Wi-Fi Hotspots: Avoiding a Dotcom Redux

By Scott Smith  |  Posted 2003-08-08

Wi-Fi Hotspots: Avoiding a Dotcom Redux

For those with the experience of having watched numerous new communications technologies take root in the big boom and even bust of development over the past decade, it all seems a bit too familiar. With so many other sectors down in the dumps at the moment, Wi-Fi has come along to provide industry veterans and watchers alike a desperately needed shot of excitement, activity, employment, and possibly even revenues.

But as the money flows, the ad machines crank up, and the marketers of the world stay busy creating new logos and grab the remaining few fun names for Wi-Fi start-ups, no one is really checking to see who is on the other end.

Who are the heavy users of Wi-Fi? How much segmentation is there? What do these hordes of promised users want? Is it an army of road warriors, a wave of casual Web surfers, or a mixed bag of many user types? How much physical business is hotspot deployment creating for the facilities owners? How do operators differentiate their marketing and pricing, if all they know about are traffic volumes?

Where do we enable VoWLAN, and where do we give service away for free? How can this industry take root with only secondary ways of gathering business intelligence about levels of spending from billing, and patterns of usage from network operations? In short, how can the Wi-Fi "industry" take the big step forward from spray-and-pray hotspot deployment and marketing based on traditional service and equipment marketing placement, and plan business strategies based on detailed, segmented intelligence about this new service area?

At the rate hotspots are being deployed, now thousands per month globally, there can be little sustainable argument that hotspot coverage is proceeding with hard ROI data to back up the patterns. I have spoken to a number of operators who, at the moment, have little else to rely on except visual observation ("I saw a few groups of co-workers in here over the past few weeks"), raw network traffic and sign-ons (if they are captured), and a loose correlation with food and drink receipts. Beyond that, no one seems to be tracking and analyzing patterns. As a result, they have a hard time putting a figure on how successful their customers investments in hotspots have been.

A representative of one company touting its high rate of hotspot deployment told me with a straight face recently that business intelligence doesnt matter to them. "We set up hotspots for our clients, and who uses them is their problem. We just put them out there, and we will worry about making money later." Re-read that last statement: we will worry about making money later. Either a mad oil-rich prince secretly funds this and many other companies, or they havent looked around lately and realized that the industry is in the state it is in precisely because of that approach over the last five years.

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Pinpointing Usage

One could assume that hotspots in airports and hotels will attract business users, while students and younger Web users, will hit cafés, bookstores, and fast-food joints. However, the lines have already started to blur significantly, with business users stopping in a downtown McDonalds, Starbucks, or local bar fitted with Wi-Fi, while people who normally hate road warriors as a group are popping up in hotel lobbies and airports to send that quick picture to friends or e-mail home. One location might be investing in quality customer support (such as business hotel chains), while another is staffed by devil-may-care baristas. At the moment, there is no empirical way to know which one your good business customer just pitched up in.

How do you direct targeted marketing, investment, and value-added services when the picture is so muddled? Wi-Fi usage is largely intent-driven, so more and more people will use it when and where the need arises, not just where the customer segment they belong to is supposed to use it. Simply correlating billing data and the information customers provided when they signed up for the service (if they registered) wont tell what the business trends are. It will only tell you whom you lost when its too late to do anything about it.

At the moment, the hue and cry is about whether there are sustainable business models for Wi-Fi. Analysts fingers already point to low average session figures at many hotspots, saying for the moment saturation is imminent. Only properly targeted, attenuated services will succeed in an environment where the free-lunch syndrome that killed so many fixed-line ISPs and portals is again taking root. Players in this market need to invest not in one-off retrospective studies, or even as much in predictions of future growth.

All of these growth forecasts will get derailed when consolidation of one-size-fits-all service packages strikes and the market reconfigures. The big hardware and software companies that are counting on the market for mobile solutions enabled by widespread Wi-Fi need to step in and insist that we find a better way of quantifying the patterns of usage and establish future demand trends if they want to keep their shareholders happy down the road.

What is needed now is a dynamic view into ongoing customer usage, and some smart correlation of data to show where the better Wi-Fi watering holes are. What little money has appeared recently to back this market in a down environment must be spent wisely now understanding the market demand in an ongoing fashion, not thrown about in a speculative land-grab. It happened eventually in the fixed-line Internet market with the advent of new metrics and tracking methodologies, and it is only just beginning to happen in the wireless broadband world, where many more variables of service and usage exist.

Addressing these questions through a tool such as Public Hotspot Monitor will spark some recognition that quality and suitability, not quantity, of hotspot build-out will be the key. Failure to address them will result in another missed golden opportunity to create a sustainable marketplace.

Scott Smith is Managing Partner of Cumulus Research Partners, a London consulting firm that specializes in helping companies understand the social impact of new technologies.

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