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Four Commercial Drone Trends to Watch in 2018

In my last post, Five Biggest Commercial Drone Trends of 2017 and the Challenges Ahead, I used data from our 2017 Drone Market Sector Report to illustrate the major trends of the past year and describe the major challenges ahead for the drone industry. That post looked back, but this one looks forward, offering our specific predictions for 2018, including investments, technology improvements, ecosystem partnerships, and software innovations.

(Listen to this companion Drone Radio Show podcast here for our complete assessment.)

1. Investment and testing will continue in earnest on Unmanned Traffic Management (UTM) and beyond visual line of sight (BVLOS) operations.

With regulations moving at the speed of government and dissenting views on Drone ID, it seems like UTM (air traffic management for low-altitude drones) is an elusive dream. However, there is hope that testing being done on beyond visual line of sight (BVLOS) operations in drone corridors will provide the necessary inputs to integrate drones into the national airspace. Expect news this summer from the vendors and service providers conducting tests at NUAIR in New York as they release results and performance-based navigation standards begin to coalesce.

2. You’ll see more news on improved sensors, hardware integration, networking, and processing.

Already, we’ve seen announcements like this one for new thermal imaging drone payloads. Expect to see further Ethernet / IP sensor integration efforts as more and more remote managers demand immediate access to data from local operations. Expect more news on LiDAR / drone integration like this one from Delair-Tech as more land surveyors and construction professionals demand further time and money savings over traditional methods.

3. Look for more partnerships, software, and innovations coming from the DJI Enterprise ecosystem.

We noted in our 2017 Drone Market Sector Report just how much DJI dominates the industry with its 72% market share. All the major mission-planning and mapping applications—like DroneDeploy, PrecisionHawk’s PrecisionMapper, Skycatch, and dozens more—now run on the DJI SDK. What our report didn’t mention was DJI’s focused efforts to further expand its commercial ecosystem. DJI Enterprise’s AirWorks Conference is but one example, an event whose purpose is showcasing applied drone solutions for the commercial industry’s most challenging obstacles. Expect many innovations from DJI’s partners in the hardware, software, and service sectors.

4. Software will dominate advancements.

Along with the new imaging sensor announcements in 2018, we expect to see imaging software advancements as companies seek to combine RGB, thermal imaging, orthomosaic, and radiometric data.

We also expect to see more aerial imaging and mapping software firms announce artificial intelligence (AI) capabilities. Right now, most of this is cloud-based machine learning (aka deep learning and predictive analytics) where data sets are trained by specialized teams. You may see some edge-based AI announcements for image recognition/machine vision, but be cautious when you do. We think it’s still early in the technology development cycle and AI is at peak hype.

We think the big news for 2018 will be the integration of drone data and workflow into asset management systems. Capabilities include documentation, tracking, and GIS data integration. It may bring a yawn to some but we believe when you can connect the dots and show the effect of drone data capture on the balance sheet, CFOs and CEOs will take notice and drive further enterprise adoption.

Parting thoughts

As I speak to clients, I always like to remind them of two things about the commercial drone market. First, it’s not a drone market, it’s a data and information market. The drone is just a data capture device. Second, drones are aircraf, not consumer products and as such their operations are regulated by aviation authorities.  All technology advancements aside, this is a regulated market, so always expect lumpy, bumpy growth.

We hope you keep those in mind as well and wish you best success in the coming year.

Listen to the companion podcast here http://bit.ly/2CXe6uK.

If you have questions about what’s in the report I mention or would like to comment, write me at colin@droneanalyst.com.

 

Image credit: Shutterstock and Skylogic Research

The post Four Commercial Drone Trends to Watch in 2018 appeared first on Skylogic Research - Drone Analyst.

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Five Biggest Commercial Drone Trends of 2017 and the Challenges Ahead

Last year at this time, I reflected back on the news and trends of the commercial drone markets of 2016 and wrote about the mixed state of affairs ahead for 2017. Throughout the year, I offered my perspective on how the drone industry was still motivated by hype and how assessing forward momentum required hard data on the performance of the various sectors of the industry. To that end, we did research over the summer that surveyed 2,600 respondents on drone purchases, service providers, business users, and software services. In September, we published the data in 2017 Drone Market Sector Report 2017.

In this post, I’ll use that data to illustrate the major trends of the past year and describe what I think are the major challenges ahead for the drone industry.

Listen to this companion Drone Radio Show podcast here for the complete assessment.

Trend 1—Growth

By all measures, the drone industry in 2017 was marked by significant growth – growth in aircraft sales, software licenses, the number of service businesses entering the market, and the number of industrial businesses setting up commercial operations.

Here are a few statistics:

  • We project U.S. sales in 2017 to be about 3.3M units, which is 36% above 2016 figures. That’s all drones, all sizes. It’s about 1.3M units for the >250gram category.
  • As of October 31st, there were about 837,000 hobbyist users and 107,000 non-hobbyist drones registered with the Federal Aviation Administration (FAA).
  • As of December 1st, there were about 66,000 Part 107 FAA Pilots.

This represents a big change in the commercial market since Part 107 regulations supplanted Section 333 as the means for commercial operations in the U.S. What this and our survey data tells us is the number of service providers currently outpaces demand, and as a result, service prices are coming down significantly.

Trend 2—Consumerization

We said in our report that more consumer drones are being used for commercial work than ever before. For example, our data shows that more than two-thirds (68%) of all drones weighing over 250 grams are purchased for professional purposes—either governmental or business.

Why is this significant? Because the impact of consumer-originated technology on the enterprise is something that can’t be ignored. Enterprises want to take advantage of powerful, yet easy-to-use products (like DJI’s popular consumer models), and put them to work on the job. What this means for operators or businesses is that a shared core technology benefits all users and enables companies to scale the best experiences to everyone. Enterprise customers get the added simplicity and usability of the consumer product that has been built to meet the demands of thousands of customers around the world.  The average individual pilot gets to benefit from the reliability and scalability inherent in the product and demanded by enterprise users.

Trend 3—The DJI effect

Our data shows DJI is the clear market leader in drone aircraft sales and almost every software category. For example, DJI is the dominant brand for drone aircraft purchases, with a 72% global market share across all price points and an even higher share (87%) of the core $1,000–$1,999 price segment. Additionally, in the three categories of software we evaluated, DJI is the market-share leader in two: flight logging and operations, and automated mission planning.

This is significant because by building on top of its existing technology platform, DJI has fast-tracked development and has benefited from economies of scale. By migrating a successful technology stack and feature set upmarket, DJI never has to reinvent the wheel—it just needs to improve upon the original design and save engineering cycles for real innovation.

The upshot is that to stay relevant, all the other major vendors have had to partner with DJI (see Trend 5 Partnerships, below). DJI’s sales success has taken market share from others and has led to layoffs at 3DR, Autel, GoPro, Parrot, and Yuneec. However, fears about data security remain. And this has some speculating about whether DJI can sustain its leadership role in the future.

Trend 4—Investments

According to CB Insights, investments shifted in 2017 from aircraft hardware to software. In 2016, there were 106 deals totaling $542M. Most of these were for hardware. In 2017, VCs focused on software, end-to-end solutions, and counter-drone technology. CB Insights projects the year will end with 110 deals totaling $494M. The most significant investment this past year was 3D Robotics’ $53M Series D round. It saw them pivot from hardware to software services.

Why is this significant?  Because it shows the industry is still maturing. Seed and Series A rounds represented 60% of all deals in 2017; whereas early-stage share peaked in 2015 at 73% of deals. Additionally, some of the most well-funded drone companies are targeting enterprise and industrial inspection.

What this means for operators or businesses is greater affordability. Software advances, computer chip manufacturing techniques, and economies of scale will continue to drive down the cost of drone platforms and sensors and solutions.

Trend 5—Partnerships

This year we saw a change from synergistic merger and acquisitions to the creation of end-to-end solutions via partnerships. For example, look at how DJI’s enterprise partnerships have grown. Consider their AirWorks conference. What drone major vendor wasn’t there? The list included DroneDeploy, Measure, PrecisionHawk, Skycatch, and Sentera, to name a few.

This past year we also saw an uptick in regulators and industry stakeholder partnerships. For example, the Drone Advisory Committee was created to provide the FAA with advice on unmanned aircraft integration from a diverse group of stakeholders. Major commercial participants include Intel, DJI, Amazon, Google X, and Facebook, as well the Aircraft Owners and Pilots Association.

Consider also the FAA’s new UAS Integration Pilot Program. Here, government entities are partnering with private-sector companies, such as unmanned aircraft systems (UAS) operators and manufacturers, to submit proposals to the FAA to fly more advanced operations in their communities, including flying beyond line of sight and over people. This is significant because it’s clear that regulators want to include industry when creating policies.

However, there is some good news / bad news with this.

The good news is greater flexibility. With vendor partnerships, drones will be able to perform more types of data gathering in a shorter timeframe and with more precision than many other options. So, more aircraft, sensor, and software integration.

The bad news is operators and businesses have regulatory uncertainty. We advise our clients to plan for some uncertainty as technology, the public, and bureaucracy find common ground on operations for beyond visual line of sight and over people.

Challenges ahead

Here’s my list of the major challenges facing the drone industry in 2018:

  1. Regulations: We may see more regulatory red tape—e.g., a patchwork quilt of rules as the FAA’s UAS Integration Pilot Program begins to make policy.
  2. Public sentiment: Basic public concerns still exist about drone safety, security, privacy, and their public nuisance. My question is: How can we overcome this?
  3. Business value: We’ve yet to see credible ROI that hits the executive scorecard. The key question is: What monetary benefit do drones and information gleaned from drones provide shareholder value?
  4. Information accuracy: Up to now, drone vendors have been focused on the accuracy of image capture and the rigor of the drone system. For better business value, they need to focus on the accuracy of the data processing and the rigor of data analysis.
  5. IT data governance: This is especially the case for drone inspections where a single drone could collect 50 to 100 gigabytes of data. Managing these large data sets starts to become one of the things that have to be worked out.
  6. Automation: A lot of software automation will come, including artificial intelligence (AI) or algorithms that minimize the amount of human effort to distill all that information and get to some actionable inference. But large scale industrial use of AI is young and it requires manual intervention to distinguish the difference between near-similar objects.
  7. Endurance: We’re still on the quest for efficiencies like better power sources or mixes.
  8. Widespread business adoption: Business and industry adoption is growing, but it’s mixed because of factors such as business risk aversion, concerns over invasion of privacy, and a reluctance by many companies to share too much information about successes.

That’s it for now.

Listen to the companion podcast here http://bit.ly/2CXe6uK.

Look for a follow-up piece on our specific predictions for 2018, which will include investments, technology improvements, ecosystem partnerships, and software innovations.

If you have questions about what’s in the report I mention or would like to comment, write me at colin@droneanalyst.com.

 

Image credit: Shutterstock

The post Five Biggest Commercial Drone Trends of 2017 and the Challenges Ahead appeared first on Skylogic Research - Drone Analyst.

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Setting Realistic Growth Prospects for the Drone Market

I believe three of the biggest misconceptions in the drone industry is how fast it will grow, which sectors will grow, and which ones will lag.

No one disagrees that drones—both consumer and professional—represent a new and emerging market. Drone market forecasts abound. We currently track 73 independent companies that provide market forecasts, and each of them projects growth for the drone or unmanned aerial system (UAS) sector that is nothing short of phenomenal. Some of these, however, are questionable, because, at the time they were written, there were no historical sales or reliable market survey data on which to create a proper forecast. We wrote about this problem back in 2015 here. Still, today we still see a big gap between current forecasts and actual purchases, services, and business adoption.

In this article, I’m going to take a look at some of the data collected in our latest report on the drone industry—data we think is important to you and answers the question: “Why don’t we see widespread adoption of drones in my industry just yet?”

Business use defined

As part of our 2017 Drone Market Sector Report, we conducted a survey to identify the business users for drone-based projects and which industries have traction. We define “business users” as those individuals or companies that use or purchase drone-based imaging or sensing services. A total of 623 respondents answered our qualifying survey question that they either do such work themselves or contract out for it.

When we asked respondents about the primary commercial drone-based service they perform or purchase, the results show that:

  • the #1 business use is aerial photography and/or video at 31%,
  • the #2 use is surveying / mapping / GIS with 20%,
  • and the #3 use is construction (design, building inspection, or monitoring) at 6%.

Company size

To gauge the extent of drone use, we asked our business users about their company’s revenue, the number of projects they perform per month, and the number of remote pilots they employ. As with service providers, the numbers are low. For example, 75% of business users perform one to five projects per month.

The revenue figures of business users reveal an interesting trend as well. More than half (53%) are small and medium-size businesses (SMBs)—organizations with less than $10 million in annual revenue. Only 6% could be classified as a large enterprise, i.e., an organization that makes over $1 billion.

As we did with drone-based service providers, we asked these business users how many aviation-authority, licensed small UAS / UAV remote pilots they currently employ. The numbers were smaller than we expected. Almost three-quarters (74%) have five or fewer pilots; 50% have only one.

Certainly these numbers debunk the media hype about drones. There are not hundreds of thousands of drones flying now (certainly not at the same time), nor is it true that Millions More Drones Will Be Flying Above Your Head by 2020 and in this piece we make the case Why the Drone Network of Tomorrow is Farther Away Than You Think.

Limited success stories on integration

Our research finds widespread business adoption is being hampered by a reluctance to share too much information about successes.

Companies are depending on information communicated about drones by others that have been successful. Certainly the interest is there. You can see that from the diversity of industries attending the major U.S. commercial drone expos, such as InterDrone, Commercial UAV Expo, and Drone World Expo (which was just purchased by Commercial UAV Expo). Unfortunately, only a handful of companies (we estimate 75–100) are willing to come forward and present their use cases at these shows. Most of these presentations are not about companywide adoption, but rather about a particular, localized proof of concept.

There are positive messages in which the benefits of drones are explained, but communication about what a successful integration looks like is still very limited. Additionally, we find that companies that are already using drones are reluctant to share too much information, so they can continue to reap the benefits of their early investments. As a result of this reluctance to share information, further integration lags as companies wait on successful user stories that may never appear.

Bottom line

Unfortunately, the media all too often equates the business use of drones with drone delivery, and only reports on the headline-seeking efforts of Amazon, Google, and Facebook. There is so much more that’s actually happening, and it’s getting difficult to generate a comprehensive story on business use. Some of this can be attributed to the fact that many of the major industrial users are starting to focus only on the use cases that matter to them. The most concrete examples of this are the NAB Show, which brings together photography, video, and cinema professionals; the Energy Drone Coalition Summit, which is bringing together the major drone / UAV ecosystem players with the energy industry asset owners and end users; the American Society for Photogrammetry and Remote Sensing (ASPRS), which hosted a pre-conference UAS Technical Symposium this year at the Commercial UAV Expo, and will co-locate with the International LiDAR Mapping Forum in 2018.

That said, we will continue to do research on individual verticals and report growth and adoption issues.

If you have questions about what’s in the report or would like to comment on it after reading it, write me at colin@droneanalyst.com.

 

Image credit: Shutterstock

The post Setting Realistic Growth Prospects for the Drone Market appeared first on Drone Analyst.

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Show Me the Money—A Look at Where Service Providers Are Making Money in the Drone Industry

Guest post by Zacc Dukowitz, Director of Marketing UAV Coach

In this article we’re going to take a look at some of the data collected in the new report from Skylogic Research on the drone industry—data we think is important to you and answers the question: “Where are drone-based service providers making money?”

The report defines Service Providers as those individuals or companies that offer drone-based imaging or sensing services for outside hire (as opposed to Business Owners, who “use or purchase drone-based imaging or sensing services”).

Let’s dive in.

PRIMARY SERVICE AREAS FOR SERVICE PROVIDERS

Skylogic’s report found that the top three primary service areas for commercial drone work are: Aerial Photography / Videography; Surveying / Mapping / GIS; and Real Estate.

However, as indicated in the pie chart below, the first area (i.e., Aerial Photography / Videography) takes up the lion’s share not just of those three, but of the entire services scene, with 41% of the entire chart, while the following category (Surveying / Mapping / GIS) only receives 13%.

skylogic-survey-services

A note on the data: Respondents were asked to indicate the primary and secondary commercial product or services they offer. They could pick one primary and up to three secondary services. Skylogic intentionally had them choose a primary because previous research revealed that many service providers boast about their ability to service multiple industries, but have no domain expertise in those industries.

But just because the majority of commercial drone operators are working in aerial cinematography doesn’t mean they’re actually making money in that sector.

The report goes on to rank the top 10 drone services making over $100K/year. Surprisingly, it’s Surveying / Mapping / GIS that ranks first in that list. Aerial Photography and/or Video is #2. (Of course, just because you’re not making over $100K/year doesn’t mean you’re not making any money.)

After those first two, the third area listed where people are making over $100K/year is Utilities Infrastructure Inspection or Monitoring—even though this is the seventh item listed in the pie chart above, with only 3% of respondents indicating that they work in that field.

SO WHERE IS THE MONEY?

It seems one conclusion we can draw from these data points is that those commercial drone pilots who find a commercial niche (a place where there aren’t many people operating, but there is a demand for the work) are likely to make the most money.

Taking a simplistic view, a commercial operator could potentially look at those areas of minimal saturation on the pie chart—the ones lower down the list—and then look at those areas where people are making over $100K/year, and see what might be required to get into that sector.

Of course, transitioning into commercial mapping or inspections isn’t as easy as just knowing how to fly a drone. But we can foresee a future where solopreneurs team up with other professionals with specific skill sets—for example, a licensed surveyor—to provide high-end services to large industrial operations.

SERVICES MOST LIKELY TO BE OUTSOURCED

Another chart we want to share from Skylogic’s report shows the commercial areas where business owners are outsourcing services.

If you’re a solopreneur looking to find a skill set that will help you find work, this graphic could be a great jumping off place for finding skill sets you might want to develop.

skylogic-survey-outsourced-services

The bottom line is that there is money to be made as a service provider in the drone industry, but the most popular field (i.e., aerial cinematography) is not the most lucrative, and the areas where you’re most likely to find a solid financial foothold will require additional skill sets beyond knowing how to fly and how to operate a camera.

It will be interesting to see the data in another year or two. Things are developing rapidly, with students beginning to study drones and STEM in high school and the landscape appearing to shift radically to focus more on industrial applications. We may soon see mapping, surveying, and similar commercial use cases rise to the top of the services areas for drone service providers, and we might also see a resulting shift in the market from cheap drones to high-end drones developed for niche applications.

skylogic-report-cover
Don’t have a copy of the report? Purchase a full copy of the report here.

Note: If you participated in the initial survey you can get a copy of the report for free—just email info[at]droneanalyst[dot]com.

This post first appeared on UAV Coach

Image credit: Shutterstock

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New Research: 2017 Drone Market Sector Report

We have just released the results of our latest market research on the drone industry.

The 2017 Drone Market Sector Report examines worldwide drone sales, service providers, business users, and software services. The research is the result of a three-month project sponsored in part by Airware and DroneDeploy.

The online survey portion of the research garnered over 2,600 respondents representing more than 60 industries worldwide. Our analysis yields 10 key insights that summarize the current state of the industry, plus views of the overall market growth and drone use by vertical.

Among the many insights in the report, three are especially worth highlighting:

  1. The U.S. market is flooded with service providers and remote pilots, with very few making enough money to sustain a full-time venture. The data shows that 85% of service providers make less than $50,000 per year, and 79% perform only one to five operations per month.
  2. More consumer drones are being used for commercial work than ever before. Survey data shows that more than two-thirds (68%) of all drones are purchased for professional purposes—either governmental or business.
  3. DJI dominates the industry with a 72% global market share for drone purchases across all price points. In North America (U.S. and Canada), it’s 62%.

The 88-page report is comprehensive, featuring more than 40 helpful figures and tables and offering insight and analysis on:

  • Who’s buying what types of drones, from which makers, at what prices, and for what uses.
  • The size and nature of drone-based service providers, how they position themselves, and what markets they’re targeting.
  • Who the business users for drone-based projects are, and which industries have traction.
  • How service providers and businesses use software for drone-based projects—for flight management, mission planning, and image processing.

You can find out more about the report and how to get it here: http://bit.ly/2xZRJ4n

If you have questions about what’s in the report or would like to comment on it after reading it, write me at colin@droneanalyst.com.

 

Image credit: Skylogic Research

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