In late June, Massachusetts-based startup Fly4Me opened for business, joining more than 500 (and counting) businesses in the U.S. that are now cleared by the FAA to operate drones commercially. Like most of its competition, Fly4Me’s so-called Section 333 exemption allows the company to deploy drones to gather aerial data and conduct research for commercial gain.
However, the company differs greatly from other Section 333 holders, chiefly because it doesn’t actually operate any drones. Its website, launched in beta last month, connects drone pilots with companies that need aerial data collection, but don’t necessarily want to invest in their own drone fleet. The company is part of a growing sub-market within the larger drone economy focused on “drones as service,” a segment many believe will soon overshadow the multi-billion-dollar market for drone hardware itself.
“There are drone makers, there are the companies that want to use drones, and then there’s everything in between,” says Lisa Ellman, a drone policy expert and co-leader of the UAS Group at the Washington D.C. offices of law firm Hogan Lovells. "Drones as service” companies see opportunities in a growing space that exists between those certified to operate commercial drones and potential clients that want to utilize drone data, she says.
The growing drone service business has a lot to do with changing government regulations. Technically, commercial drone operations are banned in U.S. airspace pending the finalization of new FAA drone rules expected sometime next year, but under pressure from industry groups the FAA last year began issuing exemptions for commercial drone use. Those exemptions, known within the industry as Section 333s, allow companies to fly drones commercially under a pre-defined set of conditions outlined in government applications every firm must fill out. Companies must identify what specific drones they want to use, what those drones will be used for, and why the marketplace needs that service.
Originally Section 333 exemptions also required applicants to state the location in where drone operations would take place, limiting where and when exemption holders could operate their drones. Then, in March, the FAA eased its drone rules, allowing Section 333 holders to operate their drones anywhere as long as their aircraft remained below 200 feet above ground level.
The new regulations have been a huge boon for the drone service industry, since companies like Fly4Me can now get a Section 333 that allows it and/or its subcontractors to conduct commercial operations anywhere not strictly prohibited by FAA rules (for example, near airports). Fly4Me received its Section 333 approval in April is and already working with several certified drone pilots to provide data to customers, mostly aerial video and imagery for photographers and commercial properties like golf courses. The company is also working with a solar company to capture roof dimensions and shading data for solar panel placement and infrastructure inspections.
“We did not expect this kind of explosion, this kind of interest,” says company cofounder Dmitry Sharshunskiy. “We originally were going to launch only in Massachusetts, but we received so many requests that we had to immediately go nationwide.”
Meanwhile, a firm called Measure, currently based in Washington, D.C., has also recently moved into the drone service space. The company acts as something of a consultant and drone service provider that targets larger Fortune 1000 companies. While Measure currently operates no drones itself, that will likely change in the next 12 to 24 months, says company CEO Brandon Declet. The company’s Section 333 exemption covers more than 400 different types of aircraft, he says, allowing Measure to contract just about any drone a client could need for any application.
Brokering drone services is only part of what Measure does for clients, Declet says. Right now the company is focused on developing relationships with corporations that could benefit from drones and helping them figure out how best to integrate the technology into their operations. The ultimate goal, he says, is to show these companies exactly how drones fit into their business model and then ink long-term contracts for providing those drone services.
Unlike other companies, most of Measure's founders come from the world of government or big business rather than aviation or aerospace, fields where understanding regulation and return on investment (ROI) trump technical acumen. “We’re one of the few companies talking to end users about ROI,” Declet says. “There’s no reason for anyone to sign a long-term contract [for drone services] if there’s not some kind of return on investment.”
Providing companies with drone insight has helped it develop relationships with mining companies in Western Australia, Guinea, Zambia and Tanzania, as well as with a utility in Gabon. The company will soon launch an ROI calculator for the American Farm Bureau Federation to help farmers determine whether incorporating drones into their business makes sense. It’s also worked with the American Red Cross, producing a report detailing how drones could aid in disaster response.
Fly4Me and Measure are far from alone in the drone services space. Gofor offers “drones on demand,” an app-based platform allowing customers to use their smartphones to “task a drone to complete a variety of helpful tasks.” Likewise San Francisco-based startup Skycatch, which offers its own proprietary drone platform for lease to commercial customers, is developing a platform called Workmode that connects companies to third-party pilots, similar to Fly4Me. A number of startups—some still in stealth mode—are developing similar business models built around brokering drone services to those who need them.
The growing number of businesses entering the drone service market signals a certain maturity within the larger drone marketplace, Declet says. The real inflection point for the industry won’t come to pass until sometime next year when the FAA likely abandons the Section 333 exemption regime. Most assume the agency will decide to issue a new set of rules for commercial drone operations that will allow companies to operate drones commercially, either in-house or as a services provider. Once that happens, service brokers and integrators, like Measure, will likely see increased competition, he says, althought the overall marketplace will expand as well. As drone technology itself becomes more mainstream, drone services will be the next big evolution for the industry.
“I think this market is going to be very, very large [and] ultimately much bigger than the hardware market,” Declet says. “Services is the future of this industry.”