And I, for one, welcome our new geospatial overlords
I didn’t bother to blog about the Google and GeoEye announcement (Google launches satellite? Are you kidding me Information Week?) from a couple weeks ago (or was it a couple days ago?) because I really didn’t see what was so newsworthy about it. It isn’t like this is the first announcement we’ve seen from Google and a satellite company. Plus Microsoft even went out and bought Vexcel (hmm didn’t blog about that acquisition either).
I just don’t care too much about these deals as they don’t affect me in any way. I still aquire my imagery the way I did before and I still use the free services the way I did before. The only thing this confirms to me is that you can’t make money from selling sattelite imagery on an open market, you need a sugar daddy to pay the bills. I guess that is what is the most telling thing out of this announcement, GeoEye’s and Digital Globe’s business models are broken.
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And of course that sugar daddy is us (US taxpayers) through the NextView and ClearView licenses that funded these satellites. That being said it is nice to see our intel agencies investing in technology that benefits folks outside of DOD.
James your posts are usually well balanced and informed. But this time I thing you lost a bit of perspective. The news here is not Google. That just came late. The news is the deployment of the largest resolution satellite ever put in the space. This is part of a trend where we count with VHR data from space borne sensors. Next year will come World View II, with spatial resolution along the same size but an interesting improvement in spectral resolution. The satellite will be capturing data in the red edge band, something so far not available and which is vital for studies of vegetation. TerraSar is the first radar system capturing data at 1 meter resolution. It is a German satellite. These satellites are for real and scientific applications instead of mere visualization of data. If the only thing you do with images is use them as a backdrop for your GIS layers then you are probably wasting your money and as you said you should not give a huh for this exciting advances in the remote sensing field.
You could also argue that the only people making money on the GeoWeb right now are the data providers with the satellite imagery leading the way.
Traditional GIS has always had a standard revenue stream, but when it comes to the GeoWeb web maps have even been loss leaders for Google, MS and Yahoo!. They provide traffic but actual click through revenue – not so much.
In the meantime GeoEye and Digital Globe, I believe, have experienced fairly ridiculous revenue growth. I’m sure other data vendors like NAVTEQ, TeleAtlas and Europa are doing pretty well also.
I’m not huge fans of their business models but can’t argue with the fact they are making bank when few others outside of the traditional GIS vendors are.
@JP: We’ll see, I just prefer aerial imagery over satellite imagery. Maybe this will change my mind, but I just can’t get excited over just another satellite getting launched.
@Sean: Yes, one can’t fault them for taking money, but this means that they aren’t in the driver’s seat, Google/Microsoft is.
I would be interested to know what percentage of revenue GeoEye/DigitalGlober receive from non-DOD sources. My inclination is that is cannot be too much as Space Imaging went up for sale rather quickly after they didn’t get that NextView/ClearView contract from NGA. Sean – do you have any insight on this?
@James depends on the view point – looks like they negotiated a deal with Google for exclusive rights to the imagery from the satellite. Apple did the same things with the iPhone with AT&T. I would hazard they could have swung a deal with MS and if they were clever pitted the two against each other to maximize the rents they extracted. Hard to say who drove the deal though and Google is well known for their talent with deals.
@Jarlath – I would need to do some digging but read an article recently about GeoEye getting an award and it discussed record revenues both commercial and defense. I’d heard similar things anecdotally about Digital Globe. They were more savvy with having API’s and GeoWeb business before GeoEye and I’d think would be benefiting even more so.
We had talked to both about you using their imagery for our applications but the business models did not make sense in either case, so definitely agree with James from that perspective.
From what I could find with a quick search about 50-55% of revenue comes from DoD contracts. Estimates for pure commercial revenue were around 10-15%. This varies by year and source but here are the relevant articles:
http://www.fool.com/investing/high-growth/2008/08/14/keep-a-geoeye-on-the-future.aspx
http://www.streetinsider.com/New+Coverage/Soleil+Securities+Initiates+GeoEye+(GEOY)+with+a+Buy/3794831.html
http://www.oldschoolvalue.com/stock-analysis/geoeye-geoy-analysis/
http://www.leesburg2day.com/articles/2006/11/02/loudoun_business/biz68geoeye110106.txt
Interestingly their 10k discloses their million dollar investment in SPADAC for %4.9 of the company. Pegging SPADAC’s value just north of $20 million
@ Sean – many thanks for this. My suspicions were well founded.
I think the DOD side of things often gets lost when folks discuss the business models for DigitalGlobe and GeoEye as much of what they do is paid for up front in NGA contracts. The GeoWeb side is in fact rather small. It will be interested to see what happens to this revenue stream if NRO goes forward with BASIC.
Yeah – several of the investor analyses referred to the government launching their own satellites and GeoEye taking the hit as one of the big risks investing in the company.
I’m curious if the “broken business models” might have anything to do with any restrictions the US government applies to limit the ability of US (or even some allies) companies to sell the highest resolution possible of any spot on the planet that any customers would want at any time.