Is Setting BBM Free a Smart Move?

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Earlier this month, Research In Motion Limited (BBRY) announced that its iconic Messenger service will soon emerge from the confines of its phones. Speaking at the BlackBerry Live developer conference, software vice president Andrew Bocking said the service would now be available on iOS from Apple Inc. (AAPL) and Android from Google Inc. (GOOG). And by becoming a “multi-platform mobile service” it is aiming to increase its user base manifold.

If increasing its user base is the primary motive for this move, BlackBerry is up against some formidable competition. Facebook, Inc.’s (FB) Messenger and Microsoft’s (MSFT) Skype have 1.11 billion and 280 million users, respectively. Even smaller applications like WhatsApp and WeChat have 200 and 190 million users, respectively. To put it succinctly, BlackBerry will be entering a hugely overpopulated arena.

More importantly, the application, popularly known as the BBM, is often cited as the primary reason why consumers buy the company’s phones. It has been the real-time messenger of choice for many, preferred for the security and privacy that it offers. If it becomes available on competing hardware, it will become far easier for loyalists of the phone to make a transition to other phones. But the incentive to purchase a BlackBerry device for a new user will become that lower.

The company is only now emerging from a period of financial difficulties. It returned to profitability in its previous quarter, with net income increasing by $9 million to $98 million. And this is a great improvement considering it had reported a loss of $125 million in the same period last year.

Much of this success can be attributed to the newly released Z10 model. The company shipped 6 million phones last quarter with the Z10, accounting for 1 million of these. Its keyboard equipped sister device the Q10 has already been launched in quite a few markets and is expected to become the company’s next cash cow.

This is because the majority of phones sold by the company use its old software, the BlackBerry 7. Now equipped with the BlackBerry 10 operating system and a keyboard, old enthusiasts may have a new reason to switch to the phone.

Additionally, the company plans to launch a lower priced device called the Q5. Positioned at a lower price range compared to Apple, it is expected to help the company gain ground in emerging markets.

But this may not resolve all the company’s troubles. Despite the gains it made in its last quarter, revenue dipped 2% sequentially to $2.7 billion and was 36% lower than the same quarter a year ago. And now by deciding to make BBM available on other platforms, the company stands to lose a major source of revenue: service fees. Service fees made up 36% of sales or $964 million in the last quarter.

However, BlackBerry CEO Thorsten Heins is confident that he’s made the right move. Even BlackBerry founder Mike Lazaridis believes the BlackBerry 10 has its own strengths and can attract users even without the exclusivity of BBM. This despite the fact that BBM is a steady source of revenue and is the choice of 61 million users who use it to send 10 billion messages a day. Fifty-one million of these users use the application for at least 90 minutes each day.

The channels feature of BBM may be the key to monetizing this move. This is because BBM Channels are chat rooms centered on a particular theme. This may become an attractive feature for potential advertisers who could connect with focused segments by sponsoring posts.

But even more importantly, this is possibly a decision which BlackBerry should have taken some time ago. With the proliferation of several free real-time messenger services, many believe it is too little, too late for the company. However, other industry watchers think that it may still prove to be a smart move.

Not only is there an opportunity to monetize BBM, but also because of the channels feature it may become help the company regain lost ground. Windows Phone has relegated BlackBerry to the fourth spot in the global smartphone market. By offering BBM free on other platforms, it may help users sample its interface. This may help it to attract new consumers for its phones.

At the same time, existing users will be able to easily connect with those using other platforms. However, the decision raises many questions. And only the future holds all the answers.

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