(Chinese Version)

The commercial Wi-Fi market has become a red ocean.

It seems to many that there’s no a clear threshold for entering the commercial Wi-Fi sector. Entrepreneurs interested in kickstarting their business in this sector can go to OEMs in Huizhou or Dongguan and purchase Wi-Fi routers at a low price from them.

That’s pretty much what’s needed to run a commercial Wi-Fi business. After that they would have to try to sell their routers to shops, which costs almost nothing. These entrepreneurs would first offer to businesses their commercial Wi-Fi service for free and then start to charge them service fee after a while. Since there isn’t any direct reference system of commercial Wi-Fi service, it’s very hard for the clients to know whether the commercial Wi-Fi service they have subscribed to is good or not.

In terms of the business model, Chinese commercial Wi-Fi companies generally rely on advertising service to make profits. Companies like 100MSH, WIWIDE, TreeBear etc., all have founders coming from the media or advertising industry. A company named Opsmarttech for example is backed by BlueFocus.

In the past few years, Chinese investment organizations have been pouring a great amount of money into the commercial Wi-Fi sector while most startups in this field are burning money to garner client users. Companies that fail to get a good figure in cash flow and to make profits would probably end up dead in the capital winter without even a slight chance of getting a new round of investment.

At present, the capital no longer considers the Wi-Fi sector as the medium that carries the value of entry portal, O2O or To-C. In other words, it’s not a blue ocean anymore, therefore it won’t be easy to attract an investment volume that’s over a hundred million RMB. It’s estimated by industry insiders that in the next one or two years the industry will have a major shuffling that will eliminate many companies.

To develop healthily, commercial Wi-Fi companies need to produce new blood by themselves.

This is exactly Exands’ strategy, a commercial Wi-Fi company that has provided commercial Wi-Fi services for over 200 brands including Starbucks, Haidilao, and 133 shopping malls of Wanda etc. The company has been generating profits in the past few years and it’s still profiting. However, different from the common business model for commercial Wi-Fi companies, which is profit through advertising service, Exands charges its clients directly.

In nature, Exands has become an example of enterprise service. The company has two natural advantages: 1. Enterprise service has a user retention property and can generate stable cash flow, which is what investors are looking for; 2. Enterprises will have more service demands in the future, and therefore commercial Wi-Fi companies would have more business opportunities, such as providing cloud service.

“China is short of commercial Wi-Fi companies that really connect the user experience, clients’ demand, social value and economic interest,” Exands’ founder Lu Guoming said.

Technology is the biggest obstacle

Exands was established in 2001 and its first client is the famous Yongxin in Shanghai. Yongxin hired Exands to fix the communication problem that occurred in two buildings that were separated by walls and space. Every year, Exands will invest 15% of its revenue in R&D. Its independently developed Wi-Fi cloud platform supports almost any AP device in all industries.

Lu Guoming told TMTpost that Exands’ service includes: meeting consumers’ demand for Wi-Fi connection to use the Internet, providing Wi-Fi connection for the company’s internal communication such as ordering, POS devices, logistics management etc.

To put it into perspective, Haidilao’s flagship restaurant serve hundreds of tables at the same time with the same amount of iPads serving as the menu and order platform. If something goes wrong with the Wi-Fi connection, then the restaurant would face losses. In this case, companies’ internal functions generally require Wi-Fi connection that’s more stable and safer.

Safety issues are very common in commercial Wi-Fi. The 312 event has been exposing the cyber security issues existing in public Wi-Fi for two consecutive years. On Wooyun’s platform, there are several hundreds of loopholes on Wi-Fi submitted by white hat hackers. Many loopholes involve the cyber security of millions of consumers. The Wi-Fi service in the Wooyun White Hat Conference held in this month in Beijing was provided by Exands.

In the contrary, many commercial Wi-Fi companies put cyber security and technology at the bottom of their priority. The entire commercial Wi-Fi industry has been stuck in the vicious cycle of low-cost R&D and high-cost PR for a long time, neglecting the power of technology and cyber security. “Many free Wi-Fi can’t even guarantee the separation when two people are using one Wi-Fi network at the same time. This is a fundamental technology, but many companies have failed to achieve,” said an industry insider.

Fishing Wi-Fi is still common in the market as well. Some commercial Wi-Fi will even install some apps in the background in users’ smartphone. It’s also no news that users’ data are being sold to businesses for profit. The privacy of the clients is the most important thing in cyber security. Many commercial Wi-Fi companies talk a good talk about big data, innovation and stuff, but they don’t even pay attention to such basic issue.

Convenience and safety are contradictory. To solve this proble, Exands has found a solution: The Hotspot 2.0 standard that seamlessly verifies hotspots, which is the security level of banks. When users first use the company’s Wi-Fi service, they would need to download to safety certificate of installment. After that, when they are near safe and reliable hotspots, their device will automatically make the connection. In this sense, convenience and safety are no longer a contradictory. Users won’t need to connect to the Wi-Fi network manually and are free of the assault of advertisements and fishing SSID.

Sustainable business model

Looking from the scenarios, the commercial Wi-Fi companies nowadays can be divided into two groups, which are resource-oriented and industry-oriented. Resource-oriented companies usually have clients that have communication troubles due to the natural environment, technological issues, or human activities. For example, subways companies, airlines, railway companies and train stations would need their service. On the other hand, industry-oriented companies have clients such as public bus companies, and hospitals etc. These companies generally have a simple and stable structure. But to be in this filed companies need to resourceful.

The two profit model for these two groups of commercial Wi-Fi companies mainly relies on advertising and big data. The former is a business about traffic data while the latter is about collecting data from the users and make something out of it. Make no mistake, this is an era of data in which the investment community and startups really value big data.

Lu Guoming believes in the business value of big data, but still commercial Wi-Fi companies don’t have the right to collect private data from the users. Individual data on users’ personal information and consuming pattern etc. can’t be used commercially. Even if the operators have some relevant license, they can only do group analysis instead of individual analysis. Otherwise, they endanger the users’ privacy. In Lu’s opinion, data on user’s consuming pattern should not be used in marketing campaign without permission and supervision.

“Having a license or a membership in some Wi-Fi security alliance doesn’t mean the commercial Wi-Fi company is capable of providing a safe Wi-Fi service. Exands itself is also far from that level,” he said

If commercial Wi-Fi companies base their business model on the protection of consumers’ private data, then they would probably end up with great regulation risks, leading to an unclear prospect. Besides advertising and data, commercial Wi-Fi companies also need to find another approach to sustainable business.

Exands is a technology provider. Wi-Fi is a technological method instead of operation method. By providing technology to gain profit might be the most stable way to produce blood independently. Exands aims to enter the enterprise platform and become a cloud service provider in the next few years through Wi-Fi technology.

“The challenges we are facing are not from Wi-Fi providers that offer free commercial Wi-Fi. What we are trying to achieve is the integration of enterprise service and cloud service based on Wi-Fi, allowing our enterprise clients to use cloud service to optimize the operation of their companies and reduce the cost of staff,” Lu Guoming concluded. “We also want to make it possible for our clients to collect data automatically and truly enhance the efficiency of enterprise operation. Our service will never stop. There is still a huge space in the enterprise market.”

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[The article is published and edited with authorization from the author @Sun Cheng, please note source and hyperlink when reproduce.]

Translated by Garrett Lee (Senior Translator at PAGE TO PAGE), working for TMTpost.