Starbucks beats operators at own game
ISP’s, carriers and mobile service providers need new revenue sources and models. Content is one possible model. We have already an ISP that offers access to newspaper articles, cooperates with Apple iTunes and App Store, and conducts mobile advertising. They have also got millions of people to use mobile payment. This innovator is Starbucks.
Starbucks has for a long time offered free WiFi access in its stores in many countries, but of course they get users to pay in coffee, and partners pay too. For example, in the US Starbucks has offered WiFi with AT&T since 2008. Now they are moving to work with Google, which has promised to offer 10 times faster connections than AT&T. But Starbucks hasn’t been willing to offer only a dumb pipe to its customers. It also offers additional services with its partners.
Starbucks customers can read 15 Wall Street Journal and New York Times articles for free a day. This demonstrates how Starbucks has started to work with media and content companies. At the same time the Wall Street Journal has announced that they will offer limited access to their content through 1,300 WiFi hotspots in New York and San Francisco. These are examples of how data connection and content can be bundled to offer value for both parties.
Starbucks also works with Apple to offer a “Song of the Day” or “Pick of the Week” for free from iTunes. This cooperation includes songs and apps. Starbucks has also worked to display recent songs playing in the coffee shop for their WiFi users and offer users the opportunity to download the tracks. And Starbucks also sells video advertising inventory to its login site.
Starbucks has its own loyalty and payment card. Customers can download money from their debit or credit card to a Starbucks account. And they can then pay by using the card or their mobile app. The mobile app simply uses a 2D bar code and normal bar code reader to identify the user and take the payment from his or her account. It is not rocket science or NFC, but it is a mobile payment solution that really works. It is the most common mobile payment solution in North America. It has been estimated that the total amount of mobile payment transactions at Starbucks was $500 Million in 2012.
All these services are possible businesses for mobile carriers too (see The future of carriers' revenue). But how many carriers have got this kind of cooperation to actually work? Most of them are much behind Starbucks. Why is a coffee company more innovative in the data connection business than carriers, which have a lot of people to think of new innovations, strategies and business models?
One answer might the focus on business and customer experience, not on technologies or process optimization (see The best churn-management solution). Starbucks has wanted to create great experiences for its customers, from buying and payment to sitting in a table. They want to make it easy to pay, use time in a coffee shop and also find good reading and listen to music. And then they find partners that can help to implement this experience and look for business models that make sense for both parties.
Starbucks is a bad and good example for carriers. It is bad, because a coffee company has been able to do these things better than them. But it is good, because it proves it is possible to offer new things with data connections and make money with them. And once again it is a good reminder that carriers must focus on customer’s needs and experience, not on their own processes and technology.
Jouko Ahvenainen is serial-entrepreneur and co-founder of Grow VC Group (growvc.com), a new funding solution. In the 1990s Jouko worked for Nokia in Europe and Asia, and then lead the 3G practice at Capgemini globally. The last 12 years Jouko has been an entrepreneur and investor.