Market Watch reports that Microsoft is partnering with MetroFi to provide location-based advertising. This collaboration with Microsoft will bring free wireless Internet access to Portland, Oregon (pop: 500,000), the state’s largest city and MetroFi’s largest municipal installation to date.
MetroFi, a metropolitan wireless operator, is building a 134 square mile wireless network in Portland (below). MetroFi offers two levels of service; free (with ads) or $19.95/month (without ads). On the surface, the only thing new here is that Microsoft bought ads. But Microsoft’s Adserver — which can also deliver location-based advertising — could be the elephant in the room.
Ad sales in traditional media totaled nearly $150 billion last year, says the NY Times. The entire United States ad market, which also includes direct mail, outdoor ads, yellow pages ads and online ads, is worth about $286 billion, according to Robert J. Coen, chief forecaster for Universal McCann, part of the Interpublic Group.
Internet ad revenue have been growing by upward of 30 percent a year — this year about $16 billion will be spent online. But, as Google pointed out in its annual report last year, large advertisers would most likely continue to focus most of their ad budgets on traditional media.
Revenue from banner ads funds the free MetroFi wireless service. Not everyone is enthusiastic. GeekPdx, for one, isn’t thrilled by the prospect of looking at Microsoft ads.
A Wi-Fi network provides the right eyeballs for Microsoft. While MetroFi can target ads by region, city and zip code, Microsoft’s adCenter can detect a customer’s location by their IP address and then display relevant local ads based on that location. Microsoft will provide the Web page greeting users at log on and include localized search and mapping.
“This is kind of our first pilot,” said Stefan Weitz, director of planning of Microsoft’s online service group. “When the time comes when there’s an ecosystem in place that supports us, I can see us engaging in it, certainly.” Should things go well, it’s likely Microsoft will play the same role in the seven other networks that MetroFi operates in California and Illinois, thus replacing its homemade ad serving technology, and the half dozen other MetroFi expects to soon build, said MetroFi co-founder Chuck Haas.
MetroFi’s Haas said the Portland network will be turned on in December, but only a two-square mile portion. In the next 18 months, MetroFi intends to blanket 95% of the city with free wireless Internet access. It will also offer a premium, ad-free service for $20 a month.
MuniWireless says more than $3 billion will be spent to build and operate wireless networks in U.S. municipalities during the next four years. MetroFi’s service is currently being tested near DailyWireless world headquarters in downtown Portland.
Downtown and the central eastside neighborhoods should be online early next year. By mid-2008, it is expected to cover “95 percent” of the city. But with only 20 SkyPilot access points per mile, it may depend on how you define “95 percent”. It is Wi-Fi, after all.
MetroFi and Microsoft say they have partnered to bring “locally relevant MSN content and services” to the city-wide network in Portland and plan to incorporate Microsoft’s adCenter technology (AdCenter Blog) into the service as well. Microsoft referred to the deal as a “pilot.” Perhaps like Google, Microsoft could be using a city WiFi deployment as a test bed for different types of advertising, including location-based ads.
|LOCAL BROADCAST: Top 100 Markets|
|2nd Qtr 2006||2nd Qtr 2005||% Change|
|LOCAL BROADCAST TV*||$4,119,691,600||$3,923,748,200||5.0|
|TOTAL BROADCAST TV||$11,792,424,900||$11,400,857,400||3.4|
National CPM (cost per 1000) rates:
- Newspaper (1/2 page B&W) $ 19.20
- Spot TV (30 sec. primetime): $ 16.25
- Magazine (1/4 page color): $ 8.00
- Radio (30 sec. drive time): $ 4.95
- Traditional Billboards: $ 3.00
- Mobile Advertising: $ 0.90
On our well-marketed consumer networks, we typically see 20% to 25% household penetration (on par with DSL plus cable broadband penetration). This translates into an average of 1,550 steady daily users on a typical network for a 10 to 15 square mile city, and an average of 2,640 unique users/devices on the network per week. Percentage of users who rely on the network every day of the week ranges from 45% to 95%. Data suggests that 5% to 10% of clients are roaming around the city on any given day. We consistently see a broad range of devices on our networks daily, typically from 50 to 150 unique device types, and growing.
Wireless Philadelphia projected break-even in 3-4 years. Philadelphia’s Earthlink network, at 135 square miles, is similar in size to Portland’s 134 square miles. Earthlink charges $20/month. A portion of that revenue is then given back to the city of Philadelphia to subsidize inexpensive or free service for low income residents.
But most Earthlink service is not free. Free has better penetration — which is good for advertisers.
Here’s another (unscientific) way to look at it. If a 130 square mile cloud resulted in 15,000 users daily, then $1/day per person (in ad revenue) might net $15K total (daily) x 365 days or $5,475,000/year. A free network might get three times the subscribers.
But would they get much more than $5M+ a year in ad revenue? Perhaps not. That’s where the “anchor tenant”, subscription revenues and leased back-haul come in.
Here’s another way of looking at it; if the wholesale cost to deliver city-wide WiFi is $10/month, then MetroFi would need to generate something like $.35 daily per user (30 days x $.35 = $10) to break even.
In three years (at 20-30% penetration), the system might be profitable. Then it’s a license to print money.
For the third quarter of 2006, spending for print ads in newspapers totaled more than $11.1 billion, down 2.6 percent from the same period a year ago. At the same time, advertising on newspaper Web sites increased by 23 percent to $638 million in the third quarter. The addition from web ads doesn’t make up for the loss of print revenue.
Newspapers have a print monopoly, but they must compete for eyeballs on the web. Local broadcasters enjoyed a boost from this quarter’s political advertising, but may continue their revenue decline next quarter. Broadband is the bright spot. With over 50% broadband penetration in the United States (a G-7 laggard) the future seems clear.
If you were a coffee shop, how much would you pay to reach most of your neighborhood? Local Wi-Fi advertising may be good news for local media and bad news for television affiliates.
The MetroFi experiment is interesting. It’s a new mass medium. Microsoft may be targeting the top 100 Markets. Broadband markets. Is this a good bet? Opinions differ.
The Interactive Ad Bureau and Paid Content cover the beat. Other DailyWireless Municipal Wireless articles include; Ten Cities Under Colorado Cloud, Municipal/Community WiFi Interference?, MetroFi Backers Confident, Portland MetroFi Antennas, Washington’s 1500mi Cloud, Sacramento Regional Cloud, Power for Portland WiFi, Bellevue: Do It Yourself and Lease Back, MuniFi Spending Up, Municipal Wireless Flash Applications, Park City: Solar WiFi and Portland Chooses MetroFi for 134 Mile Cloud.