Specifics of the deal have not been released, but it’s Google’s name on the network: “Google Starbucks.” Starbucks likely valued the cachet of being attached to a premier technology company. The companies are reportedly working together on the next generation of Starbucks’ Digital Network, which could include incorporation of Google offerings like YouTube videos and Google Play access. The fact that AT&T’s matching proposal was turned down does raise the likelihood that Google is also offering Starbucks a deal it can’t refuse monetarily.
What’s in it for Google? Forbes quotes a Google representative as saying, “Google has always invested in projects that help the Internet grow stronger, including projects that make Internet access more affordable and more widely available.” That’s the marketing-speak.
Google wants the nationwide recognition as a player in the ISP game this deal would give (even if it’s effectively reselling a Tier 1 ISP’s services). It’s another element of that “Internet for everyone” strategy.
Google Fiber has garnered the company significant press, but the reality is the service is geographically limited — currently in Kansas City with Austin and Provo next on the list — and it’s going to take a lot of time and a lot of money to gain a real foothold. Project Loon? Well, that’s one of those cool concepts cooked up by Google X, the idea lab behind other projects like the self-driving car. There’s a Project Loon pilot going on in New Zealand right now, but any mass deployment of Wi-Fi balloons is far off at best and would likely take place in areas of the world that currently lack telecommunication infrastructure.
Showing up in 7,000 Starbucks locations almost overnight (18 months is pretty fast for any telecommunication national rollout) is a big win in terms of recognition as an ISP force. Logging onto Google Starbucks and discovering your connection is 10 times faster than it used to be is also likely to increase demand for Google Fiber by association. “Google equals speed” is the hoped-for reaction in customers’ minds.
The real win for Google may be that Starbuck Digital Network collaboration. Starbucks currently partners with Yahoo (YHOO) on the portal, and although it wasn’t specifically mentioned as part of the announcement, what do you suppose the odds are that Google is going to keep the status quo when that next-generation version is developed? Having millions of Starbucks customers log in to the portal and likely have in-your-face presentation of Google services like YouTube is going to help bolster Google’s mobile advertising and search business — while sticking it to competitor Yahoo.
As of this writing, Brad Moon did not hold a position in any of the aforementioned securities.