Sunday, August 15, 2010

Starbucks Don't Know Shit.

Starbucks has shown nothing but complete confusion in the recent years. Their growth was stagnating before the downturn, and then when everyone stopped having money, their growth took an even bigger dive.

The good decisions that they did make were all pretty much straight out of business 101. Close some locations. Refocus on your core aesthetic. Introduce new product.

But whenever Starbucks tried to step outside of this basic "make something; sell it" business model, they stumbled. The first Starbucks card was cumbersome and stupid, the Gold card was better but wasn't a hit with the faithful. Starbucks never released numbers, and even lied about them being good, but it's rumored that they were very poor. The newest card, My Starbucks Rewards gets rid of what was good with the Gold Card, reintroduces what was bad with the Starbucks Card, and numbers have plummeted. I can only go on what baristi have told me, and they say the new card is not liked. How does a massive company fail so badly when simply having a paper punch card with little holes shaped like latte cups gets the job done for other cafes?

Or for an even more laughable example, Starbucks music label, which they brilliantly announced just as the music industry was crashing. It's like getting onto the Titanic after it's hit the iceberg.

Their shocking cluelessness was illustrated very well a few days ago, with the announcement of the Starbucks Digital Network. Before I get into that, though, a little history. WiFi has roots going back to the 1980's, but was solidified and patented in the US in 1996. WiFi started its atmospheric rise quickly, and by the early 2000's, ordinary people had wireless networks in their homes. It didn't take long for major companies to try and sell wireless access, which anyone with a brain knew was stupid at the time. People don't want to pay for something that they can only use in one spot. Luckily, smaller companies were there to quickly fill the void and offer free WiFi as a freebie to get people to come in. For example, Coffee Exchange has had free WiFi since 2004, which requires no clicks, no landing pages, no sign-ins, no nothing, and it is, I'm not kidding, ten, maybe twenty times as fast as WiFi at Panera, Borders, or Barnes & Noble.

After a decade of failing to sell access, the big guys finally stopped trying and, last year, Borders, Barnes & Noble, and any number of big companies started giving it away for free. Starbucks, oddly, was the last hold-out. You could get "free" access for a scant two hours each day if you used your Starbucks card at least once a month. You also had to create a sign-in name (which, despite my best efforts, I could never get to work) and profile. Again, shocker, very few people used Starbucks WiFi.

Finally, earlier this year, Starbucks has started giving away actual, real, truly free WiFi that requires naught but a single click on a landing page (still annoying, but I'll leave that be for now). I figured that Starbucks had finally gotten it. But oh, no, they didn't. They moved simply because it was grotesquely obvious that they should.

What about this move shows that Starbucks doesn't have a clue? Basically, it's that the same issue that Cox, Charter, or Comcast has. They don't want to simply be a dumb pipe, where information from other sources flies over their wires to the consumer. They want control, because in the old world, control meant profit. Free WiFi is the right move, the SDN is just dumb.

"We know that people would pay us for this opportunity. But instead of asking them to pay us, we thought, ‘Let’s aggregate and compile the best content that [Starbucks customers] can’t get any where else,’"

"Starbucks does plan to upsell SDN users, and there will be a revenue share between the coffee retailer and its content providers should customers go on to purchase while browsing."

"In the News channel, customers will have unfettered access to the Wall Street Journal, USA Today and The New York Times. Brotman explained that access to the latter of the two will be the paid versions not available for free to readers anywhere else."

Really? You know that you can sell this? If you can sell it, why does everyone who tries to sell it fail? Why was your own WiFi a failure? Oh, and the Times and the Wall Street Journal? WOOOOOooooOOOOOhhh! Hold me back! I already get "unfettered" access to everything on the web. NY Times gets blocked, Huffington Post, here I come. Wall Street Journal? I haven't read that in years, and I'm a freaking stock trader.

Starbucks still thinks that they can sell data, as do its partners. They can't. That business model is dead. You can sell new data, the creation of data, the searching of data, the manipulation of data, but once the data is out and about, it's free because it's infinite. The SDN will try to upsell you to other content... most of which can be had for free on the internet. The SDN cannot compete with the internet. Its video services can't compete with YouTube, Hulu, and BitTorrent; its audio can't compete with Pandora, Uvumi, and TheSixtyOne; its news can't compete with... everything ever. This service is dead before it even comes out.

The final point I find puzzling is how the service will be distributed. Will it be a no-download application? Java? Adobe Air? People hate downloading things. I've worked in the online casino world, trust me, people HATE downloading things. The uptake for a download casino is less than half of that for a casino that streams through a browser. And even if we assume that people have no issues with a download, are they going to be willing to download an application that they can only use in one place? The digital world is mobile, why do companies refuse to understand this? If I can't use your program at my house, I don't want it. Boundaries and borders no longer exist, data is infinite, sell the finite. The goal of a company is to get the finite product as integrated with that mobile experience as possible, not to try and shoehorn the mobile experience back down something physical and immobile.

BRAINSTORMING SESSION: How can we sell the finite (food) better with free WiFi and a Starbucks network? We've got an iPhone app from which people can order food, next step, people sign into and pay for food from their SDN page in their laptop. The network knows from which location you're signing in, so it knows where to send your order. You sit down, open your laptop, log in, place your order, it's done and brought to your table all the while you're in a video chat.

For people who like the experience of ordering from a real person (weirdo), signing into the Starbucks network from a Starbucks location pops up coupons, freebies, and information from and about the employees at that location. Allow people to leave tips in a digital tip jar. The network lets Starbucks know who's signing in, where, when, and how often. Let them link-up Facebook accounts to glean consumer information and better target products. You know that someone who eats a lot of cinnamon buns has suddenly changed his most frequent location, and he shows up at 3pm every day, Starbucks knows to have a cinnamon bun read at 3pm. Let people publish their Facebook on the SDN, so people can see if there's anyone interesting at the location, maybe facilitate a date.

I came up with those ideas in three minutes. Not hard.

No comments: