The Starbucks Digital Network. Why Bother?
Earlier this year Starbucks made Internet access totally free in all its company-owned U.S. stores. Now, Starbucks has launched the online Starbucks Digital Network, available exclusively in its U.S. locations.
This network, according to a company press release, is "a collection of hand-picked premium news, entertainment and lifestyle content along with local insights and events. Developed for screens big and small, customers with Wi-Fi enabled laptops, tablets or smartphones can visit the network while in line or while enjoying their favorite beverage in the café."
To bring this digital network to life, Starbucks, along with Yahoo!, is working with lots of content partners including: Apple, New York Times, Wall Street Journal, USA Today, Rodale (health and wellness publisher), LinkedIn, Zagat, and SnagFilms. Essentially, this is a "walled garden" of online content that Starbucks and Yahoo! will tightly control.
Mark Walsh from MediaPost questions the sanity of Starbucks digital network strategy. Mark remarks, "My initial reaction to the Starbucks digital hub is 'why?' Isn't free WiFi enough of an incentive to bring in customers who might otherwise not come to Starbucks? The swelling laptop and netbook population in stores since the company switched to free Web access in July attests to that."
Agreed. Why bother?
Here's why according to Stephen Gillett, Starbucks executive vice president, chief information officer and Digital Ventures general manager...
"Our customers are the inspiration for the Starbucks Digital Network. They’ve told us they want to be the first to know what’s happening in their neighborhoods and around the globe, to have an easy way to discover new music, great books and important films and find ways to be more involved in their communities. And they’re connecting with the brand digitally in numerous ways. These points combined with our passion for creating a unique customer experience, our heritage of recommending culturally-relevant works and focus on giving back to the community, led us to create this new, one-of-a-kind, localized content experience with Yahoo!."
Disagreed. How bothersome.
Let's get real. Here's the real why bother.
If we put Stephen's words through a digitization monetization translation filter, we learn Starbucks has overcomplicated all of this because they are trying to make money from all of this. Starbucks has already done something uncomplicated to get customers to linger longer inside its stores — it made wi-fi access totally free. (The general assumption being if customers linger longer inside Starbucks using the free wi-fi, they will buy more goodies.)
Perhaps a more accurate quote from Stephen should read like this...
"Our ancillary need for profit is the inspiration for the Starbucks Digital Network. The analysts working on Wall Street have told us we need a systematic way to discover new revenue, great profit and important mechanisms to financially leverage our community of customers. We're monetizing our customers with our brand digitally in numerous ways. These points combined with our passion for creating a unique revenue stream, our heritage of being a relevant high-growth stock and focus on giving back to the Wall Street community, led us to create this new, one-of-a-kind, monetizable experience with Yahoo!"
We've been through this before.
Remember how Starbucks, in the early 2000s, spent too much of its time and talents trying to sell CDs, books, and movies to its customers? I remember. I also remember Starbucks selling real estate space inside its stores for Kozmo.com drop boxes. We can go further back and dig up Starbucks failed dot-com strategy from 1999, which cost the company millions.
As it relates to the Starbucks Digital Network, rest assured, it is more about making money than fostering community.
Starbucks contends it is not charging program partners $$$ to be involved with its network available exclusively to tens of millions of its affluent customers. While money may not be changing hands, Starbucks is sure to have bartered receiving advertising placements inside the pages of their newspaper partners and display ads on the websites of all their program partners. Starbucks will also benefit financially from money its customers spend with any content provider while on the network.
All of this potential money making activity that's far outside Starbucks comfortable home of coffee troubles me today, just as it did in 2004 when Starbucks strayed from what it does best. Then, Geoffrey Moore, business strategist and venture capitalist, made a smart observation that applies today... "If Starbucks is just trying to find more ways to monetize the traffic that comes through, this is a bad idea. At some point the customers will start to feel abused."
I'm afraid Starbucks, with it's newly launched Starbucks Digital Network, is falling victim to a proven failed strategy of trying to monetize its customers in ways unrelated to coffee.
Why bother Starbucks? You already know how this will turn out.