To look at Monsanto’s product pages, you’d think the company’s business is in selling two closely related commodities: agricultural seeds and weed killers. But that would be like saying that Verizon sells people data and phone calls. What these companies are truly engaged in is an effort to make themselves indispensable to their target market’s daily activities. Now Monsanto is stepping up that campaign by expanding into the high-tech world of big data with its $930 million acquisition of The Climate Corporation.
It’s not that Monsanto is unfamiliar with the cutting edge of technology — as its long list of patents will attest — but so far most of the company’s energies have been spent on altering, enhancing, and otherwise rearranging the basic ingredients that go into land farming. With Climate Corp’s expertise in hyper-local weather prediction and big data analytics, Monsanto looks set to become a fully fledged services company as well.
Founded by a pair of former Google employees in 2006, The Climate Corporation began life under the moniker of WeatherBill Inc. Siraj Khaliq and David Friedberg put together a complex system for highly detailed weather monitoring, prediction, and analysis, which allowed them to offer a new type of insurance to farmers. Instead of protecting growers against loss, WeatherBill promised to recompense their anticipated profit in the event of a given weather calamity. Thus, if you sign up for the company’s drought protection plan and your fields don’t receive the stipulated amount of rain, you still get the full anticipated profit of a healthy year’s crop.
Name your peril and The Climate Corporation will insure your profits against it
After changing its name to The Climate Corporation in 2011 and thereby better harnessing the prime web estate of its climate.com homepage, the company’s next big milestone has been this month’s takeover by Monsanto. The all-cash purchase price of $930 million is big by anyone’s standards — standing alongside Instagram and Yammer in the pantheon of tech startup sales — and marks the growing value and importance of applying big data analytics to long-established industries like agriculture.
As Monsanto’s press release makes clear, it’s buying technical acumen and capabilities first, with the insurance business being of secondary interest. Climate.com provides the farmer’s equivalent of a fitness tracker: it offers hourly reports on field-level conditions like precipation and wind speed, email and text alerts when thresholds are exceeded, and even a mobile app for iOS and Android. You’re not just given rough temperature estimates, you’re given field-specific and highly detailed weather forecasts, plus a litany of optional support services for helping you choose when to seed your next crop.
Yes, of course there's a mobile app
It’s this farmer-support infrastructure that most appeals to Monsanto, which already has various ventures like its AgAcademy and Integrated Farming Systems (IFS) designed to help inform planting decisions. The first IFS product from Monsanto — FieldScripts for corn, which advises on the best types of Monsanto seeds to plant in each field — is actually the product of a similar acquisition the company made last year when it bought Precision Planting for a quarter of Climate Corp's price. FieldScripts is still in testing ahead of a 2014 launch, illustrating how nascent this market still is.
If Monsanto is successful in putting together a comprehensive farm management, oversight, and planning service, it can make itself even more pervasive in the US farmer’s day-to-day operations. The company’s not being modest in its estimates, claiming there’s $20 billion of "untapped yield opportunity," which it can help farmers unlock through the application of what it calls "data science." Buying The Climate Corporation is a shortcut to getting out in the lead.
Developing the service side of its business is more than just an attempt to catalyze extra growth for Monsanto; it could also help rejuvenate the company’s dubious reputation around the world. Monsanto’s Brave New World approach to farming — where super-strength herbicides like Roundup are used in concert with genetically modified seeds — has been highly controversial. Some 2 million people participated in a global March Against Monsanto in May, and another such event is planned for this Saturday.
The grassroots repulsion to Monsanto’s practices has been vocal, finding expression through documentaries like The World According to Monsanto and activist websites such as Occupy Monsanto. Fears about the undocumented or as yet unidentified effects of genetically modified food intermingle with disapproval of Monsanto’s zealous enforcement of patent rights and the onerous conditions it imposes upon its client farmers. Monsanto demands, for example, that growers should keep purchasing new seeds every year instead of re-seeding their fields in the natural way.
Monsanto's diversification roadmap passes through Silicon Valley
Although unpopular, these impositions have proven successful in establishing Monsanto as the preeminent seed and herbicide supplier in the US. Still, the company now has a chance to improve its image dramatically if it continues along a path of diversifying its biotechnology core with more benign information services such as those Climate Corp can provide.
Tim Gosman, Senior Consultant at The Brand Union, warns that Monsanto's efforts "to help farmers improve their practices and profits will be seen by many as hugely disingenuous." The company still has a major reputation issue it needs to resolve, he tells The Verge, but "it's a wise move to try and generate some positive PR for the business and this acquisition could be the first step towards doing exactly that."
The Climate Corporation aims to retain all its current employees and will continue to operate in its present role as an expert risk management and agri-insurance firm. The question for Monsanto is whether it can properly capitalize on Climate’s smarts to become the leader in this new field of data-driven farming. If it does, it stands to benefit both financially and reputationally.