Freedonia Drones Expert Weighs in on Belt Tightening at Alphabet’s Experimental Drones Unit

CLEVELAND, Ohio, Nov. 11, 2016 /PRNewswire/ — Alphabet, the parent company of Google, recently scrapped plans to partner with Starbucks to deliver coffee using drones.  Alphabet had previously tested delivery of the coffee chain’s products as part of its Project Wing pilot program.  The tests used hybrid vertical takeoff and landing (VTOL) drones that hover in place and lower their cargo to the ground on a rope.

According to Bloomberg.com, the decision was made as part of a broader effort by the firm to turn what are currently money-losing experimental projects into real businesses.  Disagreements with Starbucks over access to desired customer data also played a major role in Alphabet’s decision.

The full article can be read here:  https://www.bloomberg.com/news/articles/2016-11-08/alphabet-taps-brakes-on-drone-project-nixing-starbucks-partnership

David Vos, the former leader of Project Wing, said last year that the company’s goal was to have a commercial business up and running in 2017.  However, his departure from Alphabet last month and subsequent efforts to trim the program’s staff will make this difficult at best.

Safety concerns about commercial drone operation and strict government regulations are also likely to keep drone delivery services from being a viable business for a number of years, according to Ken Long, an analyst at the Freedonia Group.  Alphabet’s recent focus on research and development projects with relatively short term profit potential made it easier for the company to make the decision to cut its spending on drones.

Commercial drone operation is regulated by the Federal Aviation Administration (FAA), which recently eliminated some of the most burdensome and expensive restrictions placed on their use, including the requirement that the operator have a pilot’s license.  However, other rules that have had a dampening effect on commercial drone use — such as the requirement that an unmanned aerial vehicle (UAV) can only be flown within visual line of sight of the operator — remain in place, unless the applicant can demonstrate how such flights will be safe and a waiver is granted by the FAA.

“Sense-and-avoid” and other safety technologies have improved greatly in recent years, but drone mishaps still occur.  This will prevent commercial drone delivery services from taking off in the US until testing and demonstration projects show that autonomous drone operation is safe in real world settings.  As a result, you probably won’t be able to order a Caramel Brulée Frappuccino from Starbucks on your smartphone and have it delivered to you by drone anytime soon.

Nevertheless, US commercial drone demand is expected to expand rapidly from what is currently an extremely small market base, according to Long’s recent Freedonia Group study.  “The largest dollar increases through 2020 will be posted by drones used in real estate and utility business applications,” says Long.  Current regulatory limitations on drone use are not as important in these markets as they are in technologically challenging applications like delivery services, and the potential cost savings that drone use can provide are substantial.  Both factors will lead to robust increases in product demand.

The Freedonia Group Drones (UAVs) study, written by Long, can be accessed here: http://www.freedoniagroup.com/industry-study/3408/drones-uavs.htm

About The Freedonia Group – The Freedonia Group, a division of MarketResearch.com, is a leading international industrial research company publishing more than 100 studies annually. Since 1985 we have provided research to customers ranging in size from global conglomerates to one-person consulting firms. More than 90% of the industrial companies in the Fortune 500 use Freedonia Group research to help with their strategic planning. Each study includes product and market analyses and forecasts, in-depth discussions of important industry trends, market share information and profiles of the leading industry players. Reports can be purchased at www.freedoniagroup.com and are also available on www.marketresearch.com and www.profound.com.

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