Public transport Wi-Fi is too difficult to monetize and too costly to be shut down in more than a dozen cities

"16WiFi", owned by Beijing Yilure Hotspot Information Technology Co., Ltd., was once very successful. It was invested and endorsed by the well-known host Lang Yongchun and received a total of 438 million yuan in two rounds of financing. Now it is in a helpless situation of "slimming down". On February 16, the public transportation WiFi operator "16WiFi" published a letter to all users on its official WeChat account "16 Says", saying that it decided to temporarily shut down in Guangzhou, Shanghai, Shenzhen, Foshan, Fuzhou, Tianjin, Changsha, Hangzhou, Haikou, Shaoxing, and Kaifeng, retaining Beijing and Kunming as model cities. 16WiFi attributed the reasons for the above decision to "huge pressure from high costs, obstruction of the backward operation model, and lack of government funding support."

[[183684]]

A person related to 16WiFi told the reporter of "Daily Economic News" that the company will further increase revenue and reduce expenditure at the strategic level and explore new business models through cooperation with some big data companies.

It is worth noting that the listed company Huihuang Technology previously invested 110 million yuan in 16WiFi's parent company Beijing Qicaitongda Media Co., Ltd., and Lang Yongchun was also its early shareholder.

Bunaxin, a well-known TMT researcher, told reporters that the biggest problem with bus WiFi operators' profitability is insufficient identification of customer needs and high traffic generation costs. Wireless Internet access is not a rigid demand for short-distance travel, but for long-distance travel, WiFi has a certain potential, but it still depends on how the front end is cut in and the design of the profit-sharing model.

Keep Beijing and Kunming as models

A person related to 16WiFi told the reporter of Daily Economic News that the employees in the temporarily closed cities were withdrawn to the Beijing base, and there were some adjustments in the company structure. The operation and maintenance in Beijing and Kunming would be strengthened, and the deployment of the big data team would be strengthened. The APP content team personnel and some APP technical personnel had been adjusted before January 2017, and some had been laid off.

When talking about why the above two cities were maintained, a 16WiFi official said that Beijing is the company's base camp, with the largest number of deployed vehicles and a large number of bus passengers. At the same time, the human resources for operation and maintenance and operations are the most sufficient. The Kunming branch was established relatively long ago, and the team's personnel structure and relationships with bus companies, operators and other parties are stable, so Beijing and Kunming were retained as sample cities.

The person also said that the company will further increase revenue and reduce expenditure at the strategic level. On the one hand, it will further reduce costs; on the other hand, it will explore new business models through cooperation with some big data companies. On the technical level, it will develop advertising systems to effectively combine big data with scenarios and advertising precision marketing. In addition, it will also explore cooperation with some cities where bus companies do not charge fees to open up new markets.

However, the other side of the current "slimming down" of the two cities is the "expansion" that was in stark contrast to before.

Relevant data released by "16Say" on December 30, 2016 showed that in 2016, 16WiFi left its footprint in more than 10 cities across the country.

Regarding future financing and expansion plans, Qiu Chaomin, founder and chairman of 16WiFi, once said: "We will expand in a planned, step-by-step and rhythmic manner, and will not expand blindly. Now that we have launched the network in a city, we hope to deepen our presence in that city. For example, Kunming launched free WiFi in April, and the current revenue can cover 70% of the operating costs."

Huihuang Technology invested over 100 million yuan

It is worth noting that 16WiFi, which is currently in the process of "slimming down", was previously favored by capital.

According to China Securities Journal, at that time, Qiu Chaomin, chairman of Qicai Group, chairman and founder of 16WiFi, said that 16WiFi's Series A financing was completed in November 2015, with joint investment from Huihuang Technology, Saisheng Investment, and Shoujia Investment, with a financing amount of 138 million yuan. On June 20 last year, 16WiFi announced that its Series B financing was nearing completion, and it had received 300 million yuan, which was also the largest Series B financing obtained in the commercial WiFi field so far.

In addition, in November 2015, the listed company Huihuang Technology subscribed to the registered capital of Beijing Qicaitongda Media Co., Ltd. with its own funds of RMB 100 million, accounting for 8.79% of its total share capital, thus entering the field of public transportation WiFi. On June 20, 2016, Huihuang Technology subscribed to the registered capital of Qicaitongda with RMB 227,603 with its own funds of RMB 10 million. After the transaction was completed, Huihuang Technology held a total of 9.03% of the shares of Qicaitongda.

When talking about 16WiFi's plan to list on the NEEQ and its profitability, a person related to 16WiFi said that the NEEQ policy has changed and the company is a loss-making enterprise and cannot be listed on the NEEQ for the time being. As the number of cities where the network is opened increases, 16WiFi's profitability is on the rise before the closure of cities, but unfortunately the cost pressure is too great and it can only cut off its arms to survive.

In addition, the reporter found a 16WiFi advertisement with Lang Yongchun as the spokesperson on bus No. 10. The reporter checked the industrial and commercial information and found that Lang Yongchun's name was also among the shareholders of Beijing Jiahua Xintong Investment Partnership (Limited Partnership), one of the investors of Beijing Qicai Tongda Media Co., Ltd., a shareholder of Beijing Yilu Hotspot Information Technology Co., Ltd. The above-mentioned 16WiFi related person also claimed that "he is an indirect investor of our company."

Difficulty in monetization due to cost pressure

At the same time, some users and industry insiders have raised questions about the profit model of public transportation WiFi. 16WiFi related personnel said that the current difficulty in realizing the monetization of public transportation WiFi is due to the excessive cost pressure. The main cost pressure comes from the entrance fee of the bus company and the traffic fee purchased from the operator. If the two costs can be reduced, there is hope to achieve a balance between income and expenditure through reasonable operation. In 2016, the average number of bicycle users in Kunming reached 80. Under the policy of "high consumption cap" for traffic fees, the balance between income and expenditure has been achieved without increasing operating costs as the number of users increases. Through refined operations, public transportation WiFi can be successful.

In terms of future business models, it said it will explore the direction of big data, cooperate with more big data companies, deepen its presence in the Beijing and Kunming markets, develop a sustainable and viable business model, increase revenue and reduce costs, and open up more low-cost markets.

A person related to 16WiFi also revealed that it has reached data cooperation with Didi, AutoNavi, Baidu and other companies, started to develop an advertising system with big data as the core, and will introduce new investors.

When talking about the future development of public transportation WiFi, a person related to 16WiFi admitted that 16WiFi has been deeply involved in the public transportation WiFi field for 5 years and has accumulated rich experience in both technical aspects and operation and maintenance, market and operation. "Some of our peers in the public transportation WiFi field have been acquired by us, and some have given up operations. If 16WiFi fails, it will be difficult for other large-scale public transportation WiFi companies to emerge."

Bunaxin believes that the investment community values ​​Internet companies or whether they can solve scenario problems. Obviously, there are problems with the scenario design of public transportation WiFi. If it is ready to use, it means that the product is just a tool, not a platform, and the profit margin of the tool is definitely not as good as that of the platform. Compared with short-distance travel, long-distance travel has more room for imagination. Strong operators such as railways and airplanes can cultivate their own WiFi companies internally.

However, facing the competition in the industry, Qiu Chaomin was quite confident. He once told the investment tide that the airline WiFi faces high-end users, and should explore how to make users spend more per customer and have stronger monetization capabilities. However, 16WiFi faces relatively low-end users, with a relatively low per customer price but covering more users, so 16WiFi's focus is different.

The above-mentioned 16WiFi related person also said that bus WiFi has gone through the stage of technology exploration, market competition, and now the stage of business model exploration. "Some peers who cannot operate on a large scale have collapsed, and 16WiFi is also facing the torture of its business model."