Commercial Drone Markets: 2014 Year in Review

Judging by the headlines, 2014 turned out to be the year for drones. I referenced in Tweets a total of 503 articles with the word ‘drones’ in the headline last year.  A Google search brings up about 61.4 million results referring to ‘drones.’  Granted, that search includes references to military and hobby drones, but it still delivers higher results than other years.

If the first theme of 2014 was the rise in popularity of drones, the second theme was how hamstrung the commercial markets are in the U.S. because of a lack of regulations. But there’s more going on than the buzz and frustration with FAA progress; in this post, I’ll review what I think were the five most significant commercial market trends for drones in 2014.

  1. ‘Drones’ Got Hyped

As mentioned, 2014 brought lots of hype about drones in the media, and investors can’t tell fact from fiction.  Here’s one example where a writer and industry analyst asserts that the civilian commercial market for unmanned aircraft systems (UAS) will dwarf that of the military. But the evidence shows otherwise. My colleague Mitch Solomon summarizes the problem well in this article:

“Venture investors have a huge variety of questions about the commercial drone market, but two stand out in terms of their importance.  The first is: what is hype and what is reality?  Put another way, is this market really a big, high growth, high margin market?  If you rely solely upon media hype and AUVSI [fusion_builder_container hundred_percent=”yes” overflow=”visible”][fusion_builder_row][fusion_builder_column type=”1_1″ background_position=”left top” background_color=”” border_size=”” border_color=”” border_style=”solid” spacing=”yes” background_image=”” background_repeat=”no-repeat” padding=”” margin_top=”0px” margin_bottom=”0px” class=”” id=”” animation_type=”” animation_speed=”0.3″ animation_direction=”left” hide_on_mobile=”no” center_content=”no” min_height=”none”][Association of Unmanned Vehicle Systems International], your answer would be an unequivocal: yes, the commercial drone market is the biggest, highest growth, best new market opportunity to come along in decades (or maybe centuries…AUVSI shows the US commercial market at over $1 billion in the first year after regulations are approved by the FAA.  (Really?!).”

Like Mitch, I’m not so quick to buy the media hype or AUVSI’s forecast (for more on that, see this article), and my market view is much more pragmatic and measured. Still, if tier-one venture investors are asking questions about the hype, then that is a good sign. It means that while there is interest in the space, investors will need to work smarter to make sure capital won’t be wasted chasing fictional opportunities.

  1. Oil and Gas Inspections in the U.S. Got a Frivolous Beginning

While drone inspections of land-based refinery flare stacks have been permitted in other countries for some time, it wasn’t until June of this year that the FAA granted permission for the first commercial drone for this industry in the U.S.  Problem is, it wasn’t for the same purpose. That permission went to oil company BP and drone manufacturer AeroVironment to fly aerial surveys of over Alaska’s North Slope.

The lack of real-world consequence of this permission is best stated in this article. Until June, the FAA has approved drones for public safety, such as police or firefighters, or for academic research, on a case-by-case basis. Most of those cases were for use cases similar to flare stack inspections (perch and stare) and were for small, versatile drones with relatively low-cost technology.  But this was for an expensive 10-year-old military spec fixed-wing drone that has limited commercial viability. As the article states:

“The FAA is essentially using the military’s prior experience with this specific drone platform in place of the agency’s airworthiness certification requirements, so it is not an option for people hoping to use the newer drones being designed by high-tech startups that are not involved in military applications,” [Brendan] Schulman said. “It is a small step in the right direction but really only for companies who want to operate in very remote locations using military surplus equipment.”

  1. Drone Cinematography Came Out of Shadows

As this research points out, filmmaking, video, and photography drones have flown commercially without FAA authorization for years now.  It’s no surprise, then, that this is the biggest and most mature commercial market for drones. Notwithstanding, drone regulation was among many issues the Motion Picture Association of America (MPAA) lobbied on in 2012 and 2013, at a total cost of $4.11 million. The MPAA has been constantly appealing to the FAA to let them use smaller drones for film-making purposes. It seems that lobbying paid off.  In September, the FAA granted regulatory exemptions to six TV and film production companies to operate drones on sets: Astraeus Aerial, Aerial MOB, HeliVideo Productions, Pictorvision, RC Pro Productions Consulting, and Snaproll Media.

There is a catch here.  Operators are required to hold private pilot certificates. This has many scratching their heads.  Why do commercial remote control operators need to learn how to land a Cessna when they’ve been operating these drones safely for years as ‘hobbyists’ without that requirement?

  1. Agricultural Drones Got A Reality Check

A reality check is an assessment to determine if one’s circumstances or expectations conform to reality.  This certainly is the case with the market for agricultural drones.  It needed a reality check because of the hype created by AUVSI study titled The Economic Impact of Unmanned Aircraft Systems Integration in the United States. It claims precision agriculture and public safety will make up more than 90% of the market growth for unmanned aerial systems. The report confidently states, “…the commercial agriculture market is by far the largest segment, dwarfing all others.”  To this day, that fiction gets repeated over and over again in the media.

The market potential for drones in precision agriculture needs vetting—see Film or Farm: Which is the Bigger Drone Market? – Part 2 for my thoughts on this. It’s not yet clear how a UAS can deliver more usable data to a farmer or provides a cost benefit over the existing image solutions available to them today. But don’t take my word for it–watch this video of Rory Paul at the 2014 sUSB Expo for his take on the misconceptions about this market.

  1. The GIS Market Heats Up

Back in the spring, GIS software market leader Esri published this article about how drones greatly benefit the work of professional surveyors and mappers.  Devon Humphrey states it clearly:

“Due to the unique flight characteristics of UAVs, the imagery is sharper and offers some unique advantages. This means that the camera captures high ground resolution on the order of two to five centimeters. In addition, because there is a large amount of overlap in the imagery, digital photogrammetric processing results in 3D point clouds of similar resolution. Turnaround time is a few hours, instead of days, weeks, or months in the case of traditional delivery times. The user also controls the process rather than working with an outside vendor or being stuck using “day-old donuts,” generic imagery that doesn’t meet the temporal requirements.”

He is not alone in that assessment. I think this market is heating up to become the second biggest commercial drone market behind aerial photography and cinema and ahead of precision agriculture. In a nutshell, I believe the GIS market will continue to grow rapidly because drones provide a technical advantage over incumbent aerial technology and incumbent technology costs more.

What should we expect in 2015?

A lot depends on the forthcoming small drone rule from the FAA.  If it looks at all like the exemptions granted this year (which have onerous restrictions), then U.S. commercial market growth will be seriously hampered.  This should be no surprise to anyone.  Much has been written on how government regulations hinder economic growth (for example here and here).  Still, in other countries with smarter regulations, expect these and other markets to continue to flourish and those over here will be looking at the success stories with envy.

You can find more insights from 2014 on these SlideShare presentations.  I would love to hear your thoughts about the commercial drone markets. Feel free to comment or write me at colin@droneanalyst.com.

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Why Drones Are the Future of the Internet of Things

What if you could talk to a drone?  No, seriously.  You can already talk to a locomotive, so why not talk to a drone?

For those of you following the technology, you already know that unmanned aircraft systems (a.k.a. drones) are finding their way into Internet of Things (IoT) implementations. IoT applications are typically composed of:

  • A sensor “at rest,” e.g., on a highway or a bridge or a thermostat that gathers input (like weather conditions or seismic activity)
  • A connection (via the Internet) between the sensor and a back-end data collection infrastructure
  • A back-end data collection infrastructure that’s commonly based in the cloud

So why do I claim that drones the future of IoT? For one, drone technology is evolving very rapidly. Drones are already beginning to efficiently replace the connected sensors at rest with one device that is:

  1. deployable to different locations
  2. capable of carrying flexible payloads
  3. re-programmable in mission
  4. able to measure just about anything, anywhere

To illustrate the trend and these capabilities, I’ll highlight the developments of several companies. But first – so that we are all on the same page – let’s look at what I mean when I talk about drones.

A New Kind of Drone

All drones are not equal. Some like the Global Hawk are very complex systems that are connected to satellites and are only the purview of the military. Others like the Parrot A.R. Drone are mass-produced hobby aircraft that you can control with your mobile device.  But a class of drones in the middle combines the capabilities of both complex and mass-produced systems and is specifically designed for commercial purposes. These drones weight less than 55 lbs. and are classified by regulatory entities as small unmanned aircraft systems or sUAS.  We don’t see their ubiquitous use in the U.S. quite yet, but in countries like England, Australia, and France, you will find them operating in energy, mining, mapping, and surveying companies – and quite a few government agencies like those responsible for transportation and infrastructure.

Commercial drones are truly ‘unmanned aircraft systems’.  They are not just remote controlled aircraft.  They require many things in order to run, like avionics, ground control stations, communication systems, data collection and processing software, and of course GPS for geo-referencing. There’s more, but you get the idea. These are multifaceted complex vehicles whose mission is to fly sensors and collect data.

Commercial drones are also connected devices. So they are ‘things in motion’. Most are accessible or controllable over the Internet, and the data they collect is pushed to various cloud services. Some drones are beginning to carry on-board processors as well and are now part of the growing trend of fog computing devices.

Deploy a Fleet

So, if a commercial drone is a connected device, then shouldn’t you be able to ‘talk to a drone’?  And shouldn’t you be able to – from your smartphone in California –control a drone in, say, France?

You can.  And it’s because companies like DroneDeploy and U|g|CS have figured out how to make addressable drone management platforms that control multiple drones from anywhere on any device.  DroneDeploy does it by marrying a simple 4G telemetry device to a drone’s avionics.  This enables real-time data transmission, processing, and sharing. With this kind of hardware and software combination, you can plan missions (launch, go to point A, then point B, then to point C, etc.) in a browser, upload them to a drone anywhere, press start, and away it goes.  You could do that with a fleet and monitor them all in flight.

Flexible payloads

So one of things commercial users want is the ability to mount different sensors such as thermal imaging, UV or multispectral cameras, sniffers, and microphones to sUAS. PrecisionHawk figured out early on how to offer an array of sensors that are hot swappable and just snap into place. The cool thing about their aircraft is that the body itself is made of circuit boards and processors.  They’re hardened of course on the outside, but it’s an example of the innovation happening in the commercial drone industry.

Reprogrammable in mission

So, not only can you deploy these anywhere, but they are reprogrammable while on a mission.  Let’s say you wanted to create a 3D map for a construction project and you programmed it to run its mission but in the middle you noticed something odd (because you are looking through the camera in real-time on your laptop or smart-phone). With SenseFly’s drone software, you simply point to that area on the map, and you can:

  • divert the drone
  • command it to perform another function in that area
  • then resume and complete its first mission
  • then come home and land

Measure just about anything

Every day, you can read about how measurement sensors are getting smaller and lighter. Such is the case with LiDAR, which allows you to capture minute details and measurements.  Because these units have been heavy up to now, there have been only three choices if you wanted these sensors to measure something:

  • They had to be stationary
  • They could be roving (stationary on a truck or SUV)
  • They could be carried on a manned aircraft

Stationary is the most accurate but lacks the significance of an aerial perspective.  You can get good results from aircraft, but not as good as from a drone.  With a drone can get close to the object – and as I mentioned they can be deployable on-demand. LiDAR manufacturers like Riegl and Velodyne get this, and we now see offered in the GIS market new high-performance, remotely piloted aircraft system for unmanned laser scanning, like those from Phoenix Aerial Systems and Sabre Systems. These airborne platforms provide full mechanical and electrical integration of sensor system components into aircraft fuselage.

LiDAR data models are huge, but as more low-cost in-memory computing becomes available, service providers are storing the models in the cloud and then updating them to reveal changes over time. Of course, it’s the analytics on top of that that provides the real insights – insights like structural integrity and predictive failures.  Soon, multiple infrastructure sensors – like those found on bridges and highways – will be obsolete.

What’s next?

We are only beginning to find out how drones can be used to replace multiple sensors, and hopefully I’ve successfully convinced you of how drones play into the future of the Internet of Things.  Surely this technology will push the bounds of how we can measure and analyze ‘things at rest’ and ‘things in motion’ and how they can interact with both of them.

You can find a companion SlideShare presentation to this post here.  I would love to hear your thoughts on this topic. Feel free to comment or write me at colin@droneanalyst.com.

Image credit: Shutterstock