Drone Market Forecasts: Promises and Reality

1|Copyright ©2017 Skylogic Research, LLC
DRONE MARKET
FORECASTS:
PROMISES AND REALITY
Presented at: sUSB Expo
San Francisco, CA
May 4, 2017
By Colin Snow
CEO and Founder

Drones are ___ ?
14%
19%
33%
34%
The Future
IoT Devices
Flying Cellphones
WTF are you talking about?

What is real?
$2B - $127B

The pundit industrial complex
We are currently tracking 65
different forecasts!
Most reports sell between
$2,000 and $6,000

The pundit industrial complex "[X Consulting Firm] believes that [Y emerging technology] will
eventually reach a market size of [$Z billion]."
Image: CB Insights
How it’s done

The many disconnects Most drone market forecasts overlook the largest commercial sector:
Film/Photo/Video
Source: PwC
Source: Goldman Sachs
a TAM is not a
forecast
Reality: Ag
will lag

Ground zero
“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.”
Source: AUVSI

The promise of jobs
Source: AUVSI

The reality You may get $120 a gig and as much as $70 per hour to fly your drone,
but you take the risk. You have to pay for aircraft and business liability
insurance.
Source: http://www.cloudd8ta.com/rate-sheet/

Happy thoughts
THE FAA
Image: The Marketoonist

Our view

Our view of drone industry
growth
Part 107Sec 333 Part ???
You are here
PLATEAU

Last year’s CTA’s unit forecast was 15% too high. Their new forecast
expects a 40% increase over last year.
2.8
3.4
0.1
0.4
1.1
2.4
0
0.5
1
1.5
2
2.5
3
3.5
4
2013 2014 2015 2016 2017
Projected Actual
Analysis of CTA’s figures
Source: Consumer Technology Association (CTA/CES)
Forecast
Actual
Forecast
They say sales
revenue will be
$1.2B in 2017
But that’s revenue to
dealers, not retail
U.S. Drone Unit Sales Forecast (in Millions)

$1,646,568
$2,140,732
$2,676,036
90%
73%
46%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
$-
$500,000
$1,000,000
$1,500,000
$2,000,000
$2,500,000
$3,000,000
2017 2018 2019
Projected CAGR
Our U.S. drone sales forecast
Source: Skylogic Research
$1.6B in 2017
$2.1B in 2018
$2.6B in 2019
U.S. Drone Sales Revenue Forecast (in 000’s) – all price points

How we analyze industry
growth

Service providers size
Leading indicator
Drone Analyst survey in 2014
“85% of companies that offer commercial services make under $1 Million per year”
AUVSI analysis in 2016
“Most commercial UAS operators are small businesses. About 90 percent of the
nearly 3,000 companies receiving [Section 333] exemptions make less than $1
million in annual revenue and have fewer than 10 employees.”

Business buyers industry
digitization
Leading indicator
Source: McKinsey Global Institute
Digitization of assets, business
processes, and labor is an
indicator of technology
adoption potential

Software providers strategy
churn
Leading indicator
Image: The Marketoonist

Investments
Leading indicator
1.8 1.2
7
55
107
450
482
139
1
2
2
13
29
74
95
8
0
10
20
30
40
50
60
70
80
90
100
0
100
200
300
400
500
600
2010 2011 2012 2013 2014 2015 2016 YTD 2017
Dollars ($)M Deals
In 2016 many smaller deals happened instead of a few larger ones.
In 2017 we see a few large deals: Airmap with $26M and 3DR with a $53M in a
series D round.
Source: CB Insights, The Robot Report
As DJI dominates camera
and commercial drone
sales, funding for drone
aircraft falls.
2017 funding as of May is
mostly C-UAS, services,
and software.

0.1%
9%
46% 45%
0%
10%
20%
30%
40%
50%
60%
70%
15 or under 16 - 31 (Millenials) 32 - 51 (Gen X) 52 + (Baby Boomers)
Purchase demographics
Lagging indicator
Age of drone buyers from 2016 online survey
n = 783 Source: Skylogic Research

Pilot training
Leading indicator
Age of persons making Part 107 pilot study guide inquiries
Only 2% were women
n = 475
YES
1%
7%
29%
64%
0%
10%
20%
30%
40%
50%
60%
70%
15 or under 16 - 31 32 - 51 52+

76
3
52 54 64
103
74
136
164
0
100
200
300
400
500
600
700
800
0
100
200
300
400
500
600
700
800
Aug-16 Sep-16 Oct-16 Nov-16 Dec-16 Jan-17 Feb-17 Mar-17 Apr-17
Monthly Total
Part 107 Waivers Granted
Leading indicator
97% of waivers granted were for nighttime operations.
Source: FAA, Skylogic Research
as of 4/27/2017: 426
Operation from a moving vehicle or aircraft (§ 107.25)
Daylight operation (§ 107.29)
Visual line of sight aircraft operation (§ 107.31)
Visual observer (§ 107.33)
Operation of multiple small unmanned aircraft systems (§ 107.35)
Yielding the right of way (§ 107.37(a))
Operation over people (§ 107.39)
Operation in certain airspace (§ 107.41)
Operating limitations for small unmanned aircraft (§ 107.51)

License and registrations
Leading indicator
63%
37%
FAA Remote Pilot Certificates Issued*
Total Knowledge Exams Passed
Part 61 Pilots
n = 39,041
*As of 3/31/2017 - Source: FAASTeam Program Manager
Paper 6,674
Online 54,820
Total Commercial sUAS Registrations* 61,494
Aircraft to pilot ratio = 1.6

Intended use
Leading indicator
Film/Photo/Video accounts for 43% of intended commercial use and
constitutes the largest commercial market sector
37%
16%
13%
7%
6%
6%
4%
3%
8%
Commercial photo / video
Survey and mapping
Inspection / monitoring
Precision agriculture
Academic research
Cinematography
First responder
Testing and R & D
Other
Precision agriculture is only 7%
n = 397

Precision agriculture
technology adoption
Leading indicator
Q. Will you use drones in your operation this year?
Two thirds (67.6%) say no, but many will consider it for next year
20.7%
11.7%
30.5%
37.1%
Yes ,will operate myself
Yes, third party will operate
No, but will consider in 2018
No, will not consider in 2018
Source: Farm Journal Pulse
n = 1,094
32.4% yes, but only
about a third those
use a service

Public safety restrictions
Leading indicator
Public Safety and First Responders represent only 4% of commercial
drone purchases.
Only 1% of police agencies in the U.S. have manned aviation
capabilities.
Source Skylogic Research
Image: PoliceFoundation.org

General industry adoption
hurdles
Operations Bottlenecks Data Enterprise
LAND ACCESS WORKFLOW ACCURACY SAFETY
BLOS FEEDS GOVERNANCE SOPs
WAIVERS COMMS
CHAIN OF
CUSTODY
STANDARDS
AUTONOMY EDGE / CLOUD
INTELLECTUAL
PROPERY
BUSINESS CASE
OBSTACLES
DOWNSTREAM
INTEGRATION
PROCESSING
SPEED
INCUMBENTS

Precision
Agriculture
CivilInfrastructureConstruction
Energy
&
UtilitiesFilm
/Photo
/Video
M
ining&
Aggregates
PublicSafety
&
1stResponders
Surveying
&
M
apping
OVERALL SECTOR OUTLOOK
Green = good
Challenges:
Access permissions
BVLOS operations
Data capture resolution and accuracy
Data governance and chain of custody
Data processing bottleneck
Incumbent technology and players
Intellectual property
Nighttime flights
Occlusions and obstacles
Privacy rights
Worksite safety
SOPs
Standards and practices
State and local restrictions
Terrain and object height autonomy
Workflow and legacy software integration
*VRT adoption rate
Vertical scorecard
= Few
= Several
= Many
OUTLOOK = drone usage and micro-economic
benefit

Get free research
reports
Skylogic Research Website:
http://droneanalyst.com/research/

2017 Drone Market Segment
Research
To determine the current state of the commercial drone industry, we are
rolling out a the largest market research study of its kind for release in
Q3 of 2017.
Four topic areas:
1. Drone purchases
2. Service providers
3. Business buyers
4. Software services
WE NEED VENDOR
SPONSORS
NEW!

Questions?

About Skylogic Research, LLC is a research, content, and advisory
services firm supporting all participants in the commercial
unmanned aircraft systems (UAS) industry.
We help you make critical investment decisions with confidence by
providing research-based insights on the commercial drone markets.
Our focus is on the needs of three constituents:
• Manufacturers, suppliers, and business service providers – who need research
and insight into buyer needs
• Buyers of UAS technology and services – to help inform their acquisition
decisions
• Investors – who need to distinguish technical and market viability
This focus, plus research as a foundation and reach into a community of more
than 90,000 business executives and innovators through social media and media
partnerships, allows Drone Analyst to deliver a high-value, low-risk method for
achieving optimal understanding.
Drone Analyst is the brand name and trademark of Skylogic Research, LLC
Learn more:
Web http://droneanalyst.com
Twitter @droneanalyst
Email colin@droneanalyst.com

©2017SkylogicResearch,LLC.
All rightsreserved.
This publication is not approved for public release and distribution under the terms of agreement with the
sUSB Expo.
Drone Analyst® products and services mentioned herein as well as their respective logos are trademarks of
Skylogic Research, LLC.
These materials are provided by Skylogic Research are for informational purposes only, without
representation or warranty of any kind, and Skylogic Research shall not be liable for errors or omissions with
respect to the materials.
In particular, Skylogic Research has no obligation to pursue any course of business outlined in this document
or any related presentation, or to develop or release any functionality mentioned therein. This document, or
any related presentation, and Skylogic Research strategy and possible future developments, products,
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