BlackBerry’s future: Starting from 2011

Posted on Thursday, Jan 13 2011 on 04:00 PM
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The future of Canada’s flagship hi-tech company may lie in a drab office building on a noisy, rutted road on the outskirts of New Delhi.

For the past year at the headquarters of the upstart software development company Spice Labs, Siddhartha Prakash Jain has huddled with his team of computer engineers trying to anticipate the tastes of the 41 million BlackBerry users around the globe. Specifically, Jain and his 30 colleagues are striving to create the perfect app.

Last year, the Spice Labs team enjoyed a breakthrough.

After toying with the idea of creating Suduko or crossword puzzle apps, the 32-year-old Jain settled on developing a “Hangman” app.

It was a breakout hit.

During its first day of release, some 600 BlackBerry users downloaded Hangman.

Since then, more than 2 million have done so, making Jain one of the world’s leading BlackBerry app developers.

“The key was to make something that you could have fun with for 15 minutes,” says Jain, who has helped develop 16 apps for the BlackBerry.

“We think we’re starting to figure this out.”

While Jain may have a better idea now about what apps appeal to BlackBerry users, he has yet to figure out how to turn that knowledge into profits. Four-year-old Spice Labs has yet to break even.

The future prospects of India-based developers such as Jain will be a key for Waterloo’s Research in Motion as it tries to play catch-up to its archrival Apple. In September, just three years after its release, Apple’s iPhone eclipsed the BlackBerry in total quarterly sales with 14.1 million devices sold, compared with 12.1million for RIM.

Analysts say part of the iPhone’s appeal is the number of apps customers can download. Apple has some 300,000 available through its itunes store, while BlackBerry’s online app store, called App World, and offers just 15,000 apps.

“Apps have become extremely important,” said Madhavan Narayanan, a technology columnist with India’s Hindustan Times newspaper. “The actual phone has become like a plate you would pick up at a buffet. No one looks at what plate you grab, they look at what’s on it. The apps have become what the food on the plate is.”

For RIM, India offers huge opportunity as it tries to narrowing the gap with its archrival. Software engineers here can be hired for a song

Salaries for engineers in India are roughly one-eighth what they are in North America. A RIM spokesperson says the company is working with 11,000 app developers in India, up from about 4,500 a year ago.

Development here on new apps has not slowed, a RIM official said, despite the company’s struggles to appease the Indian government. Last year, security agencies here asked RIM to provide a way to monitor encrypted data transferred to and from BlackBerry units. The negotiations have dragged on for months and in December, RIM reportedly agreed to set up a local server in India within the next 24 months, a move that would assuage the government’s concerns.

In the meantime, BlackBerry app developers such as Spice Labs continue to roll out new offerings.

Some app makes charge customers for downloads. RIM takes 30 per cent of the revenue from those downloads. But 90 per cent of new apps are of the free variety. As an app that’s available to download for free, Hangman’s revenue comes from in-game ads which periodically appear on a portion of the screen.

Spice Labs has a contract with a so-called advertising aggregating company called inMobi, which sells online ads and pays Spice Labs a rate based on how many people view the ads. While company officials wouldn’t discuss the specifics of their contract, an inMobi official said rates typically range from 50 cents to $2 per 1,000 impressions.

It’s hardly huge money.

If a company negotiated a rate of $1 per 1,000 impressions and one million people downloaded the game, that would translate to just $10,000 in revenue, assuming each user played the game 10 times.

That’s not enough to help turn a profit—even in a country where salaries are a portion of what they are in North America.

One key for Spice Labs may be capitalizing on an underserved market: children.

Two months ago, Spice Labs unveiled a BlackBerry app called “Kiddo” which teaches children ages one to three to identify letters and numbers. It’s already been downloaded more than 500,000 times.

But it’s also a free download.

“It will get to a point where we charge for a download and for additional items that can be purchased in the game,” Jain said. “I know the children’s market is big. So many people are willing to pay 150 or 200 rupees after work for a puzzle for their children at home.

They will pay for one on their BlackBerry. But we aren’t there yet.

We’re still trying to figure out the market.”

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