This short analysis is a follow-up to the “EO Business Models/Government Influence On EO Startups” analysis published earlier in the week. It seemed appropriate since Planet released an announcement yesterday containing information related to that analysis.
Within that announcement, Planet delivered the upbeat fact there was a “...100 percent year-over-year growth across all product lines, with SkySat tasking achieving more than a 200 percent increase.” This growth sounds promising, especially considering the ongoing pandemic.
To be clear, though, tasking is not equivalent to revenue growth. It means Planet’s SkySat satellites were assigned more areas to look at (in this case, 200% more). Such growth might come into play with new AND existing contracts (such as Planet’s existing contracts with Google to provide imagery). Or the tasking increase could be attributed to Planet getting more SkySat satellites online between 2Q19 and 2Q20. More satellites mean customers have more opportunities to task them (there are **only** 18 SkySats in orbit). While the announcement highlighted SkySat accomplishments, Planet didn’t say much about the cubesats it is known for operating. Does this omission also mean imagery from the company’s Dove and more recently, SuperDove, satellites just isn’t attractive to the market?
The primary customers contributing to the product line growth and taskings were:
“...users in civil government, forestry, the U.S. federal government, academia, and international government. These customers are using Planet’s data to remotely and safely monitor infrastructure, enforce code and permitting regulations, and track assets. They also expanded their partnership with Esri, enabling users of the market-leading GIS platform to purchase and access Planet’s data directly.”
In other words--civil government agencies of all stripes are responsible for the company’s year-over-year growth. If there were other commercial customers than Esri, and they contributed significantly to Planet’s growth, Planet’s leadership would highlight that. The assumption, then, is that civil government is paying for Planet’s products and services. While 100% growth is good, receiving it from traditional civil government stakeholders is no surprise and maybe should even be anticipated.
The First Step is to Admit There’s a Problem
Will catering to government result in a neverending spiral to stagnancy, one of the possible challenges highlighted in the earlier analysis? Planet is already making changes to gain and retain government customers:
“[T]he company is now finding itself building larger SkySats and lowering the altitude of SkySats in orbit, hoping the better resolutions offered will be desirable to a government customer (while praying a lucrative commercial segment eventually comes into being).”
Whether Planet can grow a commercial market for EO depends on whether Planet can create products and services that are genuinely different from traditional EO providers. To use SpaceX’s Elon Musk as an example, he typically uses the phrase “order of magnitude” to describe how much cheaper, more efficient, or better his company’s products are. That phrase ends up being closer to the truth for SpaceX’s results most of the time, which is astonishing. Can Planet create things that are an “order of magnitude” better than what’s provided from traditional EO operators?
Those may be the wrong questions. If Planet finds government patronage more profitable (as others have), it may be tempted to ask instead, “Why bother to create something better?” It’s happened before.