The Half-Caffeinated Media Company

Starbucks has gone soul searching - and it's banking on the Internet to do the heavy lifting. As the coffee chain gets squeezed between independent espresso bars and giants like McDonald's, it wants to boost the coffeehouse experience it once represented - a hangout place between work and home.

To that end, it is hyping its Starbucks Digital Network, an under-construction online portal of aggregated content that will only be available in its stores. Due to launch this fall, the site will pop up whenever you log into Starbucks' free Wi-Fi service. Working with Yahoo, Starbucks will use the network to give you customized local information and will also organize other content you can get elsewhere. The hook is that it also gives free access to certain paid content, such as Wall Street Journal articles and iTunes songs.

The collection of local news and other third-party content, along with a free way to get it, is all about enhancing Starbucks as a community center or "third place," CEO Howard Schulz told a business conference in June. This year Schultz has been pushing his lieutenants to return to community roots. "A key aspect of the network is that it can be a hyper-local, community-oriented offering," says Adam Brotman, Starbucks' vice president of digital ventures. By late August, the Starbucks digital network had signed up Yahoo, The New York Times, USA Today, Zagat, Rodale, Nickelodeon and charity

Eventually, the in-store network is expected to expand into exclusive ebook downloads, games and other social activities, some of which will be paid. Starbucks will make money through revenue sharing with partners when customers buy downloads or subscribe to partners' services. That means that in addition to selling coffee mugs, breath mints, notebooks, and other paraphernalia, the stores could also become a hub for ecommerce.

But wait a minute. Doesn't that bring Starbucks right back to its role as a corporate retailer, which is an experience quite different from a European coffeehouse?

Not necessarily, says Kevin Barenblat, CEO of social marketing company Context Optional. "This network will reinforce the company's position as a [cultural] influencer. Starbucks already is a curator of content with the music CDs it sells," he says.

So far, the company is shrugging off concerns that customers will hog table space while they explore the new Starbucks network.

"It's a great idea for Starbucks to go the extra mile," says David Armon, former president of PR Newswire. But beware. "If the company turns off unfettered Wi-Fi access so it can push its partners' content, the backlash will be fierce, " he cautions. And there are plenty of places to vent: Starbucks had amassed 12 million Facebook fans and one million Twitter followers, by late August.

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