Starbucks Stretches for Margins with Starbucks Digital Network

Starbucks launched its Starbucks Digital Network today, a multi-channel content network that, among other things, boasts unlimited access to the Wall Street Journal, full books, magazine articles unavailable anywhere else. Mashable has a full description of the Starbucks Digital Network, as well as some comments on its business aspirations:

One would assume, correctly so, that Starbucks has not gone to trouble of providing free Wi-Fi and a premium digital network without thinking about how it could profit by these pricey additions. If we didn’t know better, we’d presume that Starbucks was charging its partners for placement. Instead, as we’ve disclosed before, there’s no money changing hands — unless SDN users make purchases from partners, in which case there is a revenue share.

What it comes down is a matter of choice. Coffee and tea drinkers have a myriad of options, so for Starbucks it’s about motivating the customer to choose its stores and its digital network content partners by association.

SDN is designed with two key objectives in mind, says (Vice President of Digital Ventures Adam) Brotman: enhancing the customer’s experience and better engaging customers while they’re in the store.

“Tens of millions of customers are coming in to our stores and logging in to our Wi-Fi on a monthly basis anyways. They’re coming in because we provide this great experience — good music overhead, quality food and coffee and the opportunity to connect with your friends or the baristas … What we hope is that this is a nice complement to that experience.”

Starbucks’ strategy involves experimenting with a new product, seeing what users like, then honing the product to fit those preferences. That’s why SDN has a dizzying array of offerings, so that Starbucks can figure out what users like, Brotman is quoted as saying in the article.

I bet Starbucks is hoping that if this takes off, they can sell (very expensive) ads on SDN. I’m not convinced the network has much value. In my experience, people who come to Starbucks to sit around either have their own work to do or have someone to talk to. Those people idly surfing to kill time will most likely be standing in line and using apps that they’re already accustomed to. Besides, who needs another portal?

But Starbucks is 40 years old now, and needs to experiment with new revenue streams to stay profitable. Even if SDN sounds like a stretch, from Starbucks’ perspective, it’s still worth a shot.