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Analysis: Have we finally reached 'peak drone'?

02nd February 2017 - 14:00 by Grant Turnbull in London

Analysis: Have we finally reached 'peak drone'?

If there is one word that can describe the commercial drone market over the last few years, it is 'hyped'.

Drones – or unmanned aerial vehicles – have been a boom industry, with billions of dollars' worth of funding being injected into nascent projects or plucky start-ups. Venture capitalists, for one, and tech geeks have bought into this hype wholeheartedly.

The technology has been billed as the answer to so many different industrial, societal and economic challenges that it is genuinely difficult to keep track of them all. UAVs are now offered not just for hobbyists but for infrastructure inspection, delivery services, aerial photography, survey work, agriculture, the list keeps growing.

Indeed, those promises of drone enlightenment have contributed not only to the technology's boom, but also inflated expectations.

ABOVE: Google owner, Alphabet, recently announced they would shut down an ambitious project to build high-altitude pseudo satellites. (Image Google)

Now we are seeing signs that the drone industry is faltering, struggling to fulfil so much of what has been promised. Industry optimism has been replaced by a significant number of UAV companies cancelling projects, laying off staff and even going out of business.

This is particularly true in the consumer space, but there are also examples of commercial ventures going under or not getting off the ground in the first place.

Last month, the research division of Alphabet – owner of Google – shut down a multi-million dollar project to build high-altitude pseudo satellites (HAPS), an unmanned aircraft that could fly in the upper reaches of the atmosphere and provide internet access to people in areas with limited infrastructure.

French UAV manufacturer Parrot, a major player in the drone industry, also announced last month that it was laying off 290 employees after poor sales performance. Last year, US start-up 3D Robotics experienced a similar downsizing and re-focused much of its efforts away from the consumer space and into enterprise software solutions.

General downsizing and consolidation is a likely industry trend in 2017 and beyond.

'A lot of companies that are in the market now, won't be in the market by the end of 2018,' said Michael Blades, a UAV expert at the consultancy Frost & Sullivan. 'Many companies that received start-up cash have burned through it.'

One company that has been 'crushing' everybody else in the commercial UAV space, according to Blades, is Chinese manufacturer DJI. This is particularly the case for UAVs in the $5,000 or less cost bracket, which are generally used by the general public or 'prosumer'.

Blades describes the current period in the UAV market as the 'trough of disillusionment', a reference to the hype cycle concept put forward by the research firm Gartner. The trough comes after a period known as the 'peak of inflated expectations', where the market sees promising signs of success amongst early adopters.

ABOVE: A visual representation of the 'Hype Cycle' showing the trough of disillusionment, where some analysts think UAVs are currently residing.

The trough, however, sees interest wane as the technology fails to deliver on its key promises leading to companies failing or consolidating. Negative drone headlines surrounding safety, terrorism, criminality and privacy, have undoubtedly added to this cynical mood towards the technology.

A silver lining to the hype cycle hypothesis is that surviving companies will be stronger and will better understand what the market actually desires from the technology over the long-term, leading eventually to mainstream adoption.

That is true for the consumer market, but it is especially pertinent for those companies that offer commercial drone services to large organisations for routine tasks such as infrastructure inspection or surveying.

'To scale [up], to get to the main market, you have to be completely different [from early adopters],' said Keven Gambold, CEO of Unmanned Experts. 'You have to be already proven.'

Gambold refers to this as 'crossing the chasm', a reference to the book of the same name by Geoffrey Moore, where technology makes the leap from being solely used by tech enthusiasts to being part of the mainstream.

'Today the number of viable, scalable companies that could operate at an enterprise level, I would struggle to find 50,' said Gambold. 'Every single one of them is surviving off the scraps.'

Unmanned Experts is one company that has made inroads in the sector, with a team from the company recently inspecting the Ottawa Lift Bridge, in Illinois, using a variety of UAVs.

ABOVE: Unmanned Experts has recently seen success using UAVs for infrastructure inspection, but the market remains tough. (Photo: Unmanned Experts)

In the long run, much will depend on large organisations 'buying into' the drone concept and providers being able to quantifiably prove that long-term UAV use can be cost-effective and a safer alternative to legacy methods. So far, that has not materialised in a significant way to spur widespread adoption, but that could change.

'The adoption cycle has been brutal…[but] all it needs is the right personalities in the right room,' said Gambold.

The elephant in that room is, of course, regulation.

Growth will ultimately depend on regulation and how organisations such as the US Federal Aviation Administration (FAA), and other civil aviation bodies, keep up and adapt to the burgeoning technology. The FAA's glacial pace of reform has certainly not helped and has been almost universally lambasted by industry as a 'shambles'.

In sum, don't hold your breath that UAVs will be widely adopted and utilised by a significant number of commercial enterprises in 2017. And as we enter peak drone, expect to see a significant shakeup of UAV manufacturers and providers as the cold hard realities of the market finally sinks in.

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