DigitalGlobe Foresees Billion-dollar Business in Five Years

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PARIS — Geospatial imagery and services provider DigitalGlobe, which forecasts $635 million in revenue for 2013, expects to be a billion-dollar business in five years by increasing its share of its current $2 billion imagery market, establishing rights in the $10 billion market for geospatial information and tapping into the $30 billion market for information services.

In a series of presentations to investors Nov. 20, DigitalGlobe said it is beginning, in effect, to ride the revenue wave produced by its imagery as it works its way from the initial buyers of relatively raw data; to maps for location-based services to users in agriculture, retail sales and other industries; and continues into analyses used in energy extraction, leisure boating and even crime prevention.

Jeffrey R. Tarr, chief executive of Longmont, Colo.-based DigitalGlobe, made clear that the company’s forecasted 10 percent annual growth in the coming years will not climb to the $40 billion headline number attached to the markets in which DigitalGlobe has set its ambition.

“We’re not saying we are going to grow to $40 billion or monopolize a $40 billion market,” Tarr said. “But we have an opportunity to play in a market where real annual spending is $40 billion.”

But Tarr said that as the company learns how to maintain a revenue link to its imagery long after it has left DigitalGlobe, and as it adds crowdsourcing, social media and the type of forensics expertise associated with police laboratories to its processes, the market opportunities reach dizzying proportions.

A 10 percent average annual revenue growth rate, which takes the company to $1 billion in 2018, is what DigitalGlobe thinks it can maintain for the foreseeable future.

Tarr said the growth forecast in no way depends on the company’s receiving permission to sell 30-centimeter-resolution imagery on the commercial market. U.S. regulations now limit DigitalGlobe to selling 50-centimeter-resolution imagery, which is sharp enough to distinguish ground objects that size and larger, to non-U.S. government customers.

That is still sharper than the 70-centimeter imagery that DigitalGlobe’s nearest competitor, Astrium Services of Europe, has at its disposal.

But Tarr reiterated his appeal that the U.S. government ease the current restrictions and let DigitalGlobe go after the global aerial-imagery market, which he estimated at around $900 million a year globally. Some 50-60 percent of that market is for 30-centimeter imagery, according to DigitalGlobe.

DigitalGlobe’s WorldView-3 satellite, scheduled for launch in mid-2014, will have a 30-centimeter resolution in addition to its 16-color imager with a short-wave infrared capability, which open markets that have been beyond the company’s reach.

To enable DigitalGlobe to continue to squeeze revenue from its imagery after its initial sale, the company has started what it calls the Information Partner Program (IPP).

“We have been selling imagery for 1X to partners who then turn around and add value and sell it for 5X to 7X,” said Bert Turner, DigitalGlobe’s senior vice president for sales. He said the company’s IPP effort, for which DigitalGlobe has already lined up 12 partners, will provide DigitalGlobe with royalties that expand with the amount of sales of services using the imagery.

Yancey L. Spruill, DigitalGlobe’s chief financial officer, said the U.S. government is still growing as a DigitalGlobe customer, just not as fast as the company’s other customer sets.

U.S. government revenue at DigitalGlobe will increase in 2014 once WorldView-3 is operational, in keeping with the terms of the company’s EnhancedView contract with the U.S. National Geospatial-Intelligence Agency.

Spruill said the U.S. government is finding new ways to use DigitalGlobe imagery even beyond the EnhancedView commitment, which is a series of one-year contracts scheduled to last for 10 years from mid-2010 with a total value of $3.6 billion.

Also growing is DigitalGlobe’s Direct Access Partner (DAP) program, in which foreign governments sign long-term commitments and are able to receive satellite data directly in their territories. DigitalGlobe has 10 DAP customers now and will be adding one or two per year, Spruill said.

The fastest-growing segments of the company’s business are individual industries and civil government authorities outside the United States. These two categories currently account for 20 percent of DigitalGlobe’s revenue.

Russia is an example. Spruill said the company’s business in Russia was no more than $500,000 a year nine years ago. It is now nearly $30 million a year.

What follows are examples of imagery applications and revenue sources that DigitalGlobe said it has just started to harvest.

Copper Theft

Tony Frazier, DigitalGlobe’s senior vice president for marketing and insight, said DigitalGlobe has been able to reduce copper theft for a utility-company customer by combining data-mining methods with satellite imagery.

Copper theft has been on the rise worldwide as copper prices have risen.

DigitalGlobe provided an analytical assessment using social media, local law enforcement records of recent criminal activity and copper-theft reports, plus property data showing where buildings were unoccupied to tell its customer where theft was most likely to occur.

The customer then added guards or other surveillance assets to those specific locations.

The result, said Frazier: a 54 percent reduction in copper theft from that company’s installations in a region where, during the same region during the same time period, attempted copper thefts were up 7 percent.

For the customer, the direct savings were five times the cost of the DigitalGlobe contract.

A similar analytical tool was developed for an oil company in Africa facing theft of crude oil from remote sites.

Hugging the Shore

DigitalGlobe Chief Technology Officer Walter Scott, who is also the company’s founder, said WorldView-3’s capabilities will open a new market in bathymetry, not normally a headline application for satellite data.

WorldView-3, and the eight-color imaging sensor from the WorldView-2 satellite currently in orbit, can peer through shallow ocean depths to capture the contours of the ocean floor.

Near-shore ocean bottoms evolve with the arrival of storms. Sandbars are created, posing risks to boats. Scott said one of the company’s IPP customers sharing royalties with DigitalGlobe is making maps that are regularly updated for distribution to customers.

Waiting on WorldView-3

DigitalGlobe operates five satellites, with two more under construction. WorldView-3 is scheduled for launch in 2014. GeoEye-2 is undergoing modifications ordered by DigitalGlobe after the company’s merger with GeoEye in 2012. It will then be stored until needed.

For now, there are no plans to equip GeoEye-2 with short-wave infrared, but Scott said the experience with WorldView-3, whose construction was well underway before the decision was made to add the capability, shows that it would be possible to do so.

“Having a satellite on the ground gives us options we haven’t had before,” Scott said. “Nor has anybody else in the industry.”

Also among WorldView-3’s attributes is a feature that reduces haze over a given scene so that it can be integrated into adjoining scenes to produce seamless maps that look cloud-free, Scott said. It is no substitute for a radar satellite’s ability to see through cloud cover, but the feature will improve the per-orbit yield of the satellite.

Smaller is … Just Smaller

One of the biggest developments in the past several years in the Earth observation satellite industry has been the proliferation of commercial projects using small satellites.

Some satellites weighing several hundred kilograms or less are able to perform missions once reserved for satellites weighing several thousand kilograms and costing hundreds of millions of dollars — as DigitalGlobe’s satellites do.

Scott acknowledged those advances but said small satellites will never be as capable, in terms of image sharpness, as larger spacecraft.

“In the microelectronics world, smaller is better,” Scott said. “For imaging, smaller is not better. Physics is a headwind.”

The only ways for a satellite to get higher resolution are to move closer to Earth, with the negative lifespan effects and coverage revisit-time consequences that this entails; or to carry a bigger telescope.

The wider the telescope, the better the resolution. And for the telescope to function to the maximum of its ability, the satellite platform has to be free of jitter. That too argues for larger spacecraft that can assure the stability needed to permit the camera to focus, Scott said.