Value Added: A forecast for more profits


Bob Marshall, founder and CEO of Earth Networks in Germantown, Md., stands inside his company’s Meteorological Operations Center surrounded by Earth Networks’ weather stations. (Tracy A. Woodward/THE WASHINGTON POST)
Thomas Heath
Reporter September 25, 2011

The big joke in my house is what a weather junkie I have become.

I can sit for hours in front of the Weather Channel, nervously following those green radar splotches creeping across the screen, signaling trouble.

Thomas Heath is a local business reporter and columnist, writing about entrepreneurs and various companies big and small in the Washington Metropolitan area. Previously, he wrote about the business of sports for The Post’s sports section for most of a decade. View Archive

I thrive on those live stand-ups of correspondents hanging on to a lamppost in a hurricane. I click on Web sites looking to see whether I can jog without getting soaked. My wife tells me to look out the window

Bob Marshall, 45, has built a business around nuts like me.

He prays for crazy weather.

“We buzz off this stuff,” Marshall says, staring at his computer monitor as it follows a path of lightning across Massachusetts.

His company, Earth Networks, grosses $50 million from its 10,000 suitcase-size weather stations spanning the globe.

The information pours in to the privately held company’s Germantown headquarters, home to Marshall and a posse of scientists and meteorologists.

Local emergency crews subscribe so they can jump on flash floods or lay down sand before the snow hits. Sports leagues need to know whether that thunderstorm heading their way is going to hit the stadium.

Utilities such as Pepco rely on Earth Networks’ array of neighborhood sensors so they can more efficiently allocate electricity and predict storm risks to power lines. Canada’s wheat board uses Earth Networks’ dew-point predictors to help farmers decide when to plant and when to use pesticide. Even the National Weather Service is a client.

It’s lucrative stuff; organizations pay between $10,000 and $250,000 a year for subscriptions, accounting for about half of the company’s revenue.

The other half comes mostly from online advertising on Earth Networks’ WeatherBug site, where pharmaceutical companies (weather affects allergies and other conditions), American Express (travelers need weather reports), big retailers such as Home Depot and Lowe’s (where can I buy a snow shovel?) and farm-equipment companies such as John Deere (farmers need to know if they can plant today) all pay to be seen.

Earth Networks employs more than 170 people. Most are in its 50,000-square-foot headquarters. The rest are scattered around the world, including Silicon Valley, New York City and Milan.

The $50 million in revenue returns a profit somewhere between $5 million and $10 million.

The biggest cost by department is sales and support at 23 percent of revenue, research and development at 21 percent, and marketing at 10 percent. There is little debt.

Marshall is the largest individual shareholder, with about 10 percent of the company. Employees also own a big chunk, as do Polaris Venture Partners and Harbour Vest Partners, both based in Boston; and Silicon Valley-based Sequoia Capital.

Most of its profits over the next five years will fund a $25 million network of greenhouse-gas sensors around the world, which Marshall is betting on to drive growth.

The plan is to eventually take the company public.

Adept at math and science, Marshall grew up in Montgomery County and studied engineering at the University of Maryland Baltimore County.

Looking for work one summer, he found a Frederick company in the county yellow pages that sounded interesting. He walked in one day and met the firm’s president, Bill Mengel, who hired him for around $5 an hour.

Mengel’s company worked on U.S. Army chemical and biological warfare, and he would become a mentor to Marshall and one of the initial investors in Earth Networks.

“I learned both the technical stuff and how to run a business,” Marshall said.

Marshall’s first job after graduation from UMBC was for a technology firm that helped the U.S. Navy track Soviet nuclear submarines around the world.

“We would drop sonobuoy sensors that listen under the water, collecting data in real time,” said Marshall. “That technology is exactly what we do today. We are listening through our weather stations to try to determine what is going on with the Earth.”

After three years working on anti-submarine warfare, in 1992 he took Mengel up on his invitation to start a high-tech company that was an offshoot of the biological detection that Mengel had done for the military.

It was a risky move. Married and soon to have a child, the entrepreneur walked away from a steady job and took a second mortgage on his house.

“It was stressful,” said Marshall.

The business started as an environmental monitoring system to measure contaminants in the atmosphere. Marshall’s company, based in Harford County, developed equipment and software that recorded air samples for temperature, relative humidity and atmospheric pressure.

The only problem was, there was no market for the information.

“I was a weather nut, so I said, ‘If we add a wind sensor to this thing, it would be a weather station,’ ” Marshall said.

They spent $10,000 to build their first weather station. Their business plan was to knit them into a network, develop advanced software to build computer models and track the weather, and then put out warnings that storms were on the way.

The goal was to measure “micro-climates,” locating stations close to where people live rather than at airports, where the National Weather Service operates its stations.

“Weather is hyperlocal,” he said. “The weather conditions at Dulles are not the same as Rockville. No longer are you just finding out what is happening at the airport, where nobody lives. You are actually finding out what is going on in your backyard, where it is impacting you and your family and others.”

Marshall started personally phoning local school principals, pitching them on his weather stations as a way to heighten students’ interest in math and science.

A turning point was selling local weather broadcaster Bob Ryan on the possibilities offered by blanketing the region with neighborhood weather stations. Ryan convinced his management at WRC, where he worked at the time, that the stations could help ratings. Some have video cameras, adding to the drama.

The company was profitable during the 1990s, but it ran at a loss for several years while it expanded online and into lightning and carbon dioxide sensors. It has returned to profit the last three years.

The current growth plan is twofold: first, he is installing a chain of lightning sensors around the world, which measure the small cloud sparks that can lead to killer storms. He also is installing his greenhouse gas sensors around the world, selling the network and data to governments that want to know more about climate change.

“More business opportunities have developed once we started doing lightning and greenhouse-gas sensors,” Marshall said.

Earth Networks now has weather stations on every continent except Antarctica. And Marshall said he is putting a sensor or weather station there within a couple of years.

I won’t be glued to that screen.

Follow me on Twitter: @addedvalueth.

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