A common question in the geospatial industry involves the valuation of the current market as a whole, taking into account hardware, data, software and services. But the size of the industry is tough to quantify given its continued evolution, the many different tools, different business models, and the expansion into different market segments with often new niche players. In fact, I’d say it’s impossible.
A common question in the geospatial industry involves the valuation of the current market, taking into account hardware, data, software and services. The size of the industry in terms of revenue and percentage growth year-to-year is tough to quantify given continued evolution of the market, the many different tools, different business models, and the expansion into different market segments with often new niche players.
There has been a good deal of industry consolidation over the past five years that would seem to make this task easier, but some new and hard-to-quantify players have entered the market in that same time frame, making the market hard to valuate.
Totals and Segments
One of the longest running annual market reports is done by Daratech. Their annual study is still produced, but it’s been some time since they released a public summary. I found an archived report on the Directions Magazine website from 2003 that put the value of software, hardware, services and data products at $1.75 Billion. Going back roughly a decade prior and there are reports from Frost and Sullivan (1995) that put the market value at $2 Billion, Dataquest (1994) that valued the industry at $759 million, and Daratech (1994) that placed the worth at $505 million. Clearly there were discrepancies between these various methodologies, primarily because the makeup of the industry has always been tough to define.
The historical figures above were a product of a much simpler, but still complex time. The research teams segmented the market into image processing, spatial analysis, database, and desktop mapping products; also working to define the size of different market segments such as telecommunications and utilities, state and local government, federal government, and marketing and sales. Since that time, we’ve seen significant changes in the contribution from different market segments. Over the past five years spending in the military sector has increased with a far more open presence, and the rise of a whole new military-oriented trade group.
The Daratech report of 2003 indicates an 8 percent increase in utility spending with a market dominance of the utility sector of 24 percent of the market. While that market has dried up considerably, the military spending on GIS in the last five years would certainly mirror or exceed that dominant market share, and military spending was not a previously segmented sector in previous industry reports. We’re now seeing a rise in projects that take advantage of the toolset’s ability to manage earth resources and environmental impacts, particularly in the area of climate change. Cyclical interest in different segments makes for a great deal of uncertainty that is hard to forecast, and economic downturns that effect government spending are particularly troubling for the geospatial market.
There have been significant shifts in the vendor community over the past five years as well. ESRI continues to build on their dominance, with the private company disclosing their yearly revenue in a recent feature in Investor’s Business Daily, at $1.2 Billion with a customer base of 300,000 users. Competitors like Intergraph and MapInfo sell mostly solutions rather than platforms these days, and that muddies the market for comparisons. Intergraph, now a privately held company, has steered away from GIS platform development into targeted solutions for security and infrastructure among other sectors. MapInfo continues to develop their software, but is more closely focused on location intelligence now that they’re owned by Pitney Bowes. Traditional CAD vendors Autodesk and Bentley each have tools that are part of the geospatial toolset, but these tools straddle both the CAD and GIS worlds. There’s so much diversity now among these traditional players that they can’t be compared head-to-head.
There has also been a significant market disruption from such IT powerhouses as Oracle, Microsoft and Google. Each of these three companies have products that compete in the geospatial marketplace, but they also all cross many of the different geospatial tool types. Oracle continues to enhance their geospatial data handling capabilities and have added considerable geospatial platform functionality to their offering. Microsoft built upon early map products to create a consumer-oriented map browser as well as a transaction-based web mapping platform. Google has created a number of innovative products with a consumer orientation, but they also sell an enterprise back end to help companies create rich global visualization environments. With each, the geospatial part of their overall business is a small segment, but the tools are seen as an important part of their business strategy. Teasing out the value of geospatial in these large companies is problematic, although they clearly represent a significant portion of the overall market.
Whether you’re looking at traditional players, large IT companies or smaller niche players, the size and value of the geospatial vendor community morphs regularly.
Bought and Sold
When looking a the data sector, the purchase of the two largest data vendors by outside companies in 2007 provides a clear picture of their market value. TeleAtlas was picked up by TomTom for $4.2 Billion, and Nokia purchased Navteq for $8 Billion. These acquisitions were long-term investments that fit with each company’s business strategy that may not pay off for some time, yet the high prices clearly signify the value of geospatial data in defining the future of the Web.
In the imagery sector, the IPO of DigitalGlobe this year generated $279 million, which exceeded the initial offer price by more than 30 percent. The stock of GeoEye continues to perform well, based in large part on the significant national security investments in this whole sector, and continued innovation with new space-based platforms.
While there’s still clear valuation for geospatial data on the balance sheets of these public companies, and considerable revenue streams, the advent of mashups and server and cloud-based data publishing makes it harder to quantify the revenue from this sector. As web delivery moves toward more of a transaction-based model for content delivery, the vendors stand to benefit, but it will be increasingly hard to understand the actual value of the data as the revenue generated moves beyond the take of the data middleman.
Value Without Revenue
One of the more difficult aspects for the current valuation of the geospatial industry are the free services and software. The free consumer-oriented solutions that are driven by ad revenue such as Microsoft and Google are clearly a value to the company to drive traffic and ad revenue, but like all other content, the value of individual screen views isn’t quantified, and it’s hard to calculate the amount of time spent specifically looking at maps to discern the value of maps as distinct from other search capabilities.
Open source software is a growing market segment, but the software is provided for free, with a cadre of developers making a living selling their customization services. There’s growing interest in these products in certain government circles, and more interest in the developing world where open source reduces the barriers to entry into GIS. Without a product to pin dollars on, the incomes of a developer community that is spread globally is impossible to track.
Another free factor that’s affecting the value of the data sector is the rise of OpenStreetMap. This free user-generated wiki world map has grown in popularity with impressive data quality and global coverage. It’s hard to gauge how this movement will effect the overall value of those that charge for street and navigation data, but there’s clearly a threat hear that may erode some lucrative revenue streams. Again, the advent of a free commodity makes it hard to understand where the value is derived down the road in services and solutions.
With a move to more server-based transactions and cloud computing, the industry will get even harder to value. It makes perfect sense that the number of industry reports have dropped off in the face of the Internet’s influence on the industry. From the time that MapQuest was purchased by AOL in 1999 for $1.1 Billion, it was clear that the Internet would have huge sway on the geospatial market, and that valuation would be difficult to discern.
Given the many directions that the industry has morphed over the years, it’s become impossible to pull together the overall global value of the geospatial market sector. What’s of far greater interest and value are the individual market sector reports, such as the GITA Technology Report that achieve a believable forecast for specific industry sectors. Yet even those reports face the disruption of the Internet, which has been dramatically impacting other media markets for some time.