Starbucks has announced that it has chosen Google and Level 3 to upgrade the Wi-Fi connectivity in 7,000 of its stores over the next 18 months.
Starbucks has been a leader in the public Wi-Fi space and wants to stay on top of Wi-Fi technology improvements so that it can provide higher speeds and a better experience to its customers. While the deal is a setback for AT&T, which was the previous provider of Wi-Fi services to Starbucks, it provides Level 3 with an opportunity to enter a growing market.
However, it is Google’s participation in the deal that is most intriguing. Under the deal, Boingo will remain as Starbucks’ exclusive advertising partner, while Level 3 will provide the infrastructure. This leaves Google to provide a free and undefined customer experience value add in the middle.
With its large base of enterprise advertising customers, Google has the potential to be a major disruptor in the Wi-Fi market, where no clear and definitive value chain has emerged.
Google may be shifting towards a more pragmatic access strategy
Starbucks claims that it is co-developing a “next-generation Starbucks Digital Network” with Google, but Google has not yet released any details about its involvement. Given Google’s influence and reach, merely lending its brand name to such a contract may have been enough to uproot an established service provider such as AT&T.
However, Boingo, whose advertising capabilities exist as a result of its recent acquisition of Cloud 9, may still need to use Google as a search and advertising tool. As a result, Google will benefit from a new, location-based, highly-targeted advertising channel. Eventually, Google may want to target potential new opportunities that leverage its own core advertising, search, and analytics capabilities, which will leave Boingo vulnerable.