Wednesday, January 28, 2009

Apple's Advantage Over the Blackberry: Way More Memory

With the Blackberry app store launching by the end of March 2009, a dramatic new problem will emerge with full force: Where is the application memory to run these new applications? In order to understand the magnitude of this problem, we have to look at the mother of all app store pioneers: Apple (AAPL) and the iPhone.

Ask almost any iPhone user what excites them about the iPhone, and almost all of them answer immediately that it's the app store, with many thousands of apps available. Many iPhone users have page after page after page worth of applications that they have downloaded. It seems like iPhone users install dozens and dozens of applications, and I don't see any signs of abatement. We may be entering a situation where most iPhone users love their platform so much because they have hundreds of applications running.

The Blackberry app store is being launched for the obvious reason that it's becoming the critical tool in the competitive tool kit. Without a vibrant developer community, it's very difficult to compete. The analogy with the PC world is pretty strong, and possibly even stronger given that location-based services generate so many more application possibilities that aren't as meaningful in the PC world. Here is the problem: An iPhone has 8 gig or 16 gig worth of memory, compared to a Blackberry, which has 64, 96, 128 or 256 meg worth of app memory, depending on the model. Yes, I know these numbers are not perfectly "apples to blackberries" (no pun intended), because Blackberry has an expansion card slot and the iPhone doesn't, and so forth. But keep in mind that the Blackberry's expansion memory is for multimedia (pictures, music, etc) storage, not for running apps or even containing things such as the address book that synchronizes with Outlook. One can also argue that an iPhone typically contains a lot more multimedia than most Blackberries, but Blackberries also synch with iTunes for DRM-free content, so that gap should narrow as awareness of this ability grows.

Those caveats aside, the SMALLEST iPhone (8 gig) has 32x the application memory of the LARGEST Blackberry (256 meg for the 8900 model). The manner in which most users will feel this dramatic 32x difference is in the ability to install new apps. Clearly, while some Blackberry apps have tended to carry a small memory footprint, one of the attractions of the iPhone is that those apps are very rich in their appearance and functionality, so in order to compete, Blackberry apps may have to become larger in order to be competitive.

What does this mean? It looks like this clash of Blackberry's app store vs the very small app memory will mean many unsatisfied users who will be lighting up the customer service switchboards like a Christmas Tree. Many people aren't likely to understand why they can't download/install/run all of these new apps, and their devices could start to freeze up, and their old emails and instant messaging conversation could be wiped to free up memory.

This is both a challenge and an opportunity for RIM (RIMM). The challenge will be all the unhappy customers calling to complain about the lack of ability of their current devices. The opportunity will be to start selling new Blackberries with an app footprint equal to, or greater than, the iPhone. Such a "forced upgrade cycle" is not free, and it is unclear how consumers will react to this. Either way, for Blackberry to go from 256 meg or less worth of app memory in its devices, to 16 gig and more – a 64x increase – will mark Blackberry's most important generational shift in the company's history.

The installed Blackberry base is now approximately 20 million. Ask yourself: How many of these will use the Blackberry app store as the excuse to go to another platform such as iPhone, Android and Palm, versus how many will upgrade to another Blackberry containing some 64x more memory than your current Blackberry?