Internet-based mapping services

Mankind long ago discovered that the world is round, and Skyline Software Systems seems to be trying to remind us of this fact. We pore over paper maps, mostly before taking trips, or surf various map sites on the Internet and view our destinations completely flat.

Skyline does not accept this view, and reminds that there are mountains, hills, valleys and gorges, and in general, the world is not a piece of paper or a flat computer screen. In the era of print, it was difficult to show the world in more than two dimensions length and breadth. Now, with the aid of Skyline’s unique technology, which is based on satellite photography and aerial maps, the Internet takes us on a virtual three-dimensional flight.

Skyline was founded five years ago by four partners in software company Compro: Israel Air Force graduate Arik Yifat is company chairman; another IAF graduate Izhak Stolz is president; Intelligence Corps graduate Ronnie Yaron, the brain behind the technology, works at the company’s Boston headquarters; and Israel Guy, is a non-active shareholder.

The four rapidly understood that great potential was contained in the technology, which was originally developed for computer games. Two and a half years ago, they accepted an offer to sell the software house and to concentrate their efforts and capital in Skyline.

The company is owned by the four founders (40%), and several companies listed on the Israeli capital market: the Aura venture capital fund (11%), Technorov, Alfred Akirov’s Alrov venture capital fund, which is about to make a public offering (6.5%), Sadot R&D (4.1%), and Technoplast Technologies (3.2%). Other shareholders are Poalim Capital Markets, Shrem-Fudim-Kelner, the Vertex fund, and employees.

To date, Skyline has held two financing rounds, the most recent of which was held in the latter half of 1999, when $8 million was raised at a company value of $28 million after money. A third financing round is currently being prepared which is expected to be for a much higher amount.

The almost fully prepared third round will be a private placement held in the US. Skyline expects to raise $30-50 million at a company value of $200 million after money. Giant companies such as MapQuest, Fujitsu, Kodak and Space Imaging, which cooperate with Skyline, have already expressed a desire to participate in the placement, and Yifat estimates that $15-20 million will be raised from them, and the remainder from foreign funds.

In addition, the company is planning to hold a public offering by the end of the year. The company value for the public offering has not yet been determined, but the owners note that public offerings are normally set at double the value of the most recent financing round prior to the public offering. Even a modest estimate leads to a sum of $300-400 million.

What exactly does Skyline’s 3D technology do? The expression “One picture is worth a thousand words” can easily be applied here, particularly when that picture is three-dimensional.

The technology is Internet-based. It enables the surfer to see a geographical destination in a three-dimensional photograph, accompanied by relevant information. If, for example, you want to go skiing, using Skyline technology you can find out the exact slope angle at a skiing site, see the various cable cars and the location of the hotels, and make reservations at the hotel of your choice.

However, the company still needs to complete mapping the world on satellite images, which form its database. Skyline’s declared goal is to build a very detailed “Digital Earth”. To date, the company has completed a few city sites, including Washington, Paris and Eilat, and plans to complete the mapping of fifty major cities by year-end.

The technology translates into revenues, which in 1999 amounted to $2 million, is expected to grow to $70-80 million and 2002, and to reach more than $200 million in 2004, through B2B deals with several bodies throughout the world. Serving as mediators between Skyline and end users, these concerns will insert the technology into their sites, together with advertising and links to various sites.

An example of this sort of cooperation is the agreement signed recently between Skyline and MapQuest, which was acquired by AOL for $1.1 billion in January 2000. MapQuest is regarded as the largest supplier of maps on the Internet, with 80% of the traffic dealing in maps.

Under the agreement, Skyline will apply its technology to MapQuest maps, planting virtual advertising along the way in air balloons and on the maps themselves. “This sort of localized advertising, as opposed to global advertising, is powerfully effective. The Internet world is interested in placing advertising in areas in which the surfer is interested at the moment,” Yifat states. What does this mean? Suppose, for example, we’re wandering the streets of Paris, trying to reach a certain museum. Along the way, after the sophisticated software concludes that we are art-oriented tourists, we’ll see additional museums and other tourist attractions.

Yifat says that MapQuest estimates revenues will approach $1 million a day. This is based on the number of visitors to the site, the number of hits and the price for localized advertising, which is higher than regular advertising. Yifat also notes that the average stay at a site is close to ten minutes, a long time in Internet terms. Skyline will receive fifty percent of these revenues.

In MapQuest’s three-dimensional site, you can already surf through Washington, and fifty major cities in North America will be mapped by the end of the year.

Another example of cooperation, which Skyline has had since 1998, is with Space Imaging, regarded as the world’s largest non-military satellite imaging company. The company, owned by Lockheed Martin and Mitsubishi, has one meter resolution maps, and sells mainly to companies in the urban sector. It is cooperating with Skyline in its Internet activity.

Skyline is also in advanced negotiations with iPIX, a NASDAQ listed company with a market value of $2 billion, for application of the technology in its sites. IPIX is regarded as a leader in 360 degree indoor panoramic photographs for homes, properties, automobiles, airplanes and so on.

Entry into these fields will lead to an agreement with Homestore.com, which has the biggest site for selling real estate, is traded at a company value of $4.3 billion, and whose 1999 revenues totaled over $73 million. Once it completes its mapping of fifteen cities, Homestore.com will introduce Skyline’s 3D technology into its sites. Anyone looking for real estate properties will be able to wander about the potential destination neighborhood to see where the nearest school and garbage dump are located, facts that sales agents do not volunteer to divulge, without setting foot there.

Skyline has an important cooperation agreement with giant Japanese Internet provider Fujitsu, which has a license to use the company’s technology for the next three years. Fujitsu was instrumental in leading Skyline to additional ties with automobile manufacturer Toyota, which has conquered 50% of the Japanese market.

Following successful testing, Toyota plans to integrate the 3D technology in its automobile satellite navigation tools. “This represents revenues of $20-30 per automobile, which in themselves are important,” Yifat says.

With the assistance of Fujitsu, ties were also formed with Sony, which is examining possibilities of combining Skyline’s technology into Playstation 2. “Internet hasn’t got started yet,” Yifat says, “There are a few hundred thousand Internet users in the world, but billions of television viewers. The breakthrough will come when television serves for Internet transmissions. The Playstation, which I believe is the home Internet computer, is one step on the way to the breakthrough.”

Skyline also has a two-way cooperation with Kodak, mediated by Intel International, which supports Skyline. Intel presents the company’s technology in its hardware displays as a futuristic technology proving the hardware’s strength. Kodak will provide Skyline with aerial photographs from its archives. The advantage of these photographs lies in their excellent resolution, which achieves a fifteen centimeter detail level. Skyline will set up 3D surfing sites with these photographs.

Skyline’s technology is also incorporated in the Tour de France races and another Parisian automobile race, accomplished through cooperation with French company ASO, a media giant that owns two television channels, a newspaper and rights to important sports events.

With Skyline’s technology, the races can be watched in real time, from the angle the user most prefers. This combination is achieved by advanced mapping of the larger areas of the race track, and making contact with satellite navigation instruments in vehicles. In this way, Skyline’s technology overcomes the limitations of real-time Internet video technologies. “The behavior of surfers, who downloaded 40,000 programs in three days, proves the effectiveness of the technology, and the enjoyment that can be derived from it,” says Yifat.

Skyline also sells its technology to the military and to air forces around the world, and one of its customers is the Israel Air Force.

What about competition? The Skyline team does not believe it exists, due to the state-of-the-art technology and the heavy mapping it entails. “Some companies exist, which are capable of creating 3D images of a certain limited area only,” Yifat says. “No company has applied it in the manner that we have done, on the basis of global data, on which we ‘put together’ all the relevant information, links and locally focused advertising.

”At the moment, we’re the second click. We reach end users as a tool, without advertising or a brand name. They find us through the large companies with which we have cooperation agreements, and we are satisfied with the arrangement at this stage. At the next stage, we’ll expand applications of our technology to tourism, real estate, and weather, and deliver direct. It’s reasonable to assume that we will then become competitors of those we currently cooperate with. We aim to become the future MapQuest and a geographical portal.”

Published by Israel's Business Arena on 15 March, 2000 >