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6/16/2014 Amid Stratospheric Valuations, Google Unearths a Deal With Skybox - WSJ http://online.wsj.com/articles/amid-stratospheric-valuations-google-unearths-a-deal-with-skybox-1402864823#printMode 1/3 See a sample reprint in PDF format. Dow Jones Reprints: This copy is for your personal, noncommercial use only. To order presentationready copies for distribution to your colleagues, clients or customers, use the Order Reprints tool at the bottom of any article or visit www.djreprints.com Order a reprint of this article now ĢĚŘ PǾŘ FİŇǺĿ İŘŇ ŇĢǺ FİŇǺĿ ĢĦǺ ŲȘǺ FİŇǺĿ Fǿŀŀǿẅ ųș @ẄȘJȘpǿřțș KEYWORDS Amid Stratospheric Valuations, Google Unearths a Deal With Skybox For a Mere $500 Million, Satellite Firm Promises to Boost Earnings and Rattle the World June 15, 2014 4:40 p.m. ET Silicon Valley lately has seemed like the land of wild—or at least puzzling—valuations. Facebook bought WhatsApp, a messaging service with paltry revenue and at least a halfdozen sophisticated competitors, for $19 billion. Uber was just valued at $18.2 billion in a round of privateequity financing. Even Beats Electronics, a company with a music service in its infancy and technologically inferior headphones that could fall out of fashion at any moment, was valued at $3.2 billion to Apple. But Google just bought a company that could have a bigger impact on its bottom line and on the world than any other recent acquisition by the search giant or its tech brethren—for just $500 million. For 1/38th the price of WhatsApp, Google acquired Skybox Imaging, which puts satellites into orbit 185 miles above Earth on the tip of the same Russian missiles that once threatened the U.S. with nuclear destruction. And here's what Skybox could allow Google to accomplish: Within a couple of years, when you want to know whether you left your porch light on or if your teenager borrowed the car you forbade her to drive, you might check Google Maps. That's because by 2016 or so, Skybox will be able to take full images of the Earth twice a day, at a resolution that until last week was illegal to sell commercially—all with just a halfdozen satellites. By the time its entire fleet of 24 satellites has launched in 2018, Skybox will be imaging the entire Earth at a resolution sufficient to capture, for example, realtime video of cars driving down the highway. And it will be doing it three times a day. You might think, thanks to weather maps and the satellite view on Google Maps, that such imagery already is readily available. But because satellites were, until recently, so expensive to build and launch, that isn't the case. There are only nine satellites in orbit now that capture high resolution images for the commercial market, and their capabilities are regularly commandeered for nationalsecurity purposes by the U.S. government. That means most of the pictures of the Earth that you've seen are of poor quality and years out of date. For $500 million, Google is getting a lot with satellite firm Skybox Imaging. Above, a SkySat1 Clean Room. Skybox Imaging By CHRISTOPHER MIMS

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  • 6/16/2014 Amid Stratospheric Valuations, Google Unearths a Deal With Skybox - WSJ

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    Amid Stratospheric Valuations, GoogleUnearths a Deal With SkyboxForaMere$500Million,SatelliteFirmPromisestoBoostEarningsandRattletheWorldJune15,20144:40p.m.ET

    SiliconValleylatelyhasseemedlikethelandofwildoratleastpuzzlingvaluations.

    FacebookboughtWhatsApp,amessagingservicewithpaltryrevenueandatleastahalfdozensophisticatedcompetitors,for$19billion.Uberwasjustvaluedat$18.2billioninaroundofprivateequityfinancing.EvenBeatsElectronics,acompanywithamusicserviceinitsinfancyandtechnologicallyinferiorheadphonesthatcouldfalloutoffashionatanymoment,wasvaluedat$3.2billiontoApple.

    ButGooglejustboughtacompanythatcouldhaveabiggerimpactonitsbottomlineandontheworldthananyotherrecentacquisitionbythesearchgiantoritstechbrethrenforjust$500million.

    For1/38ththepriceofWhatsApp,GoogleacquiredSkyboxImaging,whichputssatellitesintoorbit185milesaboveEarthonthetipofthesameRussianmissilesthatoncethreatenedtheU.S.withnucleardestruction.Andhere'swhatSkyboxcouldallowGoogletoaccomplish:Withinacoupleofyears,whenyouwanttoknowwhetheryouleftyourporchlightonorifyourteenagerborrowedthecaryouforbadehertodrive,youmightcheckGoogleMaps.

    That'sbecauseby2016orso,SkyboxwillbeabletotakefullimagesoftheEarthtwiceaday,ataresolutionthatuntillastweekwasillegaltosellcommerciallyallwithjustahalfdozensatellites.Bythetimeitsentirefleetof24satelliteshaslaunchedin2018,SkyboxwillbeimagingtheentireEarthataresolutionsufficienttocapture,forexample,realtimevideoofcarsdrivingdownthehighway.Anditwillbedoingitthreetimesaday.

    Youmightthink,thankstoweathermapsandthesatelliteviewonGoogleMaps,thatsuchimageryalreadyisreadilyavailable.Butbecausesatelliteswere,untilrecently,soexpensivetobuildandlaunch,thatisn'tthecase.Thereareonlyninesatellitesinorbitnowthatcapturehighresolutionimagesforthecommercialmarket,andtheircapabilitiesareregularlycommandeeredfornationalsecuritypurposesbytheU.S.government.ThatmeansmostofthepicturesoftheEarththatyou'veseenareofpoorqualityandyearsoutofdate.

    For$500million,GoogleisgettingalotwithsatellitefirmSkyboxImaging.Above,aSkySat1CleanRoom.SkyboxImaging

    ByCHRISTOPHERMIMS

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  • 6/16/2014 Amid Stratospheric Valuations, Google Unearths a Deal With Skybox - WSJ

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    Andyet,asIdiscoveredwhenIvisitedSkyboxrecentlyatitsmodest,lowslungheadquartersinMountainView,Calif.,satelliteimageryisn'teventhebusinessinwhichthecompany'sfoundersseethemselves.AsatGoogle,thebusinessofSkyboxisn'tdata,butknowledge.

    "Wethinkwearegoingtofundamentallychangehumanity'sunderstandingoftheeconomiclandscapeonadailybasis,"sayscofounderDanBerkenstock.

    Here'sanexampleofwhathe'stalkingabout.In2010,ananalystatUBSdiscoveredthatifheboughtsatelliteimagesofparkinglotsofWalMartstores,hecouldpredictthecompany'ssalesfiguresbeforetheywererevealedinitsquarterlyearningsreport,becausecarsinlotsequalshoppersinstores.

    "We'relookingatFoxconneveryweek,"Mr.Berkenstocksays,becausemeasuringthedensityoftrucksoutsidetheTaiwanesecompany'smanufacturingfacilitiestellsSkyboxwhenthenextiPhonewillbereleased.

    SkyboxcandeterminehowmuchoilisbeingpumpedoutofthegroundinSaudiArabiabyimagingoilstoragetanksfromabove.ThecompanycanpegthelikelypriceofgrainmonthsinadvancebymeasuringthehealthofeverysquareyardofcroplandonEarth.OnecityhasusedSkybox'sdatatodeterminewhobuiltillegalbackyardpoolsandmightalsouseittoidentifywaterrestrictionviolatorsduringadrought.

    It'scompetitiveintelligenceasspycraft.Andit'scompellingenoughthataSkyboxemployeeoncetoldareporterforWiredthatthecompanymightsomedaysimplybecomeanunreasonablyprofitablehedgefund.

    YettheseknownusesofsatellitedatawhichhaveneverbeenavailableintheabundancethatSkyboxsaysitcanachievearejustthebeginning.It'stheunpredictableapplicationsthatcouldbethebiggest.LikeGPSbeforeit,whichstartedoutasamilitaryonlysystemthatrequiredlaptopsizereceiversandnowenablesdrivingdirectionsineverysmartphone,Skybox'simageswillinevitablyleadtoappsandservicesnoonecanenvisionwithunknowabledisruptivepotential.

    Skyboxexecutivestellmetheyhopetooffertheirdatatooutsidedevelopers.Thiscouldleadtoaconstellationofnewservicesforbusinesses.Thisisthekindofcompetitiveintelligencethatsimplyhasn'texistedbefore,soit'sdifficulttoputapriceonit.Buttheabilitytospyoncompetitorsormonitoryoursupplier'ssupplier'ssupplierscouldbetremendouslyuseful.

    IfGooglecangetacutofthoseservicesbychargingalicensingfeefortheunderlyingdata,itcouldbeanewbusinessthatmightmovetheneedleonGoogle'srevenuemix,which,ampleasitis,remainsstubbornlylinkedtosearchadvertising.

    Intheshortterm,GooglehassaiditwoulduseSkybox'simagestoimprovethesearchcompany'smaps.ApatentrevealedinMayindicatesthatGooglebuildsitssuperaccuratemapsdirectlyfromsatelliteimagery,andthecompanyhaslonghadadealwithSkyboxcompetitorDigitalGlobe,whosesatellitescost10timesasmuchasSkybox'sandare10timesheavier,leadingtomuchhigherlaunchcosts.DigitalGlobe'sstockdipped4%onnewsoftheSkyboxdeal.

    ApotentialdownsidetotheSkyboxacquisitionisthatitcouldrepresentanewlevelofprivacyinvasionforeverydaypeople.Googlewillbeabletodetermineallsortsofthingsaboutusthatmightnothavebeendiscerniblebefore.Forexample,isyourhomeonablockwithlotsoftrees?Itturnsoutthatcorrelateswithhouseholdincome.Or,howmanycarsdoyouown?

    Google'ssatelliteswon'tbepowerfulenoughtopickoutindividualpeople.YetsinceSkybox'ssatellitesgettheirvisualacuitynotfromtheiropticswhicharerelativelyprimitivebutcleversoftware,it'spossiblethey'llbecomeevermorekeeneyedevenaftertheylaunch.

    Inafewyears,whenwelookupatthesky,we'llhavetowonder:AmIbeingwatchedrightnow?

    [email protected][email protected]

    Skybox'sheadquarters.Googleboughtthecompanyfor$500million.EPA

    http://topics.wsj.com/subject/I/iphone/1663?lc=int_mb_1001http://quotes.wsj.com/DGIhttp://twitter.com/mimshttps://mail.live.com/default.aspx?rru=compose&[email protected]
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