Starbucks Free WiFi offering is all over the news today.  Andrew Hickey at CRN had the most interesting analysis we’ve seen, giving 5 reasons why Starbucks is making this leap.  Reasons range from competition with McDonald’s to the simple fact that (short of trapping customers on an airplane) it’s becoming so you can’t charge for WiFi anymore.

Reason #2 is the most interesting, but stops short of the real point:

It’s all about targeting the consumer. Don’t think that Starbucks is just throwing around free Wi-Fi willy-nilly and expecting nothing back in return… Users must log in with a unique identifier so Starbucks will know who you are, where you are and probably get a read on your Web habits, meaning it can later target and tailor content and adds directly to users. Cha-ching.

Yes, targeting ads might be worthwhile, but that’s not the real “cha-ching”.  Starbucks has a great business selling high margin products that are completely discretionary.  If they can learn about how you engage with their stores, how you actually use them as a “third place”, then they can test ways to get you to come more often.  Creating one incremental coffee-buying trip is an order of magnitude more profitable than some cut of click revenue.  With this data linked to Starbucks card data, imagine the possibilities.

Yes, the online world can and should help drive Starbucks’ business, but Starbucks ultimate value creation will continue to be in the offline world, in their stores.

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