Free: A Double Edged Sword

An article appeared in an edition of this week’s Boston Globe (sorry I can’t find a link to it) that spoke of the difficulties that many Starbucks and similar coffee shops are facing with offering free wireless internet access. [Just for the record, Starbucks charges for its wifi access.]

It seems that folks are showing up at these coffee shops in the morning, laptop in one hand and a cup of java from a large competitor in the other, plunk themselves down at a table and proceed to spend the majority of the day surfing the net, IM’ing and emailing — all the while never spending a dime on the beverages and pastries the coffee shop has to offer.

Paying customers come in and find all the seats and tables taken up by the freeloading surfers.

If said coffeeshop decides to charge for wireless access as Starbucks wisely does, the freeloaders either pack up and go somewhere else for their free access, or they pay up and feel even more justified for not spending any money as they take up hours and hours of valuable real estate within the establishment. They figure they’ve paid their price of admission.

I have several thoughts about this issue…

First, if I owned one of those establishments, or any other restaurant or cafe for that matter, not only would I not offer wireless access (for the very behavior cited above), I would also get one of those devices that jam cell phone signals so that people didn’t sit around all day talking loudly on their phones as others tried to carry on conversations around them. I would consider it my contribution to their getting a life and actually carrying on face to face conversations with real human beings every so often. Or at the very least, creating a space for those who DO have a life and enjoy engaging in conversation. It would also help contribute to my business’s bottom line.

Which leads me to my second point. Offering something valuable for free is a wonderful way to attract a lot of bodies to your business, but unless it is linked in some way to people actually doing business with you, what’s the value? These coffee shops only survive if they sell a certain amount of beverages and pastries every day. If the growing majority of people whom I refer to as members of “The Cult of Free” continue to hoodwink businesses like the aforementioned coffee shops into giving them something in exchange for nothing, we’re going to see a number of businesses that truly do offer value go by the wayside.

For that matter, I still wonder how many of the “Web 2.0 businesses” are ever going to survive if they continue to put their best offering front, center and free.

This is a situation I’m challenged with at Tucows. It’s a free, shareware download site that earns its’ revenues (and quite profitably I might add) through advertising. So, the Tucows endusers who come through the site to download the various shareware and freeware titles pay for the privilege through the attention they pay to the ads that populate the pages. Most folks (and this is no secret to those in the online publishing business) ignore those ads and go on about their business. But a precious minority actually DO respond to the ads and everybody wins: the advertiser, the enduser and Tucows.

But it’s a numbers game. For the business to do well, you have to have an ever growing base of endusers to pay the bills. Tucows, as mentioned in my previous post, does pretty well with the endusers and advertisers they’ve got, but like any business, they could always do better.

They’ve tried any number of ways to better monetize the traffic they have coming through, which is fairly significant, I might add… They’ve had software stores in their site, but those failed miserably. They’ve tried any number of other ideas and have had mixed success at best. But they continue to do well with their ad supported model, and they would be foolish to try anything that would sacrifice that in the name of innovation.

That’s the challenge I face as a consultant helping them out on a business development front: coming up with new and growing revenue streams that their customers (and I consider their customers both their developers and their endusers) will respond to that won’t kill the goose that laid the golden egg: their advertising business.

So when I read in the Boston Globe about the frustration the coffee shop owners feel when they use wifi as very attractive bait to lure bodies into their establishments, only to have all their seats and tables taken up all day with freeloaders who will spend nary a dime, I can feel their pain.

My advice to them: charge for wifi access, establish and enforce a minimum amount of purchases per hour (at least the cost of a Latte) for them to maintain their seating at a table.

There are some people who are simply leaches and will never be customers. You don’t need them. Have them move on elsewhere…