The use of mobile messaging applications has been growing
rapidly, driven by higher smartphone penetration and the
availability of affordable data plans in emerging markets.
Installations of messaging apps nearly tripled over the last year,
making it the fastest growing segment of the mobile app space.
There has also been a flurry of deal-making activity in this space,
with messaging platforms seeing stratospheric valuations for their
user bases. BlackBerry (
) has been looking to revitalize its once dominant BlackBerry
Messenger (BBM), which is best known for its proven infrastructure
and security, opening it up to rival platforms such as Android and
iOS. BBM's cross-platform strategy was off to a strong start when
it debuted last year, with its monthly active user (MAU) base
growing by around 20 million within a few weeks of the launch.
However, the momentum has died down since then and MAUs have
remained nearly flat over the last two quarters at around 85
million users, though the company expects this to improve to around
100 million users as the Windows version of the application
See our complete analysis for BlackBerry
an $8.40 price estimate for BlackBerry
, which is 20% below the current market price.
Possible Reasons For The Sluggish MAU Growth
BBM's popularity had been tied with BlackBerry smartphones,
which have seen a precipitous decline in market share (less than 1%
share globally as of Q1) over the last several quarters. While the
move to go cross-platform was definitely a step in the right
direction, it may have come a little late since rivals such as
Whatsapp, Facebook Messenger and WeChat have been able to scale up
significantly on iOS and Android, which are currently the dominant
platforms. Given that smartphone sales growth could begin to slow
down going forward, with replacements accounting for a greater
portion of sales, it could reduce BBM's scope for growth.
Moreover, close to 50 million of the active BBM users are on the
BlackBerry platform, which is likely more popular with businesses.
Business users are generally less likely to bring in additional
users, unlike consumers who tend to follow their family and friends
on to a compatible platform. BBM's procedure for adding contacts
could also be a factor hindering the growth of its active user
base. BBM requires users to key in PIN numbers, email addresses or
scan barcodes in order to add contacts, unlike rival apps such as
Whatsapp that identify users based on their mobile numbers directly
from their contact lists.
BlackBerry is targeting revenues of roughly $100 million from
BBM by FY 2016, and its monetization strategy is multi-pronged. The
company recently introduced its BBM Protected offering, which
provides end-to-end encrypted messaging for security-conscious
enterprise users. The company is also looking to monetize its
consumer user base through its mobile payments platform for BBM and
advertising on its BBM channels. BlackBerry could also be looking
to just divest this business, given the attractive valuations that
mobile messaging properties have been witnessing of late. Some of
the most notable acquisitions have been Facebook's (
) purchase of Whatsapp (which has 450+ million MAUs) for
around $19 billion and Rakuten's acquisition of Viber (100+ million
MAUs) for about $900 million. However, we believe that
BlackBerry may not be able to realize such valuations for BBM given
that a meaningful portion of its user base is likely to be business
users who are less appealing to advertisers and marketers.
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