Economics of public Wi-Fi monetization and advertising

Abstract

There has been a proliferation of public Wi-Fi hotspots that serve a significant amount of global mobile traffic today. In this paper, we propose a general Wi-Fi monetization model for public Wi-Fi hotspots deployed by venue owners (VOs), where VOs generate revenue from providing both the premium Wi-Fi access and the advertising sponsored Wi-Fi access to mobile users (MUs). With the premium access, MUs directly pay VOs for their Wi-Fi usage; while with the advertising sponsored access, MUs watch advertisements for the free usage of Wi-Fi. VOs sell their ad spaces to advertisers (ADs) via an ad platform, and share a proportion of the revenue with the ad platform. We formulate the economic interactions among the ad platform, VOs, MUs, and ADs as a three-stage Stackelberg game. By analyzing the equilibrium, we show that the ad platform's advertising revenue sharing policy affects a VO's Wi-Fi price but not the VO's advertising price. Moreover, we prove that a single term called equilibrium indicator determines whether a VO will fully rely on the premium access, or fully rely on the advertising sponsored access, or obtain revenue from both types of access. Numerical results show that the VO obtains a large revenue under a large advertising concentration level and a medium MU visiting frequency.