Monday, April 17, 2006

And now, a word from our muni WiFi sponsor

A little-noticed item that came from the S.F. muni wireless bid process was a plan by a team comprised of SeaKay, IBM and Cisco. Cities, take note of this before you auto-lock into the concept that every private-ownership model for the network has to be driven by ad sales. It’s early enough in the game to consider other potentially better business models.

IBM and Cisco teamed with Seakay, a consulting firm that helps non-profits bring technology to underserved communities. Their business model proposed to cover the deployment and on-going operations cost of the network with corporate and philanthropic contributions (alla NPR), and direct sponsorship. Other cities are considering this option.

You can make a strong case for sponsorships. Sponsorships are not the same as ads. When Ford Motors runs a TV ad, various people see it among many other ads at various times. Impressions are fleeting, brand building is slow and there’s not much prospect interaction with the advertiser. You often have to run a lot of ads to get good results.

But if Ford sponsors the annual Lowly County stock car championship races, they “own” the event. Every ad promoting the races is an ad for Ford. Every attendee sees the Ford name all day, and they might get a Ford-branded bag of goodies to take home. When the races are broadcast on TV or radio, every 5 minutes your subconscious is pinged with “here at the Ford stock car championship.”

With muni WiFi networks, sponsorship is ownership of customer relationships without the hassles of owning the network. For the city or service provider, finding several sponsors is a guarantee of huge blocks of capital. Would you rather ask 1000 businesses for 100 each, or ask one business for $100,000? Vendors build better networks because once you lock in a few sponsors, vendors aren’t worrying so much about getting enough ad sales or subscriptions to recover their investment.

Let’s list the reasons why this makes sense – and potentially many dollars. (E-mail me if you want some scenarios for how muni wireless sponsorships can work –

Sponsorships are more attractive for some companies. Though companies obviously buy ads because they work, muni WiFi ads compete with local newspaper, radio, etc for their ad dollars. Does being rotated in with 100 other WiFi advertisers offset taking money from other media? But if you own the identity of the network the same way Staples owns the identity of the Staples Center in L.A. that’s home to the Lakers, Kings, Clippers, Sparks, Avengers and hundreds of events a year, you reap *huge* amounts of 24/7 publicity, promotion and ad impact.

Interactive ties that bind. There is no (and I mean zero) end to the ability of a sponsor to create content and interactive online features that 1) draw repeated use of the network, and 2) wrap users in a cocoon of daily relationships with the sponsor that users actively pursue.

If I’m Nokia and I own a network, I have a whole city of present and future gamers for whom I can create mini-games, special content, group chat areas, etc. If I’m the city sports franchise, the network’s an awesome channel for delivering content to create and maintain rabid fans. The local health care conglomerate? It’s all about cradle-to-grave health and wellness content plus personal reminder alerts for medical check ups.

Perfect complement to other funding. Secure block grants from federal or state sources (i.e. Homeland Security) to build out your network for public safety applications. Then bring in a sponsor to provide funds to enhance the network for public access and other general public uses. You get a very solid core network developed then enhanced and maintained without a lot of financial risk.

Mix & match your sponsorship sources. Bring in the philanthropic sponsors to fund part of the network, plus the content, community and business portals, applications and other elements necessary for digital inclusion or economic development programs. Look to a company such as Chevron Energy Solutions (a unit of Chevron Oil) to sponsor part of the network for public works applications, as is the case in Burleson, TX

Chevron Energy Solutions markets consulting services to cities that help them make better use of water, energy and other utility resources. They decided to underwrite some of the expense of Burleson’s network that will facilitate automated meter reading. Chevron get exposure that helps them sell services here and to other cities.

The bottom line

There are a bunch of cities that don’t have, or don’t want, to spend the money for municipal broadband, yet they all want broadband. You have the vendors, many of them relatively small businesses, upon which cities are putting all or most of the financial responsibility for the network. Building a useful network requires money. Maintaining and upgrading it requires yet more money (see my following post on the economics of ad sales).

Sponsorships offer a practical path to get the money that cities don’t have, and that vendors need if you want them to build and maintain a network without going out of business. The challenge is that this requires creativity, sweat equity and going against the current popularity of the ad-driven business model. So much easier, it seems, to bring someone in and let them deal with everything. The smart cities, however, should at the very least seriously explore the sponsorship option.


At 8:37 AM, Blogger Pratik Dattani said...

I'm confused about one thing: surely there are Starbucks, McDonalds and many hotels in any potential muni wifi areas that charge for the priviledge of using wifi? If there was free-for-all municipal wifi, would there have to be some kind of compensating mechanism for these companies. I can imagine they would be pretty annoyed.

For example, could the muni wifi be capped at a certain speed, so that Starbucks et al do not automatically lose all their custom?


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