Section3 Understanding Key Segments

In this section, we summarize the detailed findings for each of the four sections in our survey, and the results of our interviews. We also provide our outlook on key verticals.

Understanding Purchases

Drone Distribution Businesses

In April 2016, we released Drones in the Channel: 2016 Market Report, a research study examining drone sales and distribution channels in North America. It was the first in-depth study of drone sales channels, and it revealed mixed distribution tactics and pinpointed the market share of major UAV brands. The study found that the market for drones of all kinds has exploded, leading to a “Wild West” of reselling strategies. Manufacturers may sell direct or through drone-specific online and brick-and- mortar stores, or through hobby, photo, and broad big-box consumer outlets—most use each of these channels in varying degrees. In 2021, this strategy remains, although we adjusted our channel categories slightly in 2020. We label the channel categories as below:

  • Directly from the manufacturer’s website
  • Directly from the manufacturer’s store or sales staff
  • Action sports / outdoor retailer
  • Amazon
  • Apple store
  • Electronics retailer (like Best Buy, Fry’s, etc.)
  • Camera / Video retailer (like Adorama, B&H Photo-Video, Sammy’s Camera, etc.)
  • Drone dealer/distributor (like Drone Nerds, Multicopter Warehouse, Aerial Media Pros, etc.)
  • Hobby store (online or retailer)
  • General retailer (like Walmart, Costco, Sam’s Club, etc.)
  • Used (like Craigslist / eBay / Drone Trader / private seller)
  • Vertical market reseller (like a heavy equipment dealer, farm equipment dealer, survey equipment supplier, etc.)

Historically our data has shown that buyers choose to purchase directly from the manufacturer more than any other channel. While that remains true today, with manufacturer’s accounting for 31% of all sales, we have seen the broader movement towards buying from dedicated drone dealers / distributors more often than in the earliest years of the industry, at 23% today. This is a slight dip in the role of drone dealers, but it is still higher than the earliest days of the industry (sub 20% in 2017 and 2018), and is a reflection of more entrants in the hardware space that have yet to mature their channel sales strategies.

The reliance on drone dealers is more concentrated in narrow sectors of the market like public safety, where they account for more than 50% of all drone sales.

Rise of Other Drone Types

We have broken down drone types into five broad categories, with further definition between various rotary wing aircraft: fixed wing, single rotor (helicopter) , quadcopter / tricopter, hexa/octocopter or larger and hybrid VTOL aircraft. We have long seen the dominance of quadcopters in the market as they offer flexibility and ease of operation.

As the market has matured, the dominance of the quadcopter is moving aside as drone buyers start to purchase an increasingly diverse range of drones. In 2021, 85% of drone buyers purchased a quadcopter, down 8 points from 2020.

These buyers are moving away from just purchasing quadcopters, moving to purchase larger airframes (hexa/octo or larger). While customers are more likely to move to other rotary blade aircraft, we have also seen significant growth in the amount of Hybrid VTOL aircraft purchased.

Expanding Industrial Uses of Drones

As we do every year, we approached our research this year without preconceptions about the common terms used to describe drone segments or tiers, such as “consumer”, “prosumer”, “professional”, and “enterprise”. Instead of relying on customer’s self segmentation of their use and their drone, we instead asked about customer’s intended use for their drone after purchase.

In the Purchase objective section, we detail results across all price points, and show that 14% of buyers identified hobby as their objective for use, 15% for academic and testing purposes and an overwhelming 71% purchased a drone for commercial imaging uses. Commercial imaging is a broad term for uses that capture data to provide value, from cinematography and real estate to utilities and public safety.

Within the commercial imaging category, we have seen the largest growth among users in the utilities market, rising to 15% of all drone buyers. We explore historical trends in purchasing objectives in Figure 4.3.

A Brave New World of Drone Manufacturers

Since we began our annual reports, SZ DJI Technology Co., Ltd. (aka DJI), has had a firm grip on the drone hardware market. Truly, at times it could best be classified as a monopoly across key product segments. However, our data in 2020 showed that their market share slipped for the first time since we started collecting data, down to 68%. This is ignoring the fact that our survey data has always been a better estimate for the commercial market. Our recent analysis of customs data shows that DJI’s market share in the consumer is over 94% as competitors in the US, Europe and China have exited this market segment.

While DJI’s dominance in the consumer segment is likely to remain, our 2021 data shows a very different world in the commercial drone market. In 2021, DJI’s market share dropped 15 points to 54%, still putting them far above the rest.

This drop is mostly due to increased competition, intense focus on the drone space from regulators in key regions and DJI’s reluctance to move into drone types outside the quadcopter. In fact, DJI has not released a non-quadcopter product since 2016 (the Matrice 600), and that product is no longer in production.

Just as last year, we are closely looking at who the “runner-up” may be. While we are still not confident in who the long term #2 drone manufacturer will be, it is clear that Autel was the main benefactor of DJI’s fall. Autel rose to take up 7% of the drone market, up from 4% last year, as they have released similar drone models to DJI’s Mavic 2 Enterprise line. Yet questions remain on Autel’s long term capability, with many engineers and a short-lived US CEO joining from DJI, it is too early to say if their market share will continue to increase. The fact is that many smaller players have simply taken longer to get up due to supply chain and human resource constraints outside of Shenzhen.

Understanding Business and Agency Users

. The survey listed a series of questions for those individuals or companies that perform or purchase drone-based imaging or sensing services. The detailed answers to these questions appear in Section 3 - Business and Public Agency Users. Here, we summarize a few of those details and add additional context and insights from our previous research.

Top Industrial Uses

The business and agency users who took our survey come from a wide variety of backgrounds (see Figure 5.1). We asked them questions about the primary mission of their commercial use, and whether they outsource some or all of that work.

The top 5 business uses are:

  1. Cinematography / Movie / TV

  2. Surveying / Mapping / GIS

  3. AEC / Construction (design, building, inspection, or monitoring)

  4. First Responder Service

  5. Agriculture / Farming

When we group all answers across key sectors, we found that AEC, Surveying and Mapping uses were the primary mission of over a quarter (27%) of all business and agency drone programs.

Once moving past this large category, we also saw a grouping among new & entertainment uses, although these uses made up less than 50% of drone programs. After these two categories, we saw a large diverse group of uses from public safety and utilities to agriculture and real estate. A full breakdown of uses cacn be found in Figure 5.1.

It’s also important to note that our most common uses tended to have smaller drone programs by employee count, whereas industries like Utilities had respondents that represented larger organizations with more sizable drone operations. You can refer to Figure 5.17 for a detailed breakdown on fleet sizes by sector.

Program Maturity and Outsourcing

Our survey finds that just 42% of business and agencies using drones have done so for two years or less. While this is still a large portion, it is a large drop compared to 2018 where this group made up 74% of the market and 54% just last year. This represents a logical maturing of the market as regulations enabled general commercial use in 2016.

When asked whether or not the drone services consumed by these organizations was performed by in-house employees or outsourced contractors, we saw a shift towards outsourcing as firms tried to scale operations during COVID-19. Overall we see organizations continue to increasingly rely on in-house employees (74%, up 1-point), while the ratio of firms relying on outsourced services increased (up 6 points) and fewer relied on primarily mixed operations.

Understanding Service Providers

In our survey, we listed a series of questions for those individuals or companies that offer drone-based imaging or sensing services for outside hire. The detailed answers to these questions appear in Section 2 - Service Providers. Here we summarize a few of those details and add additional context and insights from our previous research

Revenues Increase for First Time

In a series of questions, we attempted to assess the size of drone-based service providers. We wanted to know who is making money, and who isn’t. We asked detailed questions about:

  • Annual revenue
  • Number of full-time employees
  • Number of part-time employees
  • Years in business
  • Fleet size
  • Number of projects performed per year

Ever since we started this survey, we have mostly seen these firms remain in the industry for longer, without too much movement on revenues. This year we have seen some significant positive movement, which is a great sign that the service market is more sustainable and profitable than ever before.

Generally, we found that many of these businesses have been in business longer than in previous years (less than one year was 17% of responses this year vs 32% in 2020), and revenues have increased. This is mostly seen through more service providers making above the $50K USD group, up over 50% from 30% in years prior, with further increases in higher revenue groups as well.

Service providers continue to have roughly three drones on average and nearly half have just one employee (themselves), just as we have seen in previous years.

Drone Pilot Networks

Drone pilot networks have captured interest and investment as they promise the “Uber for drones”. Despite the hype, we continue to see complaints online about jobs offered to pilots and several of these brands diversifying their offerings into software. We have continued to explore how drone pilot networks are used, and how important these pilot networks are to a service providers’ income.

We first asked if service providers have participated in a pilot network, with a few different options:

  • Yes, and demand primarily comes from a drone service network
  • Yes, we participate in a drone service network occasionally to supplement our income and/or find new clients
  • No, but we have in the past
  • Never

This way we could gauge how important pilot networks are to their final income. We found a nearly 50:50 split between service providers who don’t participate in a drone pilot network and those who do. Among those who don’t, the vast majority (80%) have never used a pilot network. Among those who are participating in a network, just one-third rely on them as their primary source of income.

These figures represent a large uptick in participation (up 20 points), but service providers broadly rely on pilot networks for supplemental income.

For those that have ever participated in a pilot network, we asked them which one they participated in. The market had three networks with more than 10% market share - first being DroneBase, followed by Droners.io and DroneUp - just as we saw in 2020.

Understanding Software Services

In our survey, we listed a series of questions for those individuals or companies that use software apps or online services to manage drone operations, plan missions, or process data from drones. The detailed answers to these questions appear in Section 7 - Software Services. Here, we summarize a few of the most important details and add additional context and insights from our previous research.

Insights / Analytics Software

We asked questions about the software app or software service that the respondents use most for generating maps and/or reports. This category had clearer, more established brands leading, with Pix4D and DroneDeploy making up 45% of the market.

Among these two dominant players, Pix4D remains in the top spot at 24% market share, although that is down 6 points from 2020. DroneDeploy held its runner-up spot at 21% of the market. We’ve also seen more firms classifying DroneDeploy as more than just an Insights / Analytics software, ranking fourth in the drone operations category and the most selected software overall. We haven’t seen other players make this transition yet, and makes them distinct in the software service sector.

Drone Operations Management Software

We asked questions about the software app or software service that the respondents use most to log flights, manage drone operations and understand airspace conditions. This category is dominated by freemium options, so market share is not likely to reflect real revenues.

Of this group, we continue to see shifts in market share as the low barrier to entry and cost means that annual market share can shift quickly. Additionally, it is likely that many firms use several providers, but we only asked them to select their preferred service. Notably, we saw AirData rise dramatically from just 2% of the market in 2020 to 22% today. They are followed by longtime players Aloft and AirMap, with software leader DroneDeploy in fourth for this category.

Software used varies greatly by industry, as several platforms have adjusted their functions and strategies to tailor to specific challenges and uses.

Bottom Line

The software sector has matured significantly over the years, with key players in the Insights / Analytics category already decided and not likely to change significantly in the coming years. By comparison, we are seeing customers increasingly need drone operations management software, but no clear winnershave emerged. We assume many firms are struggling with cash flows as prices remain low, and consolidation a specialization are likely to continue in the coming years to counteract these trends.