MuniWireless

Microsoft’s new alliance with JiWire to deliver “ultramercials” online greatly enhances the business case for free wireless Internet access supported by advertising. This could be just what the muni market needs to revive interest in free ad-sponsored service on muni networks.

The ad supported model took off like a shot a few years back with munis looking to their Internet providers to generate enough revenue from the private sector to underwrite the cost to deploy a network and provide free service to users. But it waned seriously as providers struggled to sell enough ads at high enough rates to offset the high costs of deployments. MetroFi, which pioneered the ad-supported model, this year announced that it would also seek anchor tenant commitments from cities to insure a revenue stream.

But, with the introduction of JiWire’s advertising platform and its partnership with MSN to deliver national advertising across it, that could all change. In fact, the service is expected to debut in one of MetroFi’s key markets–Portland, Oregon, as well as in Oakland County, Mi., where the service provider is MichTel.

Microsoft’s Stefan Weitz, director of planning for MSN, spoke to the viability of the ad-supported model at our New England conference last month. (Click here to see a copy of his presentation.) He said then that it was a good compliment to subscription services but did not tip the company’s hand to this new deal with JiWire.

The two companies announced their partnership today. The companies did not release the terms of their partnership. But the revenue stream their deal promises expands the possibilities for profits‚Äö?Ñ?Ævery high profits, in fact, not only for them but also for the services providers in muni markets and, possibily, for the munis themselves.

Microsoft will use JiWire’s robust new advertising platform to present Ultramercials via its MSN network. Think of Ultramercials as commercials of 10 seconds to as long as two minutes that pop up before a user can access the Internet, or while the person is using it. The user, in the registration and authentication process, agrees to view them while signing up for the service. They can be configured to present one long commercial, for instance, in advance of several hours of free use or to play at various times during the interval in which the user is online.

The reason it is so profitable all comes down to CPM.

CPM stands for cost per thousand impressions (M is the Roman numeral for thousand). In other words, it represents the amount one charges for every thousand viewers that a magazine, radio station, or online site can deliver. In the online world, the average CPM is usually well below $10 but JiWire’s Ultramercials can generate as much as $35 to even $150 CPM. Why? Well, consider the number of eyeballs that muni markets promise.

Already Oakland County, with only 18.5 square miles of its proposed 910 square mile network deployed, is showing results.The OaklandCounty muni network promises to be the nation’s largest when it is fully deployed in 2008; it is projected to serve 1.2 million people.

Gary Greenberg, vice-president of business development at MichTel, told me the business model in OaklandCounty “has many different sources of revenue but the advertising is turning into a much bigger piece. As long as we can bring in the users, it looks like we’re going to have plenty of advertisers.” OaklandCounty’s network now covers 18.5 square miles and, according to Greenberg, “we’re gaining about 100 users a day on average.” The free ad-supported tier promises speeds of 128 Kbps. By the end of 2008 when the network is fully deployed, he said, MichTel expects it will attract from 200,000 to 300,000 visitors a day.

David Blumenfeld, JiWire’s vice president of marketing, told me the high ad rate the ultramercials can command is also due to the nature of the mobile demographic, connected professionals, and to the variety of advertising formats that JiWire’s platform can deliver. It allows users to “opt in” to view ultramercials of various lengths at various intervals during the time they are online. Of course, users who tire of the ultramercials are given the option of registering for paid service and that, too, provides an incentive for service providers to adopt the platform.

MSN delivers the advertising, relieving local authorities and service providers from getting into the ad-sales business to a guarantee revenue stream. The MSN advertisers tend to be large national advertisers such as Toshiba and Expedia which target mobile professionals. But Blumenfeld said the platform could be configured to accommodate local advertising, as well.

Blumenfeld told me there’s not enough local usage yet to entice somebody to target down to a “hyper-local level” but the company envisioins the day when there will be. “We can cerainly target ads to that level, it’s really more of a matter of the market being ready for it,” he said. Certainly, large muni networks hold the promise for that level of usage.

It readily adds up to big money that could jumpstart muni business models that incorporate advertising.

The partnership also represents a big move for both companies, especially Microsoft which is locked in competition with Google. Microsoft officials expect the alliance will greatly expand the reach of MSN and reinforce the company’s competitive position against Google, which is also moving into the muni market. Google is partnering with EarthLink to provide a free ad-supported tier of service in the proposed San Francisco network.

The wires are buzzing about the partnership today. Check out the links below for more on the deal.

Click here for Wi-Fi Net News’ report.

Click here for ComputerWorld’s story.

Click here for C/Net’s story.