As its hardware sales keep falling, BlackBerry (BBRY) is loosening its grip on one of its most valuable services. The company announced on May 14 that this summer it will release iPhone- and Android-compatible versions of BlackBerry Messenger, a service that allows users to share instant messages and make voice calls to other BlackBerry owners through its wireless servers without extra charges. The service transmits more than 10 billion messages daily to its 60 million worldwide users. “It’s time to bring BBM to a greater audience, no matter what mobile device they carry,” Chief Executive Officer Thorsten Heins said at the annual BlackBerry Live conference in Orlando. He’s betting that widening the user base of the service will enhance its utility—and lead to more sales of the company’s smartphones.
Messenger’s free transmissions are a big selling point in emerging markets, especially in countries where Web and text plans are expensive. It’s also more secure than similar apps, encrypting user communications with PIN codes that users must share to communicate with each other. Because Messenger has until now only connected BlackBerrys to each other, it’s become less valuable as the company has bled customers. Offering it to hundreds of millions of Android and iPhone users could help, says Kevin Stadtler, president of Stadtler Capital Management and a BlackBerry investor. “They actually have a better shot of selling BlackBerry devices by giving away the BBM app than not,” Stadtler says.
In March the Waterloo (Ont.)-based company surprised analysts by reporting a profit in its fourth quarter, but it also lost 3 million subscribers in that period. Its user base dropped to 76 million as sales fell 36 percent from a year earlier. While Heins has cut costs in the past year, sending the company’s stock climbing 133 percent from a Sept. 24 low, it remains roughly 90 percent below its 2008 high, and the limited scale of the product launches BlackBerry announced at its annual conference deflated optimism about its comeback plan. “We see few additional positive catalysts coming through in the next six months and see a danger that the company misses more optimistic expectations,” Pierre Ferragu, an analyst with Sanford C. Bernstein (AB) in London, wrote in a note to clients.
When it debuts, the new cross-platform Messenger will only transmit texts. Voice will come a couple of months later, Heins says. Android and iPhone users aren’t likely to switch to a BlackBerry based on one strong app, but Heins says the buzz that new BlackBerry models have received in the past year will lead to better quarterly results, and expanding Messenger’s reach may help win over reluctant developers, claw back some market share, and open up new sources of revenue.
“I’m still not sure how they monetize it,” says Steven Li, an analyst at Raymond James in Toronto. New Messenger channels, essentially chat rooms focused on specific themes, will eventually create opportunities for advertisers to target users by sponsoring posts, says Andrew Bocking, BlackBerry’s executive vice president of software product management. Still, Bocking says it’s too early to predict when Messenger channels might begin to generate revenue.