Why Starbucks keeps seeking Internet froth

Starbucks is declaring itself a “content curator” with its new Digital Network, an assemblage of free news, music, and other content available to customers using its now-free Wi-Fi network.

I’m going to need another shot of espresso.

Why does the ubiquitous coffee chain keep trying to reinvent itself as an Internet startup? Chief executive Howard Schultz has long pitched Starbucks as a “third place,” a spot to linger and savor frothed-up coffee, milk, and sugar.

But it is investors that he’d really like to get to stay a bit longer.

Starbucks shares have been hammered since McDonald’s made an aggressive move into cappuccino capitalism. The problem isn’t so much price competition: Starbucks has long catered to a crowd who wouldn’t be caught dead in the Golden Arches, and will gladly pay a premium for an affordable luxury that helps them get through the grind of a day in the office.

The real issue is that if Starbucks is competing with McDonald’s, that means it’s just another fast-food outlet.

True, Starbucks sells CDs and copies of the New York Times. But that doesn’t put it in the same business as Amazon.com. And lots of people follow Starbucks on social media. That doesn’t make it Facebook.

The Starbucks Digital Network takes advantage of the fact that Starbucks can identify people using its Wi-Fi network to access the Internet, and can offer them free or discounted content and upsell them on e-books, subscriptions, and other digital media. In theory, anyway. It’s an extension of an earlier deal to give Starbucks customers free access to the Wall Street Journal’s subscriber-only content.

But look at Starbucks’s Internet track record: One failed experiment after another, going back to the 1990s.

VentureBeat contributor Paul Boutin had it right when he wrote prophetically in 2003 that “Wi-Fi isn’t a luxury or even a commodity. It’s a condiment.”

Internet access at your coffee shop isn’t a gateway to a world of handpicked content. It’s just part of the service, like lighting and clean tables.

Why doesn’t Starbucks start trying to monetize cinnamon? That seems easier.

[Photo: bennovakovic]