Northern Sky Research

DigitalGlobe/AstriumGEO – Niche vs. Mass Market

Nov 27th, 2013

DigitalGlobe held an Investor Day on November 20 where it described its strategy focused on key customers & partners. A week before, AstriumGEO conducted a Webinar presenting its Cloud solution; a product focused on numerous EO end-users. Their strategies, while increasingly different, look like a classic Niche vs. Mass Market opposition.

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DigitalGlobe’s customer base is very concentrated; a few customers represent a large share of the revenues. While the company aims to develop its revenues from commercial companies (LBS and others), it does not plan any radical strategy changes. At the same time, the company wants to increase revenue from Processing and Information Services and to do so, DigitalGlobe wants to leverage its imaging, archive and processing capabilities through in-house analytical solutions and through a network of partners (as ESRI); thus through internal capabilities and key, selected partners.

This strategy is possible thanks to its imaging capabilities (spatial resolution and spectrum), which open the way to unique analytical solutions, thus to niche markets. By focusing on key customers in niche markets and using key partners, DigitalGlobe’s goal is to maximize revenues while minimizing the cost of sales through maximum efficiency. This should lead to high-margin revenues.

In 2012, less than 50% of AstriumGEO’s revenues originated from Defense & Intelligence customers; around 30% was from commercial customers, and while Europe is the main regional market, Asia is not far behind. AstriumGEO’s customer base is less concentrated than DigitalGlobe, and AstriumGEO’s Cloud solution is in line with this strategy. It allows users to directly task, order and process imagery, but also to integrate it with other types of data. As such, it provides a single-point-of-access to independent Information Services providers and end-users. The solution does not require specific bilateral agreements, is open to every player and is tailored toward SMEs.

This strategy is possible thanks to a very large choice of imagery and a larger size than most of its competitors. AstriumGEO’s strategy should attract numerous SMEs looking for imagery that is easy to access and use, including most likely start-ups developing cutting-edge analytical solutions. AstriumGEO will be able to tap into the vast network of Information Services companies, extending the range of applications for its imagery. This should ensure a large, diversified and constantly evolving usage of AstriumGEO imagery.

Bottom Line

Both business models are in line with their current customer mix and imaging capabilities; however, both have specific challenges.

DigitalGlobe will continue to rely on large customers, with the risk associated. Besides its internal analytical capabilities, it will leverage those of a few selected partners; to a certain extent this will limit the applications and potentially the innovation rate. Moreover niche markets are limited in size, which will force DigitalGlobe to either create new applications or address the mass market. As its distribution system is not optimized for the mass market, DigitalGlobe’s imagery will be less easy to use, thus losing value when compared to EO satellite operators with a mass market focus.

As for AstriumGEO, a mass market focus implies lower margins. To compensate, AstriumGEO will have to capture a large(r) share of the market. At the same time, other EO satellite operators with similar imaging capabilities will most likely choose the same cloud-strategy; therefore, AstriumGEO will have to constantly improve its own Cloud solution or lose the value it brings to its own imagery and be forced to more intensely compete on price.

Information for this article was extracted from NSR's report:  Satellite-Based Earth Observation (EO), 5th Edition