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Fon founder Martin Varsavsky with a Fon router.
Fon, the free hotspot provider that gives away free Wi-Fi routers and wants to build a worldwide, and free, Wi-Fi network has announced closing a new investment round. They raised $9.5 Million from a bunch of investors. The current shareholders (Google, British Telecom, Digital Garage and Martin Varsavsky) invested some but there is also a new investor involved: the US Venture Capital arm of Sistema, Russia´s leading telco. This also means that FON will start expanding into Russia.
Another exciting new plan is the development of a sort of personal proxy server built into a Fon Hotspot. It will up- and download content from the internet for you while you are doing other stuff. It will be called Fonera 2.0 and we can’t wait to get one for free.
And that might take longer than expected because Martin has announced that he is going to be a little more cautious with his money. No more free hardware and slightly higher fees will help Fon decrease their burn-rate from 1.2 million a month to $500.000 a month. There are also plans to upgrade to the updated WI-Fi protocol lovingly called ‘802.11n’.
There is no mention of Index Ventures and Sequoia Capital who invested in earlier rounds. These earlier rounds also brought in a lot more money so it is likely that Fon is less successful than they try to appear. It is very hard to find out how many active Foneros are currently active and estimations range from 125.000 to 1 million+. Fon is not very transparent when it comes to showing the number of routers which are really active. If you have set-up a Fon hotspot in the past you must enter a request to have it removed from their maps. If you don’t they still count you in their media and investor statistics, as a live Fon Hotspot. Of the Fon Hotspots that are actually live only a small percentage will be a an actual hotspot where people accidently stumble upon it.
As a former Wi-Fi Hotspot operator (sold my business in 2003) I’m not very optimistic about Fon’s future. The dream of having free and ubiquitous Wi-Fi everywhere is extremely alluring and it is clear and understandable that Fon has a large community of eager believers.
Fon makes for a great story but is that enough to build a business on.
Free, as in ‘for nothing’, is the theme of the latest issue of Wired. The issue, centered around ‘Free! Why $0.00 Is the Future of Business‘ by editor in chief Chris Anderson of The Long Tail fame, has sparked a long list of blog posts on every aspect of ‘free’. In this post I’d like to list some of my favorite ways of offering something to the market for free . Of course, lots of start-ups are focused on selling advertising directly or through Adsense, but there are other options to consider. The list isn’t complete of course, so please feel free to comment with other ideas!
Offer products for free and extract data from its use to sell
The best example I think is Newsgator. Newsgator offers several RSS readers and services (Newsgator, NetNewsWire, FeedDemon) and used to charge for them - they had actual revenue by charging for their products! Recently however, Newsgator decided to offer all readers for free. That way they gather a lot more data, which they will aggregate and offer as ‘attiontion data’ to publishers, journalists and other people interested in buzz. A risky way of transforming a business, but also one that could inspire a lot of other start-ups to rethink their sources of income.
If you want to learn more about this concept you should head over to the podcast section of Educators Corner by the Stanford Technology Ventures Program, where Mitch Kapor talks about his new start-up Foxmarks. Foxmarks enables users to synchronise different lists of bookmarks for free and plans to develop business cases on top of the many millions of bookmarks they aggregate through their product.
Offer the main product for free, charge for complementary products
This is the main thinking behind some of the recent acquisitions of open source products like MySQL. When you offer a product for free (MySQL), if you’re lucky, you’ll see a growing demand in your complementary products (like the servers that SUN offers).
Google is another great example: they need more pages to plave relevant ads on, so news, e-mail, search results, book pages, product search are great ways to serve more pages to more people and thus having more space to put ads on. For an excellent article on this, head over to Strategy+Business for ‘The Google Enigma‘ by Nicholas G. Carr.
In september Fon, the free Wi-Fi initiative backed by Google, Sequoia Capital, and Index Ventures, launched a B2B program in an effort to get more coverage in densely populated areas. It promised 50% of all revenues to FONtrepreneurs willing to buy a marketing starter kit to promote and sell FON. This kit included 3 La Foneras, a Fontenna and flyers which people could use to persuade local cafés and bars to offer free Wi-Fi.
Fon has always been promoted as a community effort with hundreds of thousands of happy and cooperative members. So this should have worked. But the program has been terminated before it was launched. Here is why:
Fon originally invited 860 people from 5 countries: USA, Canada, Belgium, Holland and Germany.
Of those, 39 people replied and showed interest.
Of those, 13 people agreed to go through the legal loop holes that the laywers required.
Of those, 5 used the promo code
Of those, 2 immediately put the La Foneras for sale on eBay
Oops!
It is hard to estimate how successful Fon REALLY is. They have previously claimed 200.000 hotspots worldwide and Fon’s founder has a full-time job talking about the imminent success of Fon at every major conference in the world. But how many of those hotspots are connected, active and available for other people is anyones guess. Judging from Martin Varsavsky’s ever present smile all is fine and dandy in FonLand.
Here is an interview with Joanna Rees, the US representative for Fon including a few critical questions at the end of the interview.
Written on April 12, 2008 – 4:19 pm
Written on March 14, 2008 – 1:13 pm
Free, as in ‘for nothing’, is the theme of the latest issue of Wired. The issue, centered around ‘
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