Losing the Signal: The Spectacular Rise and Fall of BlackBerry (28 page)

That meant RIM had to select other platforms for developers to build apps for PlayBook. Lazaridis chose to lead with Adobe AIR, which QNX used on its in-car systems. Adobe AIR was a software platform based on Flash, a hugely popular platform used by developers to create slick graphics and run video over the Internet on personal computers. However, because Apple’s mobile devices didn’t support Flash, few developers bothered to write mobile apps using Adobe AIR. PlayBook’s support of Flash would differentiate the company; Lazaridis thought scores of Flash developers would embrace the PlayBook and write apps for it. “We expected them to take the step with us,” he says.

In reality, “Adobe had a limited developer base and very few people using it for mobile—almost none, in fact, as PlayBook was to be the first mobile device with full support for AIR,” says Tyler Lessard, RIM’s vice president of developer relations. “The big bet was that the big community of Flash developers would hop on board. Unfortunately, it didn’t really happen.”

While the PlayBook would eventually support five development platforms, RIM only released Adobe programming tools to developers before launch. Few developers took up the call. “AIR never made any sense to me at all,” says Trevor Nimegeers, a Calgary-based software entrepreneur whose firm, Wmode, had built BlackBerry apps for corporate and government users for years. He felt disappointed and betrayed that PlayBook wouldn’t support Java apps. “Essentially RIM was asking us to retool our people, fight with unproven nonmainstream tools, and rewrite our existing applications at huge cost only to be rewarded with a completely uncertain marketplace. I found it comical, actually.” In the end, Nimegeers’ firm, like other developers, passed on building apps for PlayBook. Soon after PlayBook launched, Adobe would drop support for AIR on mobile altogether.
⁵

What RIM needed was someone in a senior role to ask tough questions about PlayBook. Were the lack of e-mail and the app gap critical shortcomings in the emerging tablet space? Did RIM have a clear sense of what PlayBook was supposed to be? Was it for consumers or business and government users? Did it contain the right features and technology to appeal to either? What was its unique selling proposition? “It wasn’t clear why we were doing PlayBook, how it fit into everything else,” says Patrick Spence.

Instead, any such concerns were swept away. Lazaridis had pushed Dr.
No out of the way and wasn’t heeding concerns raised by Yach. Lazaridis and Dodge were enamored of their machine: its dual-core processor allowed users to perform multiple tasks at once; the browser ran well; the operating system was highly responsive; the video and sound quality were superior to the iPad. “There was no question people in the company loved PlayBook,” says Lazaridis. “I loved my PlayBook.” Balsillie stayed out of technology discussions. As for the company’s board, it lacked anyone qualified to even know what questions to ask, let alone the right answers. “Nobody on the board was able to say, ‘That’s a good thing or a bad thing, or this and that,’ “ says one person close to the board. The directors “just didn’t have enough technical knowledge.” Other directors were frustrated with RIM’s last minute planning and market research for new product launches. “As was sadly the custom,” director Roger Martin said, marketing plans for new devices such as PlayBook were “constrained by the fact that there was already a finished product.” When the board was presented with a tablet that lacked basic features such as e-mail, Martin said he told the board “the most plausible pitch” for the incomplete PlayBook was that “iPad was for fun” and PlayBook was for productivity. “It wasn’t a compelling pitch. But we needed to have some positioning for it and it was the best I could come up with,” he said.

If few people were asking the right questions internally about PlayBook, the company suffered from the opposite problem as software engineers considered what to do with the BlackBerry smartphone. For close to a year, through early 2011, Lazaridis and his developers debated how to proceed on the BlackBerry’s next smartphone operating system, delaying its development as Android stole its market share.

Lazaridis always wanted QNX to build the operating system and for another newly acquired software company called The Astonishing Tribe to build the user interface. Yach figured it would take longer for QNX to build the new BlackBerry system than Lazaridis expected: BlackBerry’s existing operating system had about 25 million lines of code, and it would take three thousand people more than a year to build the new system. Yach thought it would be best for RIM to keep releasing updated Java-based BlackBerrys to protect market share in the meantime, even if they did not deliver the next-generation experience that QNX promised.

Yach charged his software teams to work on alternative plans. Two possible solutions emerged, neither of them ideal: Yach favored running the existing Java BlackBerry platform on top of QNX’s core technology in order to support existing apps. But many developers, including Alan Brenner, championed a different approach: tacking the BlackBerry interface on top of an Android operating system with QNX at its core. Android offered ready-made technology that would enable RIM to push out a new device to market quickly, with a running start in consumer apps, where Android was a significant player. But it would also mean apps developed for BlackBerry wouldn’t work anymore. By late 2010, Yach embraced a third option: combining RIM’s Java operating system with Android’s.

Lazaridis wanted no Java on future BlackBerrys and was troubled by Android: he felt an Android BlackBerry would be less distinguishable from countless other smartphones and would be far less secure than the QNX or existing BlackBerry operating systems because Android was written using publicly available open-source code. Businesses were sure to reject it.

Nevertheless, Lazaridis allowed the debate to play out for months. “There was no right answer,” says one engineer involved in the discussions. “You just needed to pick an option and run with it. There was more and more discussion about looking at options than making a decision. And making the decision wasn’t easy because ownership wasn’t there. I think the decision was clear in Mike’s mind: there was going to be a rewrite, done by brand-new people. It was probably the right decision. But the execution of that decision,” in the engineer’s view, “was done poorly.”

After months of debate, in early 2011 Lazaridis decided to stick with his original plan—have QNX build the BlackBerry operating system, called BlackBerry 10. He believed Dodge could have the work done in time for an early 2012 launch. “If I wasn’t able to implement the dynamic smoothly and seamlessly and it took a year … okay, maybe I could have done better,” says Lazaridis. “If you want to blame somebody, blame me.”

Yach understood what this meant for him. “Mike wanted Java eliminated from the device; while he didn’t say it explicitly, his comments made it clear he felt our Java base was the reason BlackBerry was losing market share. He was a firm believer that having Java on the BlackBerry 10 device would be its downfall. In hindsight, that was the beginning of the end for me. Mike decided I was ‘stuck in the past’ and started shutting me out.” The man who had built one of the world’s first successful smartphone operating systems realized his days at RIM were numbered.

As conflicts raged throughout RIM in 2010 the first trouble signs appeared in its U.S. results. Apple’s arrival in 2007 had dented RIM’s U.S. market share but had not slowed its growth. But once Android appeared, RIM’s U.S. handset sales growth ground to a halt: for seven straight quarters, from late 2008 until late summer 2010, revenues in the United States hovered around $2 billion for each period. Sales then fell precipitously over the next year, to $1.1 billion in the quarter ended August 27, 2011, as Android siphoned away market share and became the world’s leading smartphone platform. RIM’s share of Verizon smartphone sales dropped to 14 percent in the last three months of 2010, from 60 percent a year earlier, according to internal RIM data; the drop was pronounced at Sprint (from 63 percent to 22 percent) and T-Mobile (from 60 percent to 18 percent) as well.
⁶

There was another winner besides Google: Samsung. The Korean conglomerate that had so badly wanted a BlackBerry Connect deal shed its mantle as a perennial also-ran cellphone maker to emerge as a major force in smartphones in 2010, going all-in with Android. Samsung’s size and scale meant it could outspend other Android makers like LG, Motorola, and HTC on marketing and carrier promotions while still making low-cost phones. Samsung had another advantage: it was one of the world’s largest electronic component manufacturers, supplying rivals, including RIM. If Samsung lost a smartphone sale, it still made money supplying components to the winner. As a critical supplier, Samsung had first access to the newest technology, priority on supply, and the ability to peek inside its competitors. When Balsillie saw Samsung’s huge marketing splash at the same 2010 conference where Lazaridis lectured Verizon on 4G, “it gave me chills,” Balsillie says, leaving him worried by what RIM was up against. By fall 2011, Samsung was the largest smartphone vendor in the world.
⁷

Overall, RIM’s numbers told a different story. Total revenues in the twelve months ended February 26, 2011, were up 33 percent year-over-year, reaching $19.9 billion, as sales outside the United States, Canada, and Great Britain more than doubled to $8.5 billion from the prior year. Globally, BlackBerry was still hot. Much of the world’s wireless telecommunications infrastructure was at least a decade behind North America, western Europe, and advanced Asian countries. Carriers in countries like Indonesia, Brazil, and South Africa weren’t investing in 4G—most didn’t even have 3G. With its stingy use
of precious bandwidth, BlackBerry was ideal for these networks, just as it had once been for North American and European carriers. RIM developed a cutrate BlackBerry phone called Gemini, which worked well on pre-3G networks and sold for under $200. In those markets, the iPhone was too expensive, and its better browser and abundance of apps weren’t as much of a draw. “The Gemini singly drove all of RIM’s global growth in 2009 and 2010 and was by far the best-selling BlackBerry of all time,” says Balsillie.

From Jakarta to Johannesburg, Riyadh to Rio de Janiero, BlackBerry became a sensation, embraced as a powerful status symbol—“the device of strivers and celebrities alike,” according to a report from Nigeria and Indonesia by the
Globe and Mail’s Report on Business Magazine
.
⁸
In Haiti, the band Fresh Up sang of a woman who threatened to dump her boyfriend if he didn’t buy her a BlackBerry.
⁹
A character in the Nigerian film
BlackBerry Babes
made good on a similar threat.
¹⁰

The most compelling feature driving BlackBerry sales in the developing world wasn’t wireless e-mail but another application that had been included with devices since the mid-2000s: BlackBerry Messenger. While BlackBerry was losing the app race in North America, BBM was establishing itself as BlackBerry’s first “killer app” since wireless e-mail, and the first globally successful app of the smartphone era. In late 2008, 4 million people used BBM. Two years later the number reached 28 million, and by September 2011, it was 60 million.

BBM’s runaway success was almost as unimaginable as its unlikely birth. BBM was the brainchild of a trio of young RIM employees who were looking for something to do following a rare slowdown in 2003 when the company had to lay off 10% of staff. Strategic alliances manager Chris Wormald and programmers Gary Klassen and Craig Dunk, along with two co-op students, explored how to adapt popular instant messaging services such as Yahoo Messenger for BlackBerry. These services enabled users to have real-time text “chats” at their desktop computers over the Internet, typed into a small box in the corner of their browsers.

As they delved into instant messaging, the group realized those deskbound chat services had a critical shortcoming: there was no way to know if the person at the other end had received the message, or was even there. At the same time, the three men, who all had infant children at home, were contending with a different challenge: how to reach their wives during the day. Calling was disruptive, particularly if they were trying to put their babies to sleep.
What if there was a better way to communicate without making the phone ring?

The three struck upon the idea of creating a “data call”: simulating a phone call through a series of instant messages between BlackBerrys. Creating the data equivalent of an interactive voice call would require the “speaker,” or sender, to know his message was both delivered and received. The recipient would have to know that once she opened the message, the sender was informed it had been read. People would no longer send data messages into the void, unsure if they arrived or were read.

Building on an existing program that enabled BlackBerry users to swap simple text messages known as PINs, the group created QuickMessenger, later renamed BBM. When a sender dispatched a BBM message to another BlackBerry user, a D, for delivered, would appear next to the message on the sender’s BlackBerry when it arrived. Once the recipient opened the message that
D
turned into an R, for received, notifying the sender the message had been opened. “We were stunned at how well the Ds and Rs provided a real-time mobile-aware sense of presence,” Klassen says.

Those two letters transformed instant messaging into intimate and interactive data conversations between BlackBerry users, particularly since devices were always on, connected, and usually close by. “It’s a phone conversation with the time-boundedness taken away,” says Wormald. “The pain of phone calls is they’re forced to be synchronous—I talk, you listen, you talk, I listen. This was still linear, but it provided the cues necessary to know we were having a conversation. Once you read my message, you realized the important psychological impact: I knew you’d read it, and you knew that
I
knew that you’d read it.”

Wormald realized the power of BBM, which was still being tested internally, when he gave his wife and mother BlackBerrys during a trip to Disney World with his three children in early 2005. As Wormald sat on a ride, a man in the vehicle ahead pulled out his cellphone and negotiated loudly with his wife about where they would meet next. “The magical moment was interrupted,” Wormald says. A minute later, Wormald felt his pocket buzz. He pulled out his BlackBerry. It was his mother: Meet me at the ice cream stand. He discreetly replied he’d be over soon, put the device away, and turned his attention back to the ride. After five days of BBM messaging in Florida, his mother wanted a BlackBerry. “She didn’t even own a cellphone,” says Wormald. “She was hooked. If you had asked me then, ‘Are you going to kill phone calls with this,’ I would have said yes.”