Facebook has been around for seven years. It has 500 million users. If you can’t figure out how to make money off half a billion people in seven years, I’m going to go out on a limb and say you’re unlikely to ever do – Facebook is not worth $33,000,000, David Heinemeier Hansson, 37 Signals
The challenge the social networks face is common to all media and services on the net. The majority of web users are only interested if you’re in the market to deliver a free ride but because the web is a nanocasting media platform – as opposed to a mass media platform – advertising struggles to cover the cost of delivering those services.
“The study suggests that if those services that are currently provided for free were to be charged for (at a level that generates the same amount of revenue as ad-supported services), at least 40% of current users could stop using the internet.” - IAB Europe’s The €100 Billion Free Ride: Consumers Take Most Of Web’s Value [PDF]
What interested me most in the Mashable figures was the news that Starbucks is worth $19.2 Billion or about 60% of Facebook.
Which left me with the thought: How much more would Starbucks be worth if it started to puts ads, QR Codes and coupons on its take away coffee cups?
After all what is more social in the real world than sharing time drinking a cup of coffee with friends and work colleagues? And how many cups of coffee are sold world-wide each day.
This real world example of Social Media Advertising in action displays both the strength and the weakness of the social media business model. Putting ads on the coffee cups would give Starbucks an additional revenue stream over and beyond the $3+ they already receive for the cup of coffee. Facebook’s primary revenue stream is just putting ads on the menu. That’s why Starbucks monthly ARPU is around $50 while Facebook’s is around 25 cents.
However Starbucks has a world-wide head count of around 120,000 people. Facebook’s is around 1,500. Starbucks is a decentralised bricks and mortar franchise network. Facebook is a centralised “big iron” technology platform. Starbuck’s revenues are in excess of $10 Billion . Facebook’s revenues are estimated at around $1 Billion. Starbucks average revenue per employee is just over $8,000. Facebook’s is over $650,000.
Clearly there are advantages and disadvantages in both business models. If Starbucks could achieve Facebook’s reach and headcount to deliver its ARPU you would have a real market changer.
And that’s why the announcement from last month that Starbucks is enhancing customer experience through the roll out of an In-Store Digital Network may prove interesting in the long run as the prototype of how social media may evolve and cross over into the real world.
Starbucks Digital Network will give Starbucks customers free access to a collection of premium digital content accessed through free, one-click Wi-Fi in Starbucks stores. Providers include iTunes, The New York Times, Patch, USA Today, The Wall Street Journal, Yahoo! and Zagat… The Starbucks Digital Network is inspired by Starbucks passion for elevating the third place experience to create a unique coffeehouse environment, its heritage of recommending music, books, films and other culturally relevant works to its customers, and a growing worldwide interest in engaging with the brand digitally.
So far Starbucks has made a big play in the social media space. It now boasts 12 million Facebook fans, nearly a million Twitter followers and its own CrowdSourcing site (mystarbucksidea.com) where customers can share their ideas and experiences. With the introduction of their own global digital media broadcasting platform I wonder if they can become the local social media platform of the future?
Of course if we take the idea of turning Starbucks into the world’s local social network to it’s logical conclusion then we end up with Starbucks the MVNO (i.e. The Mobile Phone Operator) compete with its own MiFi network and branded mobile handset. Thereby creating a hybrid mobile social media platform model that would have the potential to double if not treble Starbucks ARPU.
Dare I say this would enable Starbucks to turn coffee into FaceBucks?
Further Reading
- They may be plugged in and switched on but could it simply be that America is a Land of Loners?
- Hiding behind the screen – The New Atlantis
- Wifi on Steroids – NY Times
- Your Own Hot Spot, and Cheap – NY Times
[updated 15-10-2010]
“Give a Gift” is the new feature that makes the Facebook exchange of Starbucks currency possible. Starbucks Card Facebook application users in the U.S. and Canada can use the application to load between $5 and $500 to a friend’s registered Starbucks Card – Mashable Buy Your Friends Starbucks on Facebook
[update 23-10-2010]
“So what is SDN exactly? It’s a content and community portal that gives Starbucks hot-spot users access to free premium content such as the Wall Street Journal and other news offerings, music and video, as well as access to a curated list of e-book samples from major publishers. So far, Simon & Schuster, Hachette, Penguin, Harper Collins, and New Word City have signed on, allowing access to the books in-browser using Skyshelf’s platform.” – Gigaom How Starbucks Can Become the Barnes & Noble of E-books
[update 25-10-2010]
“Starbucks Card Mobile for iPhone and BlackBerry lets users pay for their coffee by holding up the 2-D barcode on their smartphone to the scanner at the counter.” Mashable - Starbucks Stores in New York Now Accepting Mobile Payments
Posted on September 26, 2010
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