Car-data firms flop as automakers see dollar signs in software

Auto companies promising billions in new software revenue by the end of the decade have been hiring engineers left and right, poaching executives from tech giants and trying to figure out how to process and monetize the oodles of data that connected cars produce.

One would think this would translate to fertile ground for startups whose mission is to help carmakers sell data. Instead, two high-profile companies in the space — Otonomo and Wejo — have been in dire financial straits.

Otonomo, an Israeli startup that went public by merging with a special purpose acquisition company in 2021, reported just $2 million of revenue in the third quarter. While that was up 12-fold from a year earlier, losses widened. In December, the company cut jobs to preserve its dwindling cash. On Thursday, Otonomo announced plans to merge with another company, a digital roadside-assistance firm called Urgently.

Wejo, a British startup that also completed a SPAC merger in 2021, is taking the creative route to shoring up its finances. After issuing a going-concern warning last year, it’s in the process of merging with another blank-check company — a transaction that Bloomberg Opinion columnist Chris Bryant has dubbed a Re-SPAC — to secure $100 million in fresh funding. Wejo’s goal is to be cash-flow positive by 2025.

The General Motors-backed company is succeeding and growing despite the macroeconomic climate, a Wejo spokesman said in an email. It expects to triple or quadruple revenue this year, though sales amounted to just $4.8 million in the first nine months of 2022.

So why the disconnect between automakers’ hefty software spending and Wejo and Otonomo’s paltry revenue?

Each carmaker and supplier is capturing data differently, and there’s no one standardized format. That’s what these startups are looking to do — scrub, standardize and organize data so it can be useful to third parties including insurance companies, fleet managers and city planners.

The challenge is that carmakers don’t want to share all that much, or they cherry-pick data to share that, by itself, isn’t all that useful to outside buyers. Another constraint: some data is only valuable in the aggregate, when provided by many automakers.

For example, if a city planner in Paris wanted to track parking-spot usage, they’d want to see all the cars parked in a particular area at a given time — not just the sliver of brands that have a data agreement with Otonomo.

By the same token, a rental-car company with multiple brands in its fleet would want predictive-maintenance data on the whole fleet — not just some of its cars. If you can’t see the whole pie, slices aren’t worth paying for.

Getting much or all of the auto industry to supply the same kind of data to one marketplace will be a steep hill to climb. Carmakers are increasingly looking to do some of this analytics work in-house, because they want to build new features and charge subscription fees.

Ford, which said last fall that it’s expanding a deal with Wejo to help process car data for insurance companies, sells data through multiple channels — startups, insurance companies, data aggregators — depending on the use case, a spokesman said. As for BlueCruise, the advanced driver-assistance system that it offers as a subscription service — Ford handles the data in-house.

The idea of a single data marketplace makes sense in theory, but so far it’s been hard to get off the ground. One former startup executive compared the situation with the 1989 film Field of Dreams, where Kevin Costner built a stadium in a corn field to lure the ghosts of famous baseball legends. Otonomo and Wejo built the marketplaces, but nobody came.

Maybe these companies will land on a model that works. The auto industry has been talking about connected cars for several years, and yet it still seems like it’s just getting started.