To understand the behemoth’s $500 million purchase of Skybox Imaging, don’t look to the sky. The clouds will do just fine.
Google will buy the micro-satellite startup Skybox Imaging for $500 million, the company announced today.
While the deal isn’t yet closed, it’s a big moment. I mean, Google owns satellites now! And the deal falls into a pattern we’ve seen so far in 2014, of big companieschasing the next wave of revenue, by entering new markets through acquisitions.
Skybox, after all, is only one of many similar small-satellite startups. Google seems to have long been hankering for a small satellite manufacturer. The two are even both located in Mountain View, California.
But I think there’s something more here, something that makes Google’s purchase of Skybox different than any old Silicon Valley acquisition. Skybox isn’t just a plain-old satellite company, or even a plain-old satellite startup. Google’s purchase might signal a new product—a new area of sincere competition—for the web’s primo ad monger.
Skybox’s Satellites Are Different
As I wrote in January, the ability to send small satellites into space has changed the satellite industry: Instead of hurling singular and unique devices beyond the atmosphere, with multi-million-dollar price tags and reams of insurance; companies can now send many cheaper probes into orbit. The increase in the number of devices has let companies specialize in mass-producing its parts, which has also brought down costs.
There are many companies planning to put cameras in the sky; some remain in stealth mode. But of this new crop of small-satellite startups, Skybox often seemed the most enterprising.
First, Skybox’s satellites capture video—the first commercially available, high-resolution video of Earth. Many of Skybox’s competitors only aspire to medium- or high-resolution still photography. Planet Labs, for instance, makes smaller satellites than Skybox, so while it can send more “birds” into space, its imagery will never be as good. Nor will its imagery move. Urthecast, a Vancouver-based competitor, offers high-resolution video imagery, but it has no satellite of its own. It parks its camera instead on the Russian end of the International Space Station. Two European engineering firms—the German Dauria Aerospace and the Spanish Elecnor Deimos—recently announced their own constellation of tiny, Earth-observing satellites, but they don’t anticipate sending any into space until 2015.
So far, Skybox’s satellites differ from all these firms. Note though, if even some of these companies succeed, a deluge of imagery will follow them. Hundreds of Earth-observing satellites means there will be at least thousands of new photographs everyday. Who will look at all those pictures?
This is Skybox’s second strength.
Skybox’s Business Could Be Different
Right now, the raw imagery created by satellite cameras can be hard to decode and process for non-experts. Therefore, many companies like Skybox hope to sell “information, not imagery.” Instead of pixels, they’ll give customers algorithmically-harvested assessments of what’s in the pixels. For example, using regular satellite-collected data, an algorithm could theoretically look for leaks in an Arctic pipeline and alert the pipeline’s owners when one appeared. Another could estimate the number of cars in all the Wal-Mart parking lots in America on Black Friday, to better estimate the company’s quarterly earnings.
Note the word theoretically. Algorithms that can scan and successfully detect that level of detail don’t seem to exist yet. Facebook bought an Israeli facial recognition company in 2012 for an undisclosed price, in part because it can process pixelated specificity.
Skybox has long talked a slightly different game. It wouldn’t sell pixels or information about them. Instead, it said, it would create a huge archive of data about the Earth, that included not only its own satellite imagery but also historical weather reports and public satellite imagery. Inside this “cloud for the Earth,” companies could experiment and run their own software.
“There’s never been a good sandbox in this industry,” Skybox’s co-founder, Dan Birkenstock, told me last year. As I wrote in January:
What did he mean [by that]? Something like this: In the past half decade, companies have sprung up around Amazon’s hosted cloud services. Amazon operates massive web servers, tools so adaptable you can build a company around them without having to actually pay to operate a data center. Amazon lets its customers pay for what they need, or can use, and no more.
Amazon’s cloud services make billions of dollars every year. Skybox’s goal was to agglomerate all that historical data it had and make one of these—a cloud computing service—that specifically dealt in data about the Earth.
In other words, Skybox’s success doesn’t depend on it developing a perfect image-evaluation algorithm. It merely depends on another developer using its cloud to develop an algorithm.
Now it joins Google. The advertising giant might use the small satellites in its quest for more and faster data for its Maps and Earth services. The company, however, gets its truly high-resolution imagery from DigitalGlobe, and it negotiated its last “multiyear agreement” with the satellite behemoth in February. Owning satellites of its own might help Google when it negotiates its next contract with DigitalGlobe, but that’s now a few years off. (Whatever happens in the world of small satellites, by the way, the military will still pay for access to DigitalGlobe’s enormous WorldView craft. That doesn’t mean its stock hasn’t responded to the news.)
No, it seems possible Google bought Skybox for two reasons.
The first? Skybox will help Google in its effort to extend Internet access to previously unconnected parts of the globe through small satellites. Perhaps its $500 million price tag is part of the $1 billion the company plans to invest, per a Wall Street Journal report last week.
The second? Right now, Amazon’s cloud product dwarfs Google’s. Reddit, Foursquare, Instagram, and the Obama 2012 campaign all depend or depended on Amazon’s web services. Google’s cloud services even recently slashed their prices to compete with the retailer.
If Google follows Skybox’s lead and creates its own cloud service for data about the Earth, then it might have a vanguard product: an industry-leading cloud service of its own. (Think how useful such a service would be not only to financial speculators or Big Agriculture, but to anyone running a global supply chain.) Google famously wants to “organize all the world’s information,” so doesn’t it make sense that it would invest in the team that has thought the most about organizing—and selling(!)—a platform for computing information about the world.
To justify Google’s purchase of Skybox, many will look to the sky. They don’t have to look all the way to space, though: The real answer is in the cloud.