The RIM Blackberry folks finally settled their patent dispute with NTP, averting a feared shutdown of the service. That dispels the ominous cloud hanging over the Blackberry, and now the company can go back to growing wildly, right?
Not necessarily. If RIM’s watching the landscape carefully, what’s happening now is more like emerging from the storm cellar after a thunderstorm only to find two funnel clouds on the horizon.
One tornado is Microsoft. The other is market saturation.
Redmond Never Sleeps
While RIM was putting its energy into fighting the patent lawsuit, Microsoft continued to plug away at its own mobile e-mail solution. The almost-finished, we-really-mean-it-this-time version was announced at the 3GSM wireless conference in February. The technology, called Direct Push, is rolling out to customers this spring, so there aren’t a lot of reviews of it yet. Computerworld did a good article with comments from testers.
Microsoft’s solution is apparently still inferior to the Blackberry, but it’s getting closer. Historically, as Microsoft starts to approach the quality of a competitor, that competitor finds it hard to win long-term sales contracts, and there starts to be price pressure. RIM is likely to find it a little harder to grow than it was previously.
Exponential Growth or Bust?
Which brings us to the second tornado — saturation of the market for mobile e-mail. The industry consensus continues to be that the really big growth of mobile e-mail is still ahead of us. Here’s Pieter Knook, Microsoft’s senior VP of mobile devices: “We’re at the tipping point of seeing exponential growth in this area.”
As you know, whenever the industry consensus says that something’s about to grow explosively, that’s the time you want to hang onto your wallet. We think there’s a risk of a nasty surprise in mobile e-mail demand. In the customer research we’ve been involved in, mobile e-mail appeals strongly to only about 12% of mobile phone users. Those are the only people willing to pay $30 or more a month for the mobile data service you need (in the US) to use mobile e-mail.
We’re not close to saturating that 12% of the population, but we may be close to using up the early adopters, which could result in slowing growth.
It’s possible that corporations will decide to deploy mobile e-mail to all of their employees, driving a second wave of adoption. But would they really be willing to pay $300 per employee for a smartphone plus $30 a month for something that only a minority will be motivated enough to use?
We honestly don’t know, and neither does anyone else. And that means the continued rapid growth of the mobile e-mail market is by no means a sure thing.
It’s Not About the Franklins
Combine the risks from Microsoft and market saturation, and RIM still has a lot to worry about. And we think that’s the real damage caused by the patent lawsuit. Forget about the monetary settlement — the biggest loss to RIM is that its executives were distracted while these new threats gathered force. That’s an important lesson for any tech company contemplating a major legal action. The biggest cost often isn’t the money or even the legal fees, it’s the irreplacable executive time you’ll burn thinking about legal issues. -MM