16 WiFi withdrawal triggers myths: Is public WiFi coming to an end?

Recently, 16WiFi, which provides free WiFi Internet access to public transportation passengers nationwide, announced that it has decided to shut down its business in 11 cities including Guangzhou, Shanghai, Shenzhen, and Foshan, and will only retain two cities, Beijing and Kunming. After three years of entrepreneurship, why did 16WiFi, which "can no longer see any direct competitors", suddenly suffer a Waterloo?

For a time, the prospects of the entire public WiFi industry seemed to be overshadowed. Is public WiFi a good business? For consumers, does this incident mean that free and unimpeded wireless networks in public areas are ultimately just a beautiful wish for a "free lunch"?

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1. A “guaranteed profit” account

According to the reporter, 16WiFi, which received RMB 300 million in Series B financing in June 2016, had claimed to have signed contracts with 200,000 buses in 70 cities at that time, accounting for more than 50% of the target market, and its market share in Beijing, Shanghai, Guangzhou and Shenzhen exceeded 60%. After obtaining the financing, it planned to launch services in nine cities including Beijing, Shanghai, Guangzhou, Shenzhen and Foshan, and all of them would be opened within a year.

In Guangzhou, due to licensing reasons, 16WiFi was not officially put into operation until November 2016. Unexpectedly, after only three months of operation, 16WiFi chose to shut down the network.

When talking about the reason for the suspension, the person in charge of 16WiFi said, "The investment cost is too high, and the original business model of importing traffic through WIFI has been abandoned due to too few users." As for the real reason for the suspension of 16WiFi in Guangzhou, he said, "It is because the entrance fee paid to the bus company is too high, and the cost of purchasing traffic from the operator is not a small amount, so we decided to suspend the network."

Just a few months ago, on October 25 last year, 16WiFi announced its "10 billion video strategy" - 10 billion yuan in annual traffic subsidies to build a video market on the road. According to Qiu Chaomin, the founder of 16WiFi, 200,000 buses across the country will be connected to 16WiFi next year. Based on the calculation of 20 days per month, 50% of users on each bus watching videos, and 150 megabytes of traffic saved per user per day, the market price of annual traffic subsidies has exceeded 10 billion yuan.

According to Qiu Chaomin's idea at the time, WiFi is an important underlying entrance to the mobile Internet. Traffic demand is the core driving force for users to use WiFi. The characteristics of commercial WiFi determine that it has extremely high advertising value. If it goes well, 16WiFi will accumulate a large amount of user data in the future, and the big data of vehicles, people and roads generated by 200,000 buses will also have strong monetization capabilities.

2. User Experience Variables

There is nothing wrong with the mobile Internet industry's demand for traffic entrances, and there is nothing wrong with users' demand for traffic. So, where did 16WiFi's "wishful thinking" go wrong? In fact, it is very simple. The mistake is that users did not save 100 yuan every month through it.

What is the real user scenario like? According to the "2015 China Labor Market Development Report", the average commuting time in my country's major cities is directly proportional to the degree of road congestion. Beijing's commuting time reaches 97 minutes, while the commuting time in third- and fourth-tier cities is mostly around 30 minutes.

Based on the average 30-minute figure, the average user's mobile Internet traffic for 30 minutes is about 30M (about 8-15M for social chatting, and 150M for watching videos smoothly throughout the whole process). In this way, the traffic consumed by users on the bus on their way to and from get off work each month is 30M/person/day 20 days2=1.2GB, which is approximately equivalent to 60 yuan based on the operator's tariff.

How do users cope with the 60 yuan cost of bus data? A user survey conducted by the 16WiFi WeChat official account in November last year actually revealed the secret: the survey showed that in the 4G era, only 26% of users have insufficient data, 40% of users need to use it sparingly, and the data of other users' mobile phone packages is more than enough. In other words, only 26% of users can become users who just need bus WIFI, and the other 40% of people still need to see the actual use experience, otherwise they would rather use offline mobile entertainment or directly use mobile network data.

As for the actual user experience of 16WiFi, according to previous media tests on Guangzhou bus WIFI, the maximum network speed it can provide is only 3MB of bandwidth, which can guarantee 50 people online at the same time. The actual usage experience is between 3G and 4G cellular networks. It can handle instant messaging, browsing news, and swiping WeChat without any pressure. However, it is more difficult to watch videos and play games with high network quality requirements. If you encounter remote areas, tunnels, and crowded areas where mobile phones have difficulty accessing the Internet, you will not be able to do anything.

With the actual user base far less than the ideal scenario, according to 16WiFi’s own survey, users who are ultimately willing to install the 16WiFi APP and like the content in it only account for 13% of the installed base.

3. Is subway WiFi also viewed negatively?

Since 2012, when Internet giants were frantically scrambling for "traffic entrances", bus WiFi, with its unique advantage as an entrance in bus scenes, became the "territory" that major companies competed for. At that time, Bus Online, China Media Group and Qicai Group, to which 16WiFi belongs, were the first to enter the market. Later, Juwan Network and others joined the battle one after another, but they have all chosen to withdraw for similar reasons.

In 2015, when Bus Online CEO Wang Xianshu announced the company's business transformation to mobile Internet, he said, "In the process of exploring the mobile future of BOL (BusOnline), Bus Online found that the large-scale promotion of public transportation WiFi is actually a false alarm. Building a public transportation mobile WiFi network is a trial and error in Bus Online's transformation to mobile Internet."

Wang Xianshu said frankly that building public transportation WiFi has made Bus Online realize the user's need for WiFi - to surf the Internet, rather than to watch ads in pop-up windows on mobile phones, which has deepened the user's resistance. At the same time, the 4G network has reduced its fees and increased its speed, and the user's demand for mobile WiFi has decreased, making the cost of commercial WiFi operation even higher.

An industry insider who wishes to remain anonymous pointed out that bus WiFi is definitely not a good choice for startups, as its profitability is not feasible.

The person also believes that the subway is in a network-free environment and the demand for WiFi is stronger, but in his opinion, this is still a business that is about to be eliminated by the market, because with the enhancement of mobile network signals and the reduction of charges, subway WiFi may go the same way as bus WiFi.

4. Long-distance public WiFi business opportunities are still there

The person believes that compared with high-frequency, short-distance, and short-time public transportation WiFi, long-distance and low-frequency long-distance WiFi presents predictable business opportunities. In the scenario of long-distance travel, consumers have a very strong motivation to find free WiFi. As for on airplanes, WiFi has become the only option. Consumers' demand for WiFi during long-distance travel is much more rigid than that of short-distance travel.

The reporter found that the current long-distance transportation WiFi business in my country is basically concentrated in a company that specializes in WiFi construction and operation in the fields of long-distance buses, railways, and aviation - Air Media. At present, in terms of railways, Air Media has signed exclusive long-term contracts with several railway bureaus; in the field of long-distance buses, it has cooperated with more than 1,400 transportation companies, 800 passenger stations and 12 mainstream coach manufacturers, and has signed contracts for 230,000 buses. By the end of 2016, it was said that 100,000 of them had completed the installation of new equipment, and it has already been the market leader in terms of contract volume and actual installation volume.

The bigger game lies in the establishment of an O2O portal for travel, which will directly affect whether Air Media will be a company with a valuation of one billion yuan or hundreds of billions of yuan in the future.

In Air China's free WiFi service, this intersection is built through its core APP "Roundtrip". When traveling, passengers usually download "Roundtrip" before enjoying free Internet access. Stimulated by rigid demand and considering the hundreds of millions of long-distance round-trip passengers every year, if Air China covers enough areas, it is not difficult for "Roundtrip" to become a popular APP.

Industry Observation

Public WiFi has no profitable *** keys

In real life, many public WIFIs have many problems and the user experience is very poor. Take Guangzhou as an example. Yangcheng Evening News recently conducted a round of tests on Guangzhou's public WIFI and summarized five major pain points: elusive, unstable signal, unclear logo, cumbersome login, and the promised WIFI is gone; the *** concluded that in Guangzhou, it is wishful thinking to use WIFI for a day without turning on data.

Wang Zhongxiong, deputy secretary general of the China WiFi Alliance, pointed out that currently free WiFi in public places mainly relies on corporate investment, and if they cannot make a profit, they will not continue to provide services. However, WiFi in commercial districts, tourist attractions and other areas is doing better because it can guide customers to consume through advertising and achieve profit goals.

In fact, 16WiFi is also such an example. Once it found that the huge investment could not be recovered, it immediately made drastic measures. However, companies like PalmSmart, which operates airport WIFI, and AirMedia, which operates long-distance bus and train WIFI, have found appropriate business models and can continue to provide stable public services.

Wang Zhongxiong believes that urban public WiFi is equivalent to the city's roads, lighting and other infrastructure. It is not only for the public to use the Internet, but also to meet the smart city needs of government departments and citizens in terms of urban management, rescue command, public utilities, etc. In this way, this investment should be made by the government, so that the public can use it for free, but in terms of construction and business models, it will move from the traditional single model to a diversified model. As for the government, it should provide financial support for three to five years in the early stage, encourage social enterprises to participate, and ordinary consumers will be free; but related enterprises and public utilities need to adopt a charging system to ensure a sustainable business model without losses.