the United States and Canada. The Wi-Fi sponsorship model allows advertisers to sponsor free access in exchange for guaranteed engagement with special offers, video placements, rich media and more. Campaigns can be targeted by venue type, audience segment or location.

Cloud 9 excels at providing user data to help sponsors assess advertising impact because it was founded by Sebastian Tonkin, who helped build Google Analytics, said Gunning. Tonkin will become Boingo's director of advertising products and strategy.

Boingo has been dabbling in adding sponsorships to its managed hotspots, with notable efforts being the Google Offers sponsorship of Wi-Fi service in New York subway stations and American Express' Wi-Fi sponsorship in certain airports.

The Wi-Fi service provider worked with an advertising partner on an outsourced basis. But because sponsorships are becoming an increasingly important part of Boingo's business, the company decided to bring that function in-house. According to TechCrunch, that now-jilted outsource partner is JiWire, whose contract with Boingo is slated to expire at year's end.

Soliciting advertisers to back Wi-Fi service is not a new concept. However, the Wi-Fi industry's earlier efforts to build an ad-supported model fell through because ads were sold on a CPM (cost per thousand), said Gunning. "If you're selling on a CPM basis, there isn't enough money in advertising to cover the cost of Wi-Fi."

However, selling on a sponsored basis, or cost-per-engagement (CPE) basis, gives an advertiser an extended engagement period in which it can intimately interact with a customer. By having a consumer watch a video or complete a survey, for example, in exchange for free Wi-Fi access, an advertiser can control that customer's attention for 30 seconds to a minute or more, which is something sponsors are willing to pay more for, he said.

In addition to retail Wi-Fi networks, Boingo resells Wi-Fi access on a wholesale basis to operators such as Korea Telecom and LGU+, for which Boingo's worldwide presence provides the equivalent of an affordable international data roaming solution, said Gunning.

As mobile operators increasingly pay data-offload fees to third-party Wi-Fi service providers such as Boingo, there may be further Wi-Fi sponsorship opportunities as the carriers seek ways to cover their offloading costs.

Gunning said industry efforts around Hotspot 2.0 and Passpoint, which are aimed at enabling mobile devices to seamlessly transition from the cellular network to Wi-Fi hotspots, will likely boost Boingo's wholesale access business though its retail business may see a corresponding slide. "You see a heavy shift to the wholesale business, but you see massive growth in the size of the market, and the number of people connecting. So you trade off margin for volume," he said.

For more:
- see this Boingo release
- see this TechCrunch article
- see this AllThingsD article

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