BlackBerry: A Dual Personality Disorder?

[RIM is torn between two very different market segments: Enterprise mobile messaging and text-addicted consumers. Amidst troubling signs for RIM's future, the company needs to reconcile its dual personality. VisionMobile Research Partner Michael Vakulenko explains why RIM needs to create separate product experiences for business users and consumers and analyses the possibilities.]

It’s hardly news today that RIM is at the verge of losing its smartphone leadership. Analysts dog-pile on the company downgrading the stock amidst declining smartphone market share, increasing subscriber acquisition costs, increasing competition from Apple and a slew of Android handsets from tens of OEMs.

A lot has changed since RIM earned its success on providing mobile push-email to enterprises. Today RIM serves two distinct market segments: enterprise users and text-addicted consumers.

Contrary to common perception, enterprise market is no longer RIM’s largest market. Back in June 2009 the company reported in that 80% of the growth came from consumers. Today in fact more than half of BlackBerry active users are consumers. Who are these people?

BlackBerry was conceived as a messaging device with optimized user interface and physical keyboard being its primary advantages. These advantages found warm reception in the hands of text-addicted youth, who according to Nielsen are sending on average 3,339 texts (SMS) a month in the US.

SMS is not the only way to socialize using BlackBerry. BlackBerry Messenger (BBM) is a proprietary instant messaging application running on BlackBerry smartphones. BBM uses BlackBerry PIN programed in the device to identify BBM users. The application supports avatars, groups, photo sharing, voice notes and reading the PIN using bar code. Because of the device-specific BlackBerry PIN, BBM has strong viral effect. A person must have a BlackBerry device to participate in the social network formed around BBM. As of May 2010, BBM had about 22.5 million users, representing close to 50% penetration across a total subscription base of 46 million subscribers.

In countries like Saudi Arabia and the United Arab Emirates, about 90% of BlackBerry owners use the BBM service – a figure which concerned government authorities, which weren’t able to intercept BBM communications. In the UK and France BBM is one of the main drivers for BlackBerry device sales. In Netherlands, Venezuela, Indonesia and Thailand users put the bar code of their BlackBerry PIN on their business cards, t-shirts or even swimwear.

A Personality Dilemma
Consumer success is great news for RIM. It is however increasingly difficult for RIM to maneuver between its established high-margin enterprise market, and the less familiar lower-margin consumer market. RIM will risk loosing both markets to competition, if it continues to serve them with the same brand and product portfolio. Enterprise users have very different and often conflicting expectations compared to the enthusiasts of message-based socializing:

- Cost is important factor for many text-addicts. Many of them are young or live in developing counties. A BlackBerry price tag in the pre-paid range has significant allure for this segment. For example, Carphone Warehouse sells BlackBerry Curve 8520 for £129.95 (more than $200) with a Pay-as-You-Go plan. On the enterprise side, the last thing that a high-flying executive wants is to use a smartphone associated with a cheapy, “smartphone-for-the-rest-of-us” brand (for example see this T-Mobile commercial)

- Many text-addicts buy BlackBerry because they don’t like touch screen. If they would, many of them would be buying iPhone or Android phones. Instead they prefer a device with physical keyboard and optimized for one-handed operation. On the enterprise side, touch screen is important to compete against high-end iPhone, iPad and Android devices.

- Text-addicts need texting, instant messaging and integration with popular social networks.  Enterprise users need emphasis on email, PDA functions, synchronization, MS Office compatibility and device management.

- Security is a big issue in the enterprise, while many consumers don’t know how to spell it – as demonstrated by the wide adoption of Facebook, despite privacy issues.

Is RIM putting its R&D cycles and money in the right places? No – RIM seems to be gravitating towards the convenient and familiar enterprise segment playing catchup with Apple. RIM acquired DataWiz, maker of MS Office compatibility software, in September 2010; Introduced high-end touch screen model, BlackBerry Torch, in August 2010; and recently announced PlayBook tablet squarely aimed at the enterprise market.
There is very little in the recent RIM product announcements to bolster confidence in the company’s historical smartphone leadership. New developments are mostly about catching up with Apple, without introducing anything significantly new and relevant for RIM’s devoted user base.

A Gordian Solution
Instead of chasing Apple, RIM shall build on its advantages and focus on unique needs of its devoted user base. The first step would be separating its product portfolio into enterprise and consumer product lines. This will free consumer products of unnecessary burden and complexity, while keeping enterprise products focused on productivity and security.

The second step would be enhancing the BlackBerry Product Experience (PX) by building up the social features of BBM on the consumer side and beefing up on the proven push-infrastructure, security and team collaboration features on the enterprise side.
Today, competition in the mobile industry shapes around Experience Ecosystems comprising of connected devices, applications, services and communities. New Product Experiences based on connected services should be the focus for RIM’s innovation. Here’s how RIM could create service-based product differentiation for future versions of BlackBerry devices.

Location-based games have proved to be very popular, especially with RIM’s consumer demographics. Foursquare, a company developing a smartphone check-in service, reached a valuation of $125M having just 1.8 Million users and 27 Employees.

Compare this with RIM who has over 20 Million users in their BBM network. Why can’t RIM build its own checkin service on top of BBM, exclusive to BlackBerry devices? Adding location context to BBM messaging will greatly enhance social interaction of the platform’s users. Moreover, check-in apps show strong advertising potential. With 20 Million BBM users RIM could create new revenue streams for itself and mobile operators.

Even compulsive texters use the phone once in a while, but for them voice call is often a part of a longer conversation taking place using multiple means of communication. RIM could integrate voice calling with BBM making voice part of a wider social context. Users would enjoy better communication experience, while operators would be happy to see users consuming more voice minutes.

Business users use their devices in rather different context from consumers. Many of them are mobile and depend on collaborating with their colleagues remotely. BlackBerry-based team collaboration could become a killer app and differentiator for such users. Real-time activity updates, multiparty discussions, wikis, collaborative task lists have all enjoyed success on the Internet as shown by Teambox, Yammer, 37 signals and long list of other Internet collaboration startups. Why not integrate information sharing tools and video calling into the operating system making BlackBerry indispensable not only for email, but for team collaboration?

The Clock is Ticking
In order to keep its position in the smartphone market RIM needs to create separate Product Experiences for consumer and business users, and focus on innovation in connected services.

RIM doesn’t have much time for experiments with the PlayBook tablet, or on internal debates about replacing the vintage BlackBerry OS with the more capable QNX OS. The mobile market continues to evolve rapidly: Apple is making steady progress in improving enterprise readiness of its products, prompting mass defections of enterprise users to more appealing iPhone and iPad devices. At the same time, Android is spreading into low-cost smartphones threatening to displace BBM with Internet-based alternatives.

What do you think RIM should do to keep its smartphone leadership position?

- Michael

[Michael Vakulenko is a Research Partner at VisionMobile. He has been working in the mobile industry for over 16 years starting his career in wireless in Qualcomm. Michael has experience across many aspects of mobile technologies including handset software, mobile services, network infrastructure and wireless system engineering. He can be reached at michael [/at/] visionmobile.com]

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