{"id":3026,"date":"2017-12-19T09:16:44","date_gmt":"2017-12-19T17:16:44","guid":{"rendered":"http:\/\/droneanalyst.com\/?p=3026"},"modified":"2017-12-19T10:02:23","modified_gmt":"2017-12-19T18:02:23","slug":"five-biggest-commercial-drone-trends-of-2017-and-the-challenges-ahead","status":"publish","type":"post","link":"https:\/\/droneanalyst.com\/2017\/12\/19\/five-biggest-commercial-drone-trends-of-2017-and-the-challenges-ahead\/'","title":{"rendered":"Five Biggest Commercial Drone Trends of 2017 and the Challenges Ahead"},"content":{"rendered":"<p>Last year at this time, I reflected back on the news and <a href=\"http:\/\/droneanalyst.com\/2016\/12\/19\/commercial-drone-markets-2016-year-in-review\" target=\"_blank\" rel=\"noopener\">trends of the commercial drone markets of 2016<\/a> 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 <a href=\"http:\/\/droneanalyst.com\/research\/research-studies\/2017-drone-market-sector-report\/\" target=\"_blank\" rel=\"noopener\">2017 Drone Market Sector Report 2017<\/a>.<\/p>\n<p>In this post, I\u2019ll 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.<\/p>\n<p><strong>Listen to this companion Drone Radio Show podcast <\/strong><a href=\"http:\/\/droneradioshow.com\/5-trends-defined-commercial-drone-industry-2017-predictions-2018-colin-snow-skylogic-research\/\" target=\"_blank\" rel=\"noopener\"><strong>here<\/strong><\/a><strong> for the complete assessment.<\/strong><\/p>\n<p><strong>Trend 1\u2014Growth<\/strong><\/p>\n<p>By all measures, the drone industry in 2017 was marked by significant growth \u2013 growth in aircraft sales, software licenses, the number of service businesses entering the market, and the number of industrial businesses setting up commercial operations.<\/p>\n<p>Here are a few statistics:<\/p>\n<ul>\n<li>We project U.S. sales in 2017 to be about 3.3M units, which is 36% above 2016 figures. That\u2019s all drones, all sizes. It\u2019s about 1.3M units for the &gt;250gram category.<\/li>\n<li>As of October 31st, there were about 837,000 hobbyist users and 107,000 non-hobbyist drones registered with the Federal Aviation Administration (FAA).<\/li>\n<li>As of December 1<sup>st<\/sup>, there were about 66,000 Part 107 FAA Pilots.<\/li>\n<\/ul>\n<p>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.<\/p>\n<p><strong>Trend 2\u2014Consumerization<\/strong><\/p>\n<p>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\u2014either governmental or business.<\/p>\n<p>Why is this significant? Because the impact of consumer-originated technology on the enterprise is something that can\u2019t be ignored. Enterprises want to take advantage of powerful, yet easy-to-use products (like DJI\u2019s 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. \u00a0The average individual pilot gets to benefit from the reliability and scalability inherent in the product and demanded by enterprise users.<\/p>\n<p><strong>Trend 3\u2014The DJI effect<\/strong><\/p>\n<p>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\u2013$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.<\/p>\n<p>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\u2014it just needs to improve upon the original design and save engineering cycles for real innovation.<\/p>\n<p>The upshot is that to stay relevant, all the other major vendors have had to partner with DJI (see Trend 5 Partnerships, below). DJI\u2019s 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.<\/p>\n<p><strong>Trend 4\u2014Investments<\/strong><\/p>\n<p>According to <a href=\"https:\/\/www.cbinsights.com\/research\/briefing\/state-of-drone-tech\/\">CB Insights<\/a>, 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\u2019 $53M Series D round. It saw them pivot from hardware to software services.<\/p>\n<p>Why is this significant?\u00a0 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.<\/p>\n<p>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.<\/p>\n<p><strong>Trend 5\u2014Partnerships<\/strong><\/p>\n<p>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\u2019s enterprise partnerships have grown. Consider their <a href=\"https:\/\/enterprise.dji.com\/airworks\" target=\"_blank\" rel=\"noopener\">AirWorks<\/a> conference. What drone major vendor wasn\u2019t there? The list included DroneDeploy, Measure, PrecisionHawk, Skycatch, and Sentera, to name a few.<\/p>\n<p>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.<\/p>\n<p>Consider also the FAA\u2019s 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\u2019s clear that regulators want to include industry when creating policies.<\/p>\n<p>However, there is some good news \/ bad news with this.<\/p>\n<p>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.<\/p>\n<p>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.<\/p>\n<p><strong>Challenges ahead<\/strong><\/p>\n<p>Here\u2019s my list of the major challenges facing the drone industry in 2018:<\/p>\n<ol>\n<li><strong>Regulations:<\/strong> We may see more regulatory red tape\u2014e.g., a patchwork quilt of rules as the FAA\u2019s UAS Integration Pilot Program begins to make policy.<\/li>\n<li><strong>Public sentiment:<\/strong> Basic public concerns still exist about drone safety, security, privacy, and their public nuisance. My question is: How can we overcome this?<\/li>\n<li><strong>Business value<\/strong>: We\u2019ve 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?<\/li>\n<li><strong>Information accuracy<\/strong>: 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.<\/li>\n<li><strong>IT data governance<\/strong>: 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.<\/li>\n<li><strong>Automation:<\/strong> 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.<\/li>\n<li><strong>Endurance<\/strong>: We\u2019re still on the quest for efficiencies like better power sources or mixes.<\/li>\n<li><strong>Widespread business adoption<\/strong>: Business and industry adoption is growing, but it\u2019s 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.<\/li>\n<\/ol>\n<p>That\u2019s it for now.<\/p>\n<p><strong>Listen to the companion podcast here<\/strong> <a href=\"http:\/\/bit.ly\/2CXe6uK\" target=\"_blank\" rel=\"noopener\">http:\/\/bit.ly\/2CXe6uK<\/a>.<\/p>\n<p>Look for a follow-up piece on our specific predictions for 2018, which will include investments, technology improvements, ecosystem partnerships, and software innovations.<\/p>\n<p>If you have questions about what&#8217;s in <a href=\"http:\/\/droneanalyst.com\/research\/research-studies\/2017-drone-market-sector-report\/\" target=\"_blank\" rel=\"noopener\">the report<\/a> I mention or would like to comment, write me at <a href=\"mailto:colin@droneanalyst.com\">colin@droneanalyst.com<\/a>.<\/p>\n<p>&nbsp;<\/p>\n<p>Image credit: Shutterstock<\/p>\n","protected":false},"excerpt":{"rendered":"<p>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 &#8230; <a title=\"Five Biggest Commercial Drone Trends of 2017 and the Challenges Ahead\" class=\"read-more\" href=\"https:\/\/droneanalyst.com\/2017\/12\/19\/five-biggest-commercial-drone-trends-of-2017-and-the-challenges-ahead\/&#039;\" aria-label=\"Read more about Five Biggest Commercial Drone Trends of 2017 and the Challenges Ahead\">Read more<\/a><\/p>\n","protected":false},"author":3,"featured_media":3028,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[7,49,30,8,23],"tags":[73,91,9,77,20,10],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v22.3 - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>Five Biggest Commercial Drone Trends of 2017 and the Challenges Ahead<\/title>\n<meta name=\"description\" content=\"Skylogic 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