Commentary – No More Dumb Pipes: Verizon Moves into Commercial Drones

Guest Commentary by Darr Gerscovich, former SVP Marketing at DroneDeploy —

In case you missed it, Verizon announcement yesterday that it was acquiring Skyward, a drone operations management software company.  Major news in my opinion.  After the third person asked for my opinion, I decided to draft this post as a primer.  Note – these are my independent thoughts.  Let’s start with the basics…

What Does Skyward Do?

Skyward enables businesses to have a single workflow involving people, projects (e.g., monitoring a construction site) and drones. Said differently, Skyward helps businesses minimize the risks of using commercial drones by following established processes and regulations.  Check out their overview video for a more eloquent and “approved” explanation.

Why Does Verizon Care?

Commercial drones pose a huge challenge and opportunity for carriers.  Today, cameras are the primary sensor on drones.  New sensors will appear on drones over time with the advent of smaller sensors, however I believe that cameras will be part of the sensor payload for the majority of the market.  Today’s drones already carry cameras capable of taking very high quality imagery (think 20MB photos and 4K video), and they’re getting better all the time.  So what’s the challenge for carriers?

Drones Transmit Massive Amounts of Data

Here’s a quick back of the envelope calculation to highlight the drone data challenge… depending on altitude, a drone will capture between 3 and 6 pictures per acre.  Therefore, to capture a 100 acre agriculture field requires 300 to 600 pictures, respectively.  At 4MB per picture that’s 1.2GB to 2.4GB of data that needs to get uploaded to the cloud for processing.  Think about it.  Over a gigabyte of still image data is uploaded for just one commercial drone flight!  It’s no wonder that limited carrier bandwidth is a huge bottleneck today for commercial drones.  To make matters worse, the market is moving towards real time processing of data streamed directly from the drone (as opposed to plugging the drone’s SD card into a computer and uploading the data from the office).

So challenge #1 is MASSIVE amounts of data, but transmitting data presents a revenue opportunity for the carriers.  And that’s exactly what Verizon made a play for back in October of 2016 by announcing drone data plans starting at $25/month for 1GB up to $80/month for 10GB.  It made waves in the industry, but unfortunately was a non-starter within the commercial drone space.  Why?  Based on our quick calculation above, Verizon’s drone data plans fell way short of what’s needed.  But as a marketer, I respect a good PR play when I see one. 🙂

Moving Beyond Dumb Pipes

Similar to Verizon’s big moves into content and advertising via the AOL acquisition and the pending Yahoo acquisition, it is now looking to capture more of the value-chain in a new and exploring IoT category, commercial drones.  Skyward is Verizon’s entree into the space and positions it to go after the drone enterprise market with its recently announced Airborne LTE Operations initiative, “a new service to simplify certification and connectivity of wireless drones.”

As Mike Lanman, senior vice president – Enterprise Products and IoT at Verizon said: “This acquisition is a natural progression of our core focus on operating in innovative, high-growth markets, leveraging our network, scale, fleet management, device management, data analytics and security enablement capabilities and services to simplify the drone industry and help support the adoption of IoT.”

Translation, we don’t want to be relegated to just the plumbing.

Who Wins and Who Loses?

I view Verizon’s move as positive for everyone, and here’s why:

Skyward

They’ve built a solid product that’s addressing a real need in the marketplace.  By joining Verizon, an early strategic investor in their company, they gain tremendous resources and are now in a position to shift into high gear.  They’re ones to watch!  Congrats team!

Verizon

They instantly gain a commercial drone offering and the ability to deliver unique bundles to enterprises (telco infrastructure + data plan + drone operations software).  I suspect over time they will continue to acquire other drone companies to build out a more robust offering.  Intel began in a similar fashion and now brings together their chips with assets from their drone-related acquisitions (hardware from Ascending Technologies and flight planning software from MAVinci).  If you’re interested in great insight into how Intel thinks about commercial drones check out this article.

Drone Software Players

The standard-issue answer of “this validates our space” is true, but there’s more to it.  Verizon’s competitors will likely feel competitive pressures to jump into the space, and I’d bet that most will pursue acquisitions as opposed to building it themselves.  This is particularly good news for the drone software companies that are slowing down and discovering a more difficult fundraising climate.  These companies, that weren’t going to make it to IPO, may now have another shot at a profitable exit.

Drone Hardware Players

Sadly, no change here.  Competing with a dominant DJI has proved too much and with every passing days more of these companies are pivoting to the software space.

What’s Next?

The commercial drone space is growing tremendously, however it’s still nascent.  I’m confident that the category is going to be so huge that despite the growth, in three years we’ll still be saying it’s still nascent.  In other words, it’s still very early and we’re going to see a lot more players (big and small) enter the space, and many shakeout, before all is said and done.

Darr Gerscovich is a consultant for drone and marketing technology companies.  As the former SVP of Marketing at DroneDeploy he moved the brand from out of the shadows and established it as a global leader. Darr is a B2B enterprise marketer with 15+ years in data & insights at large multi-nationals (LinkedIn, Yahoo, Shell) and several SaaS, high-growth startups.