Disclaimer: my saucy prose and cocksure opinions do not represent the views of my employer. Nor do they represent my own views should they become even trivially inconvenient to me in the future.ยน
There are only three basic rackets in the commercial satellite imagery industry: Mapping, Monitoring, and Mobilizing.
I am constantly impressed by the varied and obscure applications of satellite imagery.ยฒ Normalized difference vegetation indices. Small baseline subsets of interferograms. Convolutional neural networks. It can all feel a bitโฆoverwhelming.
But at the end of the day, it all boils down to the Three Mโs of satellite imagery. Emineminem, if you will.
I use the emineminem framework all the time. I find it both helpful at the micro-scale for clarifying my stance on strategic decisions weโre making at Umbra and at the macro-scale for making sense of industry news.
Dare I call it a mental model? Perhaps Iโm being overly generous, since itโs really just a Venn diagram that I scribbled on an iPad on the plane home from Thanksgiving.
Whatever you want to call it, I hope you also find some value in it. I know I have!ยณ
The Three Mโs Explained
Itโs a common fallacy to believe that the โhard partโ of building a satellite imagery company is designing, launching, and operating spacecraft that produce high quality data. It is really hard to do that. At times, it literally involves rocket science.
But, the history of this industry reveals that a good portion of the people who successfully do those hard things still go bankrupt.
Therefore, I think the hardest part of building a satellite imagery company isnโt the satellite imagery part - itโs the company part. You gotta sell stuff to people for more than it cost you to make it. Few companies in the history of this industry have ever done that.
In my opinion, you canโt solve for the challenge of company building if you try to juggle all three of the Mโs simultaneously - you must pick one, become the best in the world at it, and build a profitable foundation on top of it before branching out.
Letโs take a closer look at each of the Mโs.
Mapping
Mapping is the most mature application of satellite imagery. People have been looking down at Earth from above, taking pictures, and using that to make better maps since the mid-19th century.
Itโs also extremely expensive and difficult to support - mappers tend to want very fine resolution, extraordinarily accurate geolocation, and large, seamless coverage areas.
Theyโre willing to sacrifice timeliness for fidelity. After all, most โfoundational features,โ like roads and lakes donโt change much year over year.
And yet, for all that effort, itโs also probably the least attractive of the three Mโs from a financial standpoint. Lumpy, infrequent, non-recurring salesโฆwhatโs not to love?
Not to mentionโthe competition is staggering. Most of the pixels people actually look at in Google Mapโs โsatellite imageryโ layer are in fact aerial. And the proliferation of consumer drones has further eroded the relevance of satellite imagery for many mapping use cases. For the cost of one tasked 50cm satellite image, you can drive to Best Buy, get a professional-grade drone, and fly your own 5cm imagery before the command has even made it onto the satellite.
When I call for the satellite imagery industry to release its archives into the public domain, the reason I donโt think itโs such a crazy idea is because mapping is a dying line of business in my opinion. Even the aerial companies are moving to cheap subscription models rather than one-off licensing deals (see Nearmapโs recent acquisition as an example).
Monitoring
Now weโre talkinโ baby! Monitoringโฆjust checkinโ in. Keepinโ tabs. Creepinโ.
Likely the smallest niche of the group in terms of direct economic value capture, Monitoring is also the fastest growing category of the bunch.
A few billion dollars of VC funding is premised on monitoring becoming a bigger niche than either mapping or mobilization. I personally believe it can replace mapping as the second most important way to make money in the space, although Iโve long felt the process will happen slowly over a decade or more. Itโs not that we canโt capture lots of imagery every dayโฆitโs that almost nobody even knows what to look for in it, let alone how to look for it.
I think VCโs love affair with monitoring is less to do with any objective demand signal for it, and more to do with its technical, financial characteristics. Monitoring lends itself to a subscription model (eg $X/kmยฒ/month), and thatโs a lot more desirable revenue that the one-off purchases inherent to the other two niches.
Predictable, recurring revenue commands a higher valuation multiple due to the accounting principle of the time-value of moneyโthe higher the confidence investors have in future cash flows, the less they discount future cashflows, resulting in a higher present-day valuation.
Thereโs just one issueโฆ
Monitoring has long been the domain of billion-dollar scientific missions with global coverage and exquisitely calibrated data. Billions have gone into these projects - stuff like Landsat, Sentinel, NISAR.
Unfortunately, due to Physicsโข๏ธ and the inherent tradeoff between spatial resolution and coverage, itโs tough for commercial providers to sufficiently differentiate themselves. Sure, you can achieve a higher resolution and faster revisit cadence on a lower cost-basis, and you might even be able to reach parity on the spectral/radiometric calibration. But youโre competing with free. Free as in beer and speech.
It will always be tough to justify the (infinite?) premium you need to charge customers for a commercial, global monitoring product. Butโฆcrack that nut and itโll rain B2B SaaS-esque forward revenue multiples from the rafters like confetti.
Mobilizing
I admit it. Mobilizing is the most contrived โMโ of the bunch. Hear me out, I think I can make it workโฆbut itโs a little weak.
Mobilizing refers to the phenomenon of a customer reacting to an event by tasking a very high resolution, low latency image to further characterize that event. It could be verifying troop movements in a war zone, or estimating impact during and after a major flood event, or checking to see whether or not a manufacturing facility is currently in use. Whatever the reason - something acute and fleeting is motivating the customer to ask for that satellite imagery.
The key is that the imagery offers sufficient spatial resolution to see human-scale changes and is delivered quickly enough to inform a rapid response (ergoโฆโmobilizationโ). This use case is the backbone of every profitable satellite imagery company in history.
People often ask, โWhat is the killer application for satellite imagery?โ Well, this is it. And I mean that very literally. Targeting is an example of a mobilization use case.
Mobilizing doesnโt naturally result in recurring revenue, because itโs inherently uncertain and reactive. However, it can be structured in a recurring way, sort of like a retainer on future capacity (e.g. the โdirect accessโ programs that sell dedicated orbits to customers). How convenient!
Customers looking for this product are less price sensitive than their monitoring and mapping counterparts - itโs hard to assign a value to a piece of information that can literally save a life if delivered quickly enough and with high enough fidelity.
And unlike mapping, there often isnโt a viable alternative - you canโt easily fly a survey plane over denied airspace or use a drone in a hurricane.
A Quick Asideโฆ
Itโs nice to be back. I havenโt written for fun in over six months. Let me know what else you are curious about that I could cover in future essays (simply replying to this email goes directly to my personal inbox).
My only other half-written essay in the drafts is about something far more esoteric (how internet in space will affect the satellite imagery industry). So, Iโm open to ideas.
Thanks for reading and, above all, stay saucy my friends.
ยน This is the first time Iโve ever put a footnote in the disclaimer, but itโs for an important reason. I think โsaucyโ has the potential to become my signature adjective. I intend to liberate it from its cultural imprisonment to the phrase saucy minx, a small-minded and bizarre bench role for a player with adjectival hall-of-fame potential.
ยฒ Originally I wrote, โsundry and abstruseโ instead of โvaried and obscure.โ In honor of my decision to show restraint, Iโm taking this footnote as an opportunity to remind you that, yeah, I went to a liberal arts college. I read books on rare occasions. My vocabulary is significantly above average, even among college graduates (but only if you include the for-profit online schools in that calculation).
ยณ In fact, I hope for a lot more than just this โmental modelโ being useful to you. I hope for a lot of things. I hope you find joy and happiness in your life.ย
I also hope you share this essay with one person who you absolutely despise, preferably someone with no connection whatsoever to the satellite imagery industry. And, I hope when you share it, you include a note like, โYou have to read this, you will love it. Thereโs one footnote in particular that made me think of you.โย
Maybe youโre even the person that received a link to this essay along with that provocative note. In that case, I hope that you are currently reading this footnote with growing confusion and resentment. I hope you can reflect on why someone would despise you enough to share this essay with you.ย
Most of all, I hope you can see this moment for what it is. I want you to imagine your life sprawling out before you on all its splendor and preciousness โ you are at a fork in the road. Along the righthand path, should you choose to take it, you will find peace and reconciliation by forgiving the person who shared this essay with you. Along the lefthand path, you will find a new career in the satellite imagery industry.ย
Choose wisely. But should you venture down that sinister way into the tangled wood off to the leftโฆwelcome, friend. Weโve been expecting you.
I love the clarity of this post. My team at Planet is internally tracking the metrics behind some of these points: PlanetScope coverage (using h3) for monitoring, order fulfillment and image collection and latency for mobilizing/tasking.
Hi Joe - nice analysis. Another regularly used term for what you called โmobilizingโ is โmarshallingโ - bringing in additional, complimentary observations to resolve ambiguities and/or switch from detection to identification and surveillance.