Stop Building Satellite Imagery Platforms and Marketplaces
Disclaimer: This is purely my personal opinion and does not reflect the stance of my employer, Azavea. It’s not very “Azavean” to write negatively about a topic — but I think this is worth saying publicly since I can’t seem to shut up about it privately!
A Word of Warning
Anything worth doing will be publicly criticized. In the words of Taylor Swift, the poetic conscience of my generation,“Haters gonna hate.”
Today, I’m the hater.
That said, I deeply admire the entrepreneurs starting satellite imagery platforms and marketplaces. I share their passion for fixing an industry that is obviously, fundamentally broken. If they succeed, we’ll all be better off for it.
But…I do not think they will succeed. I hope I’m wrong.
Alright, enough hedging.
The Commercial Earth Observation Ecosystem
Like any good Thought Leader™, I have my own little taxonomy of earth observation startups:
- Suppliers (e.g. Airbus, Maxar, Planet, Satellogic)
- Marketplaces (e.g. Arlula, Shadowbreak International, Skywatch, UP42)
- Platforms (e.g. Astreaea, Descartes Labs, Orbital Insights, SpaceKnow)
- Consultants (e.g. Azavea, Development Seed, Element 84, Sparkgeo)
- Solutions (e.g. Arturo, Cloud to Street, Farmer’s Edge, SilviaTerra)
In my (inflated) opinion, only the first and last categories present venture-scale opportunities. Consultants are also a great category of business, but they simply aren’t conducive to venture capital; they tend to be small, profitable businesses that sell for modest multiples of annual profit (as opposed to outsized multiples of forward-looking revenue). Don’t get me wrong; I like consultants. I work for one!
Marketplaces and platforms, on the other hand, seem like venture-scale businesses. And they’ve most certainly soaked up lots of speculative money— on the order of hundreds of millions of dollars in equity financing over the last five years.
Yet, to survive, they almost always become consultants (although you’ll never catch them admitting to it). Fundamentally, I don’t think they work. Allow me to explain.
Defining Marketplaces and Platforms
Marketplaces are businesses that go around to as many imagery suppliers as possible and sign reseller agreements in order to distribute a bunch of disparate sources of imagery through a single web storefront.
Platforms, on the other hand, don’t typically emphasize transactional imagery sales in their value proposition (like marketplaces do). Rather, they focus on simplifying the challenge of imagery analysis either through a suite of hosted analytical tools or through their own proprietary information feeds (or both).
Both share a lot in common, including the hallmark characteristic of aggregating various sources of imagery behind a single API.¹
Why They’re Such Seductive Businesses to Start
Commercial earth observation is a complex, international, fragmented, highly-regulated, opaque industry. It’s ripe for disruption (as a fervent capitalist might put it).
Surely, satellite imagery can’t be more complicated than legacy banking infrastructure or international telephony? Distribution of satellite imagery will universally catch up to other digital goods…at some point. It’s a trend so obvious that it feels inevitable.
The thought might arise in your mind…someone will eventually make the eBay (marketplace) or the Stripe (platform) of earth observation.
And when they do, it will be an enormous business that cannibalizes all of its competitors as network effects kick in. As more users flood to the app, negotiating power with the imagery companies will increase, which in turn will push prices further down, which in turn will attract even more users, which in turn will push prices further down, and on, and on.
As this theoretical company grows, new imagery suppliers will clamor to integrate their data rather than build their own software infrastructure at great cost. A massive untapped market of semi-technical and non-technical users will suddenly have access to a trove of data representing one of the largest stores of latent value in human history.
Satellite imagery will finally have become…democratized.
Why It Doesn’t Actually Work
One word: demand.
Here’s the thing…Google Earth Engine (GEE) already exists. Imagine dedicating years of your life and millions of dollars to build an incredibly ambitious software platform for processing planetary-scale satellite imagery…and then Google just comes along with their own version and decides to offer it for free to anyone with a pulse…
Dear reader, I don’t have to imagine that, because I personally experienced it. I worked on such a platform, Raster Foundry. I got to enjoy the prolonged and horrifying realization that I was working on a project competing directly with a team at Google that had a bigger budget, more engineers, practically infinite cloud computing resources, and, best of all, no mandate to return any of that ongoing investment.
Since capitulating, I’ve noticed something perhaps even scarier — there appears to be so little commercial demand for GEE that they can barely give it away to companies.
It’s true that they have managed to completely revolutionize remote sensing research (right at a moment in history when we desperately need it). But as someone constantly squinting in their general direction, I can’t quite make out a long line of commercial users wrapping around the block to use this generationally transformative technology on anything more substantive than pilot projects. If there were even paltry commercial demand for such a thing, you’d expect GEE’s website would be teaming with examples. As it stands, every single example on their site is a research or non-profit organization.
Therein lies the main difference between Twilio/Stripe/eBay and the growing pile of satellite imagery platforms and marketplaces. The former tapped into immediate, pent-up, massive demand. The latter is bluffing.
What People Really Want
“No one wants satellite imagery, they want insights,” is a platitude I hear (and say) a lot. People tend to misunderstand the wisdom of it, though. They think, “Of course! People don’t want imagery, they want information like road networks, farm field boundaries, and building footprints!”
No one wants satellite imagery, sure, but also almost no one wants information derived from satellite imagery.
They want insights. Meaning: they want tools to help them make better and more timely decisions. Insights almost always happen at the intersection of multiple, disparate datasets — arriving at them requires a deep, contextual understanding of the other dataset(s) you’re combining the satellite imagery and related derivatives.
Realizing that information is simply not enough is why platforms and marketplaces almost always become consultants to survive. In order to arrive at the valuable thing that people will actually part with money to attain, they must build custom, detailed, one-off software that is mostly about the other data being combined with satellite imagery (rather than the imagery itself).
But Wait, There’s More
Yeah, it gets worse.
Not only is there not demand for platforms and marketplaces, but there are significant structural disincentives working against them. In order to exist, they must partner with imagery suppliers. So, it’s worth looking at what motivates the suppliers — after all, without their participation, there are no platforms or marketplaces.
Satellite imagery suppliers, historically, have made their money through large, ad hoc, defense-and-intelligence deals. This has been a very lucrative business, resulting in several multi-billion-dollar incumbents.
Platforms and marketplaces pitch suppliers with a value proposition like, “work with us, and we’ll drive more business your way.” But even if that were true (which, as I established in the section above, it is not), how much additional revenue would you have to bring to the suppliers to sufficiently motivate them to relinquish control of their distribution?
It’s probably a lot more than you might expect — after all, this is essentially “free” incremental revenue. The platforms and marketplaces are taking on all of the customer acquisition costs.
But, these companies relish having ultimate control over who can access their data and on what terms. The draconian licensing strategies suppliers have historically pursued reflect a culture of conservatism that does not suggest an appetite for the significant additional legal exposure created by some upstart reselling their data in tiny dribbles to end-customers they don’t know.
Plus, they’re worried existing customers that they enjoy direct relationships with will migrate to these other services if their data is more favorably priced or licensed there. They’ll never give a third party better blanket terms than they can offer customers directly. It wold cannibalize their existing business.
In case you have any remaining doubts about how spectacularly this can blow up at a moment’s notice, let’s look at the case of TerraServer.³ Dating back all the way to the 90’s, TerraServer was the first company ever to offer an open marketplace of satellite imagery on the web. In 2015, it was acquired by PrecisionHawk (a very well-funded drone startup) for an undisclosed amount.
Then one day earlier this year, TerraServer suddenly vanished. No one will say what happened — PrecisionHawk hasn’t commented on it publicly, as far as I can tell. It just…shut down overnight.
I can only speculate, but I suspect the terms TerraServer enjoyed for decades came due for reassessment and the licensing gods did not look fondly upon their new stewards, PrecisionHawk. This is a theme that comes up over and over in this industry — if someone at one of the major imagery providers decides you’re done…you’re done. It doesn’t matter how long your track record is.
Even the two largest platform companies in existence today, Orbital Insight and Descartes Labs, appear vulnerable to the precariousness of building relationships with suppliers. For instance, I can’t find any reference to Maxar anywhere on either of their websites. That strikes me as surprising and unlikely — Maxar is the first place I’d partner with if my goal were to make access to the best high-res imagery easier for my customers.
Why I Could Be Wrong
Before even getting into the rationale, I think one strong signal indicating I could be wrong is the large number of very smart people making very big bets on the other side of this trade. More than a handful of startups in this space have raised tens of millions of dollars from VCs, including some of the best institutional investors in VC history (Sequoia, GV, In-Q-Tel, Techstars, etc.).
If I were pitching VCs for funding, my main argument would be that the stagnant oligarchy of suppliers today will morph into a truly thriving, competitive landscape over the next 5–10 years. Just look at all of the suppliers rushing in right now, even just in optical alone:
These challengers are chucking shrapnel into space much more inexpensively than their predecessors, sometimes by an order of magnitude. The premise of building out world-class distribution software themselves is daunting — it still takes several years and millions of dollars to do right. What if they could just plug into an existing set of platforms/marketplaces and monetize their data instantly with relatively little upfront investment?
Additionally, open standards like the SpatioTemporal Asset Catalog specification, Cloud Optimized GeoTiffs, and OGC Features API are reaching the early stages of maturity right now — these are the software-building-block-equivalents of a Rosetta Stone that makes translating between systems easier than ever. As data becomes standardized (read: commoditized) the learning curve for exploiting imagery or building applications on top of it becomes much less intimidating. Reduced technical barriers to entry for non-traditional remote sensing technologists will spur growth for the industry overall as the prospect of getting started with satellite imagery gets less and less intimidating over time.
Lastly, there are some businesses that have managed to make it work at small scale. Apollo Mapping, for instance, has run profitably for almost a decade matching the right imagery to the right customers. They do it with a very consultative, hands-on approach and with a small staff (two folks according to LinkedIn).
The best industries to invest in are the small ones that become large very quickly when no one is expecting it — and the fact that there’s sufficient demand to keep Apollo in business that long is a sign that there’s a real problem being solved repeatably. The question, then, is one of timing — will the influx of new supply over the next five years bring with it a proportional influx of demand?
What You Should Build Instead
Let the existing marketplaces and platforms fight it out — I’ve met a lot of their leadership teams, and I can say without a doubt that very smart, skilled, motivated people are working on those problems. I would rather not compete with them, if I were you.
Instead, focus on a specific problem that earth observation can uniquely address. Become a “Solution” business focused on a particular vertical and compete with the status quo in that industry rather than a sea of other technology startups trying to do the same thing as you.
I believe our industry desperately needs more entrepreneurs willing to commit themselves to obsessively tackling one problem and carrying it all the way through past imagery, past information, to insight. Climate change, humanitarian aid, natural resource management, urban planning, disaster preparedness — the list is nearly endless. Find a topic you care passionately about and go deep.
If you enjoyed this post, or if you didn’t and you’re a masochist seeking to continue torturing yourself, you can hear me share more ideas about this topic on this recent Scene Above Podcast episode. Or you can always argue with me on Twitter at @mouthofmorrison.
¹ Application Programming Interface (API) is fancy software jargon for an organized way to expose data or services online. It makes it easier for software built by different people to exchange information reliably.
² My dad restores civil war era banjos (as one does), and was recently explaining how he can find original parts for 150-year-old banjos on eBay in a few days now (as opposed to searching for years or even decades in the past).
³ TerraServer’s corporate history is probably a long, fascinating blog post in itself. Before it was an independent entity, it was a project embedded in Microsoft and had a licensing deal with GeoEye (before it merged with DigitalGlobe). They were truly innovators.