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.
- ‘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 [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.
- 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.”