Interview: AnchorFree’s Mark Smith on the Wi-Fi ad model

With the subscription model and anchor tenant models for providing free Wi-Fi networks currently stalled, there’s a new interest in using advertising to subsidize user access. Mark Smith, executive vice presicent at AnchorFree, one of the powerful new tools bolstering the ad model, speaks about its implication for muni markets.As an enabler of free municipal Wi-Fi service, advertising all but disappeared in the heyday of promises of free Wi-Fi from providers that saw it as an entry into lucrative urban markets. The assumption behind those public-private partnerships was that subscription upgrades to faster service on the network would not only offset the cost of deployment, it would subsidize a low-speed free tier.

Now, it seems, the advertising model is re-emerging but in a different mode. A young company out of Sunnyvale, Calif., called AnchorFree is one in a handful of companies pioneering an ad model that brings a new flexibility to Wi-Fi’s ad model.

AnchorFree has taken the idea of targeted Web-based advertising and optimized it for Wi-Fi hotspots. The company is essentially in the business of aggregating hotspots into a network that can provide national advertisers a way of delivering targeted advertising to the consumers in the most likely position to take its advertising seriously.

A recent New York Times article about the service offers the example of Lexus routing its ads to four-star luxury hotels but not motels near airports where travelers have no need of cars. AnchorFree executive Mark Smith describes Wi-Fi as “an untapped market of virtual billboards” and notes that AnchorFree allows companies “to have their own branded relationship” with customers “while they are at their point of consumption.”

I interviewed Smith via e-mail to ask him about the implications the service may have for munis interested in using advertising as part of their business models.You’ll find his comments interesting.

Q.: Are any municipalities using your application and, if so, how?

A.: We are working with RSR Wireless in Florida and have some small deployments as a part of their larger municipality effort. Apopka Beach, FL is one example where we have implemented our ad network across RSR’s wi-fi deployment architecture. RSR uses wi-max for backhaul and Wi-Fi in their access points. They target public areas (parks and communal gathering places) – and their contracts are part of their efforts to work with government grants of such projects. In this model, RSR provides and manages the infrastructure and network ‚Äö?Ñ?¨ we provide a router ‚Äö?Ñ?¨ but it’s purpose is to serve as a traffic redirector so that the advertising is inserted directly into http web browsers. e.g. Http traffic on port 80 is redirected via our proprietary software in the router to our servers in CA where we construct a persistent ad frame that is inserted into the browser and returned to the user ‚Äö?Ñ?¨ all in real-time.

Additionally, we have powered several neighborhoods in the San Francisco Bay area ‚Äö?Ñ?¨ including University Avenue in Palo Alto, Union Square and Fillmore streets in San Francisco. This is a working experiment for us. We don’t normally install or maintain network access etc. But we are utilizing these projects in a research and development capacity.

Do note : AnchorFree doesn’t typically get involved with managing hardware and networks ‚Äö?Ñ?¨ like MetroFi and others. We do ship routers to small business locations where we can vet the projected traffic / ad revenue to justify the costs, but otherwise, we do partner with network operators who in turn, manage our equipment or accomplish the ad insertion to AnchorFree without new equipment assets.

Q.: Have you considered pursuing the municipal market or partnering with a provider who does (such as MetroFi or one of the regional providers such as US Internet in Minneapolis)?

A.: Certainly, we’d like work with additional partners to power municipalities. But again, we don’t manage networks and hardware as a business model. So our participation assumes there is a network operator who is fronting the costs associated with supporting networks (and users). Our solution provides an incremental revenue stream that we share with network operators (and venues) – but we don’t get involved in pricing and the economics of supporting said infrastructure.
We are currently deploying (with operator partnerships including Drag-N-Fly and others) outdoor retail and mall projects in the western United States (several live in CA and others in process in AZ)- but these really aren’t considered municipal projects. They are commercial venues that offer (largely) unrestricted access to the public .


Q.: What long range potential do you see in the municipal market?

A.: Admittedly, there is much uncertainty in a municipal subscription model. Earthlink and others have folded up shop on several enormous projects that assumed consumers would pay for municipal access. Thus, there is a renewed sense of awareness on the viability of an ad supported model. The reason we haven’t focused on it specifically is because municipal endeavors are, by default, out of alignment with the advertising industry (those who pay the bills).

Municipal efforts usually aim to provide uniform and ubiquitous access in a non-discriminatory manner. They strive for open access and comprehensive coverage ‚Äö?Ñ?¨ as would be expected in most public services (water, energy, POTS telecom). Advertisers on the other hand need to discriminate between customer segments and ensure messaging is targeted and accountable. In an effort to command the most premium ad dollars to offset what are real and tangible infrastructure costs, hotspot operators would be economically challenged to “subsidize” access in geo-areas where the audience does not command an advertising premium–thus, the move to penetrate commercial venues where the audience (Wi-Fi patrons) can be benchmarked relative to the venue itself (e.g. It would be important for an advertiser to know someone was a highway-traveler versus an air-traveler.)

Thus the question of viability of ad supported municipal wi-fi demands that geo-areas can be hand-selected and advertising performance forecast in a predictable and repeatable manner. In the end, it’s a fairly simple exercise in supply-and-demand. Do advertisers want to reach the audience associated with the streets/neighborhoods that are consuming infrastructure costs? If so, at what CPM (advertising rate), and does that revenue offset the costs of managing the network?
At AnchorFree, we are hand picking opportunities that afford performance and value to advertisers and are certainly eager to explore municipal efforts that can maintain alignment between operators’ costs and ad revenue generated by us .

Comments

  1. As an enabler of free municipal Wi-Fi service, advertising all but disappeared in the heyday of promises of free Wi-Fi from providers that saw it as an entry into lucrative urban markets. The assumption behind those public-private partnerships was that subscription upgrades to faster service on the network would not only offset the cost of deployment, it would subsidize a low-speed free tier.