Google Loon Rollout

Business Strategy

Google’s Loon project is aimed at using lightweight weather balloons to swiftly provide wireless internet to areas that do not have the available infrastructure to be otherwise connected to the web. The technology works by beaming signals from a base station to balloons up to sixty-five kilometers away. Each of these balloons can beam its signal to a string of up to four other balloons. Each balloon has a transmission range of 30KM. Photo Credit:

The location of these balloons is set by raising into and out of prevailing winds and jet streams at various altitudes. By carefully varying altitude balloons can both predictably travel as well as remain in static position. The wireless data from the balloons can only be picked up by a special antenna that is available at a cost of $500 and has a wifi transmission range similar to currently available wireless routers.

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While looking at data and market reports for the best possible area to roll out the Google Loon Project, we focused on finding an expanding market with pronounced obstacles to traditional infrastructural expansion. We were also focused on locating a market where the service currently available from Project Loon would be a marked improvement over existing service in the area. The last point of consideration was to find a market where adoption of the service would be financially feasible.

By pushing first into the city centers of Indonesia with both personal systems and google owned public hotspots, we project that google will not only be able to capture this rapidly growing market, but encourage near universal adoption of other google services such as google wallet and google+. With a low initial investment of under five million USD, google can create its foothold into a three hundred million dollar potential market.

We identified Indonesia as having the best potential for Project Loon’s roll out after carefully considering a dozen other regions. The Indonesian population’s adoption of the internet is growing faster than the existing infrastructure can keep up. Currently, of the 248Million people residing in Indonesia, 51M are internet users. The prevalence of smartphones has also been experiencing rapid growth. In the past two years, smart phone ownership has gone from 12M in 2011 to 61M in 2013. An interesting thing to note about the number of smartphone users in the country is that they outweigh the number of people who have access to the internet by 10M. This points to a very concrete need that is not being met. Another statistic found that 93% of all internet users are active on facebook. This is the second highest adoption rate for social media in the world. Current internet offerings on the main islands suffer from clogged infrastructure, and frequent outages due to extreme weather. while this service is rated at 6MBPS, at peak hours observed speeds crawl to 0.5MBPS. The infrastructure for broadband is only available close to cities on the main islands. The only available alternative to broadband is satellite Internet which has an initial investment cost of 3-5 thousand, bandwidths capping at 1028k for a limited number of IPs and monthly costs as high as $1700.

Despite entering an already expensive market, the greatest obstacle to universal adoption in Indonesia will be cost. With Purchasing Power Parody in the bottom third of the world average, we will have to focus on initial adopters who have an established need and an appropriate budget. Google will target local hospitals and schools as well as humanitarian organizations in the area, such as Red Cross and the Bali Children’s Project. 

The bulk of Indonesia’s world class hospitals are found on the island of Java. By rolling out three ground stations, the loon project will not just be available to dozens of Indonesia’s best hospitals and schools, but over 60% of Indonesia’s population. The initial roll out will cost google just under $5 million dollars and cover the vast majority of a $300M market.

We estimate the initial need for 27 balloons per station. If we focus on the ground station covering Bali and East Java we can launch a web of 20 loons to provide full coverage. The inner circle shows the transmission range of the ground stations. The outer circles show a conservative range attainable from loon daisy chaining. Based on the population density of this area we established the need for strong overlap and more concentrated balloons. These three ground stations allow us to cover over 80% of Java without daisy chaining any loons. This allows each loon to serve the maximum number of users at a time without sacrificing each user’s internet speed.

To reach the general population, google will provide central hotspots where people can gather to use the internet. This will enable google to reach the 10 Million smartphone owners who do not yet have internet access. They will also be able to extend service to users who can not afford the $28 per month cost of broadband internet. To do this we will offer tiered use plans as well as pay as you go plans – setting up unlimited use for as little as $25 a month and offering per minute pricing that is competitive with local internet cafes, without the hassle of waiting for a computer to become available. As 90% of Indonesians do not have a bank account, we will leverage Google Wallet as the primary payment method. Google Wallet accounts will be loaded with prepaid cards available for purchase at local cellular and convenience stores. Also, to drive users to Google+ from Facebook, google should allow free access to google + at any of these public hotspots. This would have a strong draw to new internet users and allow Google to gain a social networking hold in this emerging market.

While the initial rollout will cover half of the population of Indonesia (130M) for a$5M investment, the real benefit of Project Loon is how well it lends itself to covering the 17500 islands of Indonesia. For $15M Project Loon will be able to cover every smaller island in the nation. While this will not increase the number of users served by more than 10%, it will provide a differential benefit to the 130M users already covered that has massive obstacles to imitation.

There are two main improvements that google should work towards to fully capture this market. The first would be to eliminate the need for the system to require specialized ground antennas. If the balloons could communicate directly with existing smartphones, this service would be much more marketable to the people living and working in more rural areas. The second improvement would be to increase the bandwidth capabilities of each balloon beyond 150MBPS. The largest recurring cost is also the largest investment to scale the service. As bandwidth is increased the cost of scaling and maintaining the service will be reduced.

The third phase of the rollout will cover the final 30% of the country and cost $10M. We’ve identified this section of the country as one of the hardest to break into, which is why we have left it for last. This will enable the residents of Indonesia to have coverage across the entire country. With the installation of google hotspots, the internet would be available to every populated part of the country for under $35 Million. To focus on capturing the 10M (and growing) smartphone users without internet access we will offer many tiers of service to help capture and grow this market. We estimate that 85% of the market will log on using the free google plus access and that over 50% will be paying users. If only 1M users subscribe then Google will see over $150M in revenue from subscriptions in the first year. We suspect that small business adoption will account for a$0.5M in antenna sales and that pay as you go accounts will account for an additional 5M users and a revenue of $120-$150M per year. As coverage expands into the islands and adoption increases we expect adoption for the island to peak at 80% of the market. Adoption of Project Loon should lessen the load on existing infrastructure, eventually matching its speeds with those observed from Project Loon. The ease of expansion for Project Loon will vastly outpace broadband’s ability to keep up with this growing market.

The most similar potential markets are Brazil and India. While their geography and weather do not pose as serious an obstacle to improvement and expansion using the current infrastructure, the existing service is problematic, and many areas of the countries are not covered at all. The economies of Brazil and India are in better shape than Indonesia’s and will be more likely supported at the level of the homeowner and higher dollar monthly subscribers.

By pushing first into the city centers of Indonesia with both personal systems and google owned public hotspots, we project that google will gain a sizable foothold in this market. Timing is also perfect for the wide-scale adoption of other google services such as Google+ Gmail and Google Wallet. While we estimate $300M annual revenue from subscriptions and services, the real payoff will be in data-driven ad revenue. It remains to be seen what the value of a captive audience of 100M+ Indonesians will be, but it is safe to say that ad revenues will outpace subscription exponentially.

This case competition was presented by Princeton University as a non-MBA case competition. Our team consisted of myself and three of my classmates in Graduate School. Marcus Townsend – Bachelors in Mechanical Engineering, Chintan Sharma – Bachelors in Mechanical Engineering, Anthony Prats – Bachelors in Business, and myself. We were given 18 hours to address the problem statement as outlined on their website, and construct a presentation to present in front of our peers and a panel of judges.