Free WiFi Still Pays Off

from the skinny-latte-and-a-t1 dept

Fri, Jul 28th 2006 9:24am — Carlo Longino

As long as coffee shops and other places have been offering WiFi to their customers, there's basically been two camps: those whose eyes fill with dollar signs at all the revenue they think they can make from selling access, and those who understand that the often-minimal cost of providing free service pays off in the extra customers it brings in. It remains unclear if selling WiFi access is really a viable business, while the benefits of free WiFi are pretty apparent. Now, Tully's, a coffeeshop chain based in Seattle, has decided to make its hotspots free, realizing it will bring more people into the stores, so it can then do what it does best -- sell them coffee. But in addition to being a valuable customer-acquisition tool, free WiFi has another benefit over running a paid hotspot: lower costs. When businesses charge people for WiFi access, there's a host of additional costs they must bear, from setting up and maintaining a billing platform to dealing with support. Moving to a free service, where an establishment pays a flat-rate to a managed service provider, or simply gets a net connection and plugs in a router, eliminates many of those costs. But what about the freeloaders? Tully's founder says he's not too concerned, as he thinks most people will at least buy a cup of coffee.

Thank you for reading this Techdirt post. With so many things competing for everyone’s attention these days, we really appreciate you giving us your time. We work hard every day to put quality content out there for our community.

Techdirt is one of the few remaining truly independent media outlets. We do not have a giant corporation behind us, and we rely heavily on our community to support us, in an age when advertisers are increasingly uninterested in sponsoring small, independent sites — especially a site like ours that is unwilling to pull punches in its reporting and analysis.

While other websites have resorted to paywalls, registration requirements, and increasingly annoying/intrusive advertising, we have always kept Techdirt open and available to anyone. But in order to continue doing so, we need your support. We offer a variety of ways for our readers to support us, from direct donations to special subscriptions and cool merchandise — and every little bit helps. Thank you.

–The Techdirt Team

41 Comments

If you liked this post, you may also be interested in...

Reader Comments

Subscribe: RSS

View by: Time | Thread

Sanguine Dream, 28 Jul 2006 @ 9:48am

I don't know...
if thats so great an idea. Freeloaders will be the biggest issue. Perhaps putting a severe limit on the range of access. Like 100ft radius from the wireless router?

And Tully's has to realize this is opening a big liability door. These days with blame is being shifted all around for illegal downlading they better be ready for lawsuits up the booty. I can already imagine the freeloaders going to Tully's to do their "questionable" downloads and doing the legit stuff from their homes.
[ link to this | view in thread ]
Chris Maresca, 28 Jul 2006 @ 9:54am

Freeloaders...
... can drive away good business. There's a coffee shop near me I used to go to every day. When they started offering free WiFi a few years ago, it was great as I was the only one with a laptop that had WiFi.

Now, however, it's packed with people on laptops all day and buying one cup of coffee every few hours. I don't go anymore as there is rarely a place to sit and it's not all that pleasant any more.

I seriously doubt that it's bringing in more revenue than without WiFi as there's far less customer turnover than there used to be and a lot of locals just don't go there anymore. Plus, with everyone so focused on their screens, it very un-inviting.

The only saving grace here is that there is a kids park just down the street and a lot of parental units stop to get to-go coffee and food.
[ link to this | view in thread ]
Sanguine Dream, 28 Jul 2006 @ 10:02am

Re: Freeloaders...
Also a good point. I'll bet that coffee shop used to be great. Now its full of geekier than thou wannabes that just sit at the laptops doing "l337" stuff like posting on fourms, downloading, and chatting. Oh and I forgot hax0ring and treating real regular customers like they are not supposed to be there. And the place probably stinks too.

If someone sets up a wireless network is it possible to set up filtering software to block certain sites?
[ link to this | view in thread ]
Black no sugar, 28 Jul 2006 @ 10:12am

free wifi to sell coffee??
Doesn't say much for their coffee.

Next they'll be selling phone topup cards and postage stamps.
[ link to this | view in thread ]
OH, 28 Jul 2006 @ 10:24am

WI-FI
I disagree with the comments above. Where I go to school in CA, I used to study at the Starbucks, but I could never go online because T-Mobile is too expensive. I switched to a coffee shop 4 miles from home (but close to school) because of their free wi-fi. I don't just buy a cup of coffee, I spend on average 10 dollars per day there. That's 3x as much as I did at Starbucks, where I only paid for a coffe cake.

If the locals don't like "outsiders", then that's just too bad. Plus, locals probably don't NEED to use the coffee shop for wi-fi because they most likely live close by and have internet connections at home.
[ link to this | view in thread ]
Been there Done That, 28 Jul 2006 @ 10:37am

I used to own a place with Paid and Free
I used to own a restaurant with free wifi and we got a ton of freeloaders who would come up to our window (outside seating) and sit at our tables and just browse the web. I even had this "tool" come in with his pringles can-like antenna and set up in the corner closest to my router, while only getting a coke. Since the wifi was free at the time, with an exclusion list, I just put him on the exclusion list, and plead ignorance until he went away.

While I worked to make the experience positive for most who came in with free refills and taking care of them, most people just took advantage of it. I suspect it will be the same for that coffee shop.
[ link to this | view in thread ]
Andrew N., 28 Jul 2006 @ 10:56am

Re: Re: Freeloaders...
I'm sorry, but I have to disagree with you both here. St. Louis Bread Company (Panera for those outside St. Louis) has been offering free wireless for a couple years now, and while I have noticed more laptops, I haven't noticed a lot of "geekier than thou" types... they have tricked out home PCs for that.

I know that personally, when I need to get some work done outside the home, I'll hit Bread Co. I would go to Starbucks, but they charge for wireless, and it's just not worth it. While this does tend to make places a little more crowded, it's a big business boom, and it's really convenient.
[ link to this | view in thread ]
Fabian, 28 Jul 2006 @ 11:02am

Free wi-fi
You are absolutely right on! I have stopped going to Starbucks and spend my money on coffee and goodies at places where I can sit and drink that coffee in a leisurely manner and still flatten out my email curve. There is even one coffee/bakery near U-Village that has many, many places to plug in and the help is knowledgable about how to set up a wi-fi connection. Thanks for the article. More places should eat that cost or "REALISTICALLY" reflect it in their costs.
[ link to this | view in thread ]
Chris, 28 Jul 2006 @ 11:06am

As a WiFi employee
From what I've seen working for two major city-wide WiFi companies, those busniesses who offer Free WiFi offer just another service to their loyal customers. As far as freeloaders go, they're bound to get some, but it also attracts people to the palce of business who would otherwise pass it by. The best thing to do is have a knowledgeable person who can maintian your router and setup MAC address filtering and charge a one time access fee of $1 for lifetime use; loyal patrons get free access. The point is you can manage who you allow and dont allow, if you don't care that some script kiddie is gonna torrent away from your rotuer and drain your bandwidth for paying customers then let if be free access, otherwise enforce some restrictions. Fact is it's a service you offer as a business, and to charge for it is like anything else. $1 per person of a customer base of 1000 is going to pay for your $30month service for a long time to come. Peoeple come to a business for their quality of product more so over anything else, so if you're trying to bring in customers and increase revenue by giving them free interent, other than competeing with like businesses by offering better service for a cheeper cost, then you might want to rethink your plans for generanting revenue.

As for Sanguine Dream questions of "If someone sets up a wireless network is it possible to set up filtering software to block certain sites?"

Yes, but odds are you're going to end up blocking out legitimate sites as well, because most filters use keywords.
[ link to this | view in thread ]
Anonymous Coward, 28 Jul 2006 @ 11:07am

Re: I don't know...
Many Universities already use traffic-shaping to prevent users from running bittorrent and such - it also wouldn't be too difficult to keep the per-user connection speeds a bit slower so that large file downloads were discouraged. And bringing in freeloaders is the entire point! They eventually purchase - that's why offering free service brings sales up! It attracts those that probably wouldn't come otherwise and turns them into consumers. Don't under-estimate the power of target marketing.
[ link to this | view in thread ]
Stan, 28 Jul 2006 @ 11:10am

Free WiFi
As an individual who travels the country I find it very useful to be able to pull into a Panera Bread and enjoy a cup of soup and sandwich while catching up on emails and work.

There have been days when I have sat for hours, making multiple purchases of food all under the watchful eyes and smiling faces of the managers and employees of this progressive company.

Starbucks lost my business the minute I found Panera Bread.
[ link to this | view in thread ]
Anonymous Coward, 28 Jul 2006 @ 11:14am

Re: Freeloaders...
Sounds to me like you've missed the point entirely. Those freeloaders you're complaining about, if by your estimation, are purchasing a cup of coffee once-per-hour, are quite likely bringing in more dollars per visit than you are. And, chances are they are visiting more often too.

If I was a business owner it would be to my advantage to bring in the highest paying crowd available. You aparently are not it - it's those freeloaders that get addicted to the free WiFi and buy a cup of coffee once-per-hour on a routine basis

Just because you don't like the change in atmosphere doesn't mean the business made the wrong decision - it often means you're no longer the target market they want to focus on.
[ link to this | view in thread ]
Free Free Free, 28 Jul 2006 @ 11:16am

I sense a pattern
Is is just me, or do the writers at Techdirt only like free things. Anything free makes good business sense to them. I don't think they get paid enough.

Resturants and coffee shops make money from table turn. The more people through the more money they make. Free Internet makes people linger longer. I don't think they are going to buy two lunches just because there is free internet.

Also, you can filter the internet anyway you want. Including specific file types. For example you can block the download of any .mp3 files. You can also filter any specific site types or all sites.

A smarter way to provide access for free would to still lock down the access, but give paying customers a username and password as they sit down to order. You can also put a limit on the access and cut people off at a specified time, say when they stopped buying stuff and were just sitting there taking up space for long periods of time. Also, if you block all sites except business related and education related you can probably prevent some free loaders and get the customers you were looking for when you provided free access.
[ link to this | view in thread ]
Anonymous Coward, 28 Jul 2006 @ 11:34am

Re: I sense a pattern
"Also, you can filter the internet anyway you want. Including specific file types. For example you can block the download of any .mp3 files. You can also filter any specific site types or all sites."

how exactly can you define and block a "site type"?

"Also, if you block all sites except business related and education related"

And just exactly how do you determine what those are?

So basically you are saying offer free wifi but don't let them access anything?

I think it kind of defeats the purpose of the free wifi in the first place, not only will you prevent freeloaders, but anyone else who can't access what they want.
[ link to this | view in thread ]
Jim, 28 Jul 2006 @ 11:40am

Re: I don't know...
WRONG -- its been proven in courts time and time again that people who provide internet access -- free or otherwise -- cannot be held responsible for the actions of the users. Google it, and become informed.
[ link to this | view in thread ]
aaron, 28 Jul 2006 @ 11:46am

speaking for myself...
Personally, I pretty well ONLY visit cafe's when I'm traveling and I want to check my email or get directions. I walk in, buy a cup of coffee and spend 30 minutes online.

The Starbucks coffee shop model is NOT about maximizing traffic and "table-turn". If it was, they wouldn't have fireplaces and cumfy chairs to sit in. They are about providing user experience, and free WiFi is simply an extension of that experience (well, while it's not for Starbucks, it certainly is for a host of their competitors, now lincluding Tully's).
[ link to this | view in thread ]
robert, 28 Jul 2006 @ 11:49am

I wouldnt mind paying for the wireless honestly if it were reasonable but they always rip you off. Now if someone like starbucks charged $5 a month for unlimited access it would discourage alot but still be quite effective. Or how about a login system where when you buy something you get a certain ammount of minutes free with the purchase or something I know it can be done..
[ link to this | view in thread ]
JavaHead, 28 Jul 2006 @ 11:57am

Coffee is Murder
Once people realize there's nothing special about coffee, and stop paying $3+ per cup this shall all be moot.

Until then, the "used to be my favorite place" syndrome will carry on. If they cared about you and your cozy factor, and not about profits, they wouldn't have put up a sucker-link for the masses.
[ link to this | view in thread ]
Lay Person, 28 Jul 2006 @ 12:01pm

Hmmm...
It seems to me that they can avoid alot of the freeloader issues if they limit the time like a library. You sit, do your WiFi, then scram, let someone else sit and do it. Say 1/2 an hour per patron. That way, if they came for coffe, they will drink it and use the WiFi. If they're a freeloader, they only have a half an hour.

As far as legal liability, the plaintif will have to prove that the coffee shop knowingly allowed the culprit to perform the downloads. Kinda tough to hold up in court.
[ link to this | view in thread ]
NubbieJones, 28 Jul 2006 @ 12:02pm

FreeWifi-loaders
The idea that a customer would purchase one cup of coffee per hour would not only make that customer NOT a free loader it would make them an exceptional customer.

Unfortunaltely free loaders dont purchase one cup of coffee. I own a large coffee shop, it has two rooms, the second not visible from the service counter. It is common for laoders to come into the shop and sit in the back room area out of view of my employees.

On any given day, I will walk into the back area and count ten to twenty customers (I had as many as 50-60) sitting at tables, eating lunch from another business 's not drinking or eating anything at all from my shop.

They vary from students to business people. I once even found a guy running his struggling website devellopment business out of my shop. Downloading and uploading large files and even having meetings there. He would have meetings in the back area!!! When I confronted him , he felt that the 5 dollars or so he spent a week made up for his mooching power and a four top table for ten hours a day. These people eat up band width and slow the internet down for everyone.

I think that restaurants like panarabread have a diffirent situation because the per customer purchase is higher. Remember that the average coffee shopp customer will spend under four dollars. That means that we need higher volume than a restaurant to make the same profit.

These cases are extreme perhaps. However the problem of advertising free anything is that it draws people who have less disposable income. On average I would rather have five people come to my shop, spend four dollars, sit for an hour and leave in a single day, than one person come to my shop five days a week, spend 4 dollars a day but sitting there for 8 hours.

The solution to this problem seems to be giving away internet access with a purchase. We are contemplating just printing a unique wep code on receipes
[ link to this | view in thread ]
Adam, 28 Jul 2006 @ 12:02pm

Limited Access
Businesses might consider having the certificates expire for users every 15 minutes or so to prevent people from just hanging out all day. A little more maintenance, but far less than maintaining a bill pay system.
[ link to this | view in thread ]
Brendan, 28 Jul 2006 @ 12:13pm

Free Wi-FI
I'm like Stan, I travel a lot and usually stick to Hotels that offer free high speed ie The Hilton chain, and have lunch at Panera's. It's great to catch up with emails, read on line newspapers and jump on Google or Mapquest to get directions.
Both these establishments have made me a loyal customer
[ link to this | view in thread ]
Anonymous Coward, 28 Jul 2006 @ 12:16pm

Meh...As the person orders give them a card.
15 minutes for a small cup of coffee.
40 for a sandwich.
20 for a desert.
Etc.
[ link to this | view in thread ]
Scott, 28 Jul 2006 @ 12:23pm

Re: Re: I don't know...
Yes and the gov't can't snoop on your phone or Internet activities without a warrant....wake up, things change.
[ link to this | view in thread ]
Some Dude, 28 Jul 2006 @ 12:27pm

'freeloaders' should follow restaurant etiquette
In any restaurant situation, you can become a 'freeloader' by lingering too long at your table--if the restaurant is fairly full and people are waiting for tables. So, whether it be free WiFi or gabbing with friends for hours, you need to be respectful of others (the restaurant and its patrons) and clear out if people are wating for tables.

However, if nobody is around, the restaurant isn't going to care if you take up a table and have an occasional beverage.

As long as most patrons are being considerate enough to allow other patrons to come in and have a table, then free WiFi will benefit both patron and business owner.

However, if you and your buddies insist on clogging up the local coffee shop with your freeloading butts, don't be surprised when they start to charge for the service.

--sd
[ link to this | view in thread ]
J, 28 Jul 2006 @ 12:28pm

WiFi * at no extra cost *
Let me correct all here - there is no free WiFi, only
* Access at no extra cost *

I strongly agree with providing Wifi at no extra cost and disagree with those who thinks that it becomes a place where geeks frequent, with their head buried in their screens.

Well, I am an IT professional and I always like to visit where I can stay a little bit longer because my handheld is fired and is connected to my office network. That ways if I had to hang around with my colleagues I still am getting live alerts through my custom applications.

So, thinking out of the box and providing wifi access while you can is a good omen..
[ link to this | view in thread ]
BJ Gillette, 28 Jul 2006 @ 12:36pm

It's Gotta Be Free?
While I have never used wireless at local eateries, a friend who heads a local telco likes to slip out to Panera for a cookie and a cuppa joe during the midday sleepy time. Checks his mail, pays some bills, then goes back to work.

Unlike most local shops, Panera almost always seems to be busy. Could it be?

NAH.
[ link to this | view in thread ]
Anonymous Coward, 28 Jul 2006 @ 12:54pm

So the grand marketing aspect is to target people too cheap to have their own access?

Why would a marketer want to target that market?
[ link to this | view in thread ]
JM Neum, 28 Jul 2006 @ 12:58pm

This isn't a hard concept
One of my local restaurants offers WiFi "at no extra cost" but it is secured (WPA, I believe). They change the key every day or so and to get the key, you ask your server. I suppose that some people just ask the server and don't buy a thing anyway, but you wont have people just camping out outside. Also, I think most people when faced with the question "What can I get for you?" will have trouble saying "Just free WiFi, please." Maybe that's just me.
[ link to this | view in thread ]
Wizard Prang, 28 Jul 2006 @ 1:08pm

Free with an an asterisk*
*We reserve the right to turn off the no-cost wi-fi at peak hours and when the restaurant is busy.

Would that solve the problem?
[ link to this | view in thread ]
Dave Keys, 28 Jul 2006 @ 1:55pm

Re: Re: Freeloaders...
Any cheap to decent wi-fi router will filter sites and keywords on demand.
[ link to this | view in thread ]
Paul Couture, 28 Jul 2006 @ 2:25pm

Re: Post 28
I love how people who obviously don't travel for a living, or have a need for wireless access outside the home are complaining that free is bad here.

If I wanted to pay for T-Mobile on a monthly basis, I would be paying more for their service that I could access probably tops 1-2 hours per day than I pay for my 6 Mb connection at home, and I'm home an average of 8 days per month (exactly the t-mobile target demo.) That's an insane service-to-value ratio that I'm dumbfounded people accept.

I jump at the chance to spend my cash at locations that offer free wi-fi!
[ link to this | view in thread ]
Nathan Kully, 28 Jul 2006 @ 2:31pm

Look at it from a business perspective
This is the best option from a business perspective because there is no legit way to make Wi-Fi profitable while still keeping customers happy in the business. If they went on a login/password such order whenever a customer wanted to go online it would take too much time and things would get way to hectic.

I like where they are going with this and I hope that more coffee shops (esp in the Seattle area) adopt this trend.
[ link to this | view in thread ]
Dan, 28 Jul 2006 @ 2:43pm

Good point about the costs of overhead on billing, I never thought about that.

I refuse to pay for WiFi access.

When I want to use WiFi, I find out who has it for free and use them... then buy something, like a coffee.

It's 100% logical. And even if you have one or two "freeloaders", having a few people in a restaurant / coffeeshop is a good thing anyway. No one wants to walk into an empty restaurant.

Free Wifi at businesses will be standard in the future. I'd say it might be about 3 years away. I think even Starbucks will figure it out eventually.
[ link to this | view in thread ]
ulle, 28 Jul 2006 @ 3:20pm

I work at a well known "fast food" place that offers free wifi, we have freeloaders here, but they are the regular customers that come in, order a senior coffee for 23 cents and sit around for hours BS ing with their friends while going through pots of coffee since we offer free refills. The wifi users on the other hand buy a meal, work on their computer for half hour or so and leave. Now we are on the oppisite side of town from the college so this might make a difference.
[ link to this | view in thread ]
what the hell is wrong with you people, 28 Jul 2006 @ 3:35pm

I have never heard such a load of crap in my life; worries about freeloader, illegal downloads, liability, and password locks-- are you all retarded.
I have lived all around the US and have been to hundreds of Wi-Fi coffee shops and restaurants, all you have to do to prevent freeloaders is make it customers only. I mean really-- what spots besides public libraries let people just hang out all day without purchasing something-- there are already laws to prevent that, it's called loitering.
I have never seen a free signal do anything but increase business, I have seen the removal of these services crush a business as all the customers seek out the best value.
Right now I live in Portland, OR and a coffee shop couldn't stay open for three months without free Wi-Fi service, it's just that simple.
[ link to this | view in thread ]
Chris Maresca, 29 Jul 2006 @ 12:51am

Re: Re: Freeloaders...
Nope, I did NOT misunderstand, but I think you did. Not only do I know the owner of the coffee shop, but I also know exactly who used to go there and what they bought.

The ASP is way down, as most people buy ONLY coffee, whereas before, and at other places WITHOUT WiFi, people buy a lot more, such as food and there is much more turnover. 20 people taking up 40 some-odd seats makes the whole situation much worse.

Not only has it become a highly anti-social place, but the owner is not making nearly as much as he did when WiFi was not free. However, since the place is now pretty much known for free WiFi, he won't have any business where he to turn it off. Since he can't afford that dip, he just tries to introduce more and more stuff, hoping that some people will buy more and even out his income.

Mirroring this, the owners of another cafe near me turns off WiFi at 11am because they too where having ASP problems with customers sitting all day after having bought one drink. They have it on in the morning so that business people can check their email, etc over coffee, but turn it off at 11 so that people don't stay during lunch and take away tablespace from lunch customers.

The reality of the restaurant business is that you need high turnover (on a per table basis) in order to improve your margin, as your inventory is actually your seating capacity. Four person tables with only one person who sits there for hours is a sure way to loose money, which is why most restaurants in the US try to hurry you along....

In places with a low density of roaming laptop/WiFi users, free WiFi may be a good way to attract business, but in places like San Francisco, with tons of tech savvy students, roving consultants, dot.commers and work-at-home types, it's a bad idea.

Chris.
[ link to this | view in thread ]
Gabriel Weldon, 29 Jul 2006 @ 10:05am

Free it is & free it will always be
Aside from all the useless bickering & chattering, wifi is nothing more than a signal exactly like the one you get when you turn on your radio. It is free, technically because no matter who turns there signal on, secured or not, the actual data cable going to the modem is what you pay for, not the freekin airwaves that allow for the 'wifi' reception itself.
I just told cingular to keep there POS 8125 ppc because they failed to tell me it would cost 1cent per kilobyte-lol. I won't pay anything but the electrical/battery cost for any portable wifi device EVER. Nor would I ever pay to listen to my favorite radio station.
People who do pay for it are either stupid, desparate or forced to. I don't care how much one is worth.
[ link to this | view in thread ]
Gabriel Weldon, 29 Jul 2006 @ 10:13am

security
as distasteful as this may be, making people login, as one does with email etc, & then logging times used would be a simple way of preventing abusers. ie; those who would use it for abnormal amounts of time. And a sign posted, along with some very simple maintenance free software would be too easy.
[ link to this | view in thread ]
that would bring me in, 29 Jul 2006 @ 2:46pm

i'm a dental student, and need the coffee shops to support my all-day-studying needs. our school is very technology based, and many lecture notes and information is available online. The cauibou coffee i currently go to does offer a pay-to-use service.... but i dont see myself shelling out the money for timed use of their internet. cracking WiFi has long been known to be very possible, and even if that doesn't work for me, I've got my Verizon EVDO enabeled phone cracked so that i can just log into Verizons broadband internet - using only my airtime if its peak hours. aside that hassle, i'm not sure that if a competator came in next door with free wifi that i would immediately start going there, but its a pretty good start. even if the wifi isn't the determining factor, at least its treating the customers with one more reason to go to that coffee shop over another.
[ link to this | view in thread ]
Aimee, 19 Dec 2006 @ 8:44am

dirty facility
What a great concept, they are busy at all times of the day,they doa great job getting the food out quicky,and I have never had one complaint about my food. BUT, it is the dirtiest restuarant I have ever seen. I go to 2 Panara's all the time. SOmetimes I frequent 2 in a day to do work or to meet people there, since I am in food sales, we sometimes have a quick meeting there. The bathrooms are consistantly dirty, the toilets, the sinks, the floor. I cannot believe that a company of this size doesn't focus more on appearance, and cleanliness. If I could not see the kitchen, I would assume that is was gross too.
[ link to this | view in thread ]