Here's what to make of Snap's drone play (SNAP)

Estimated Consumer Drone Shipments

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Snap Inc., the parent company of Snapchat, is reportedly in talks to buy Chinese drone manufacturer Zero Zero Robotics for between $150 and $200 million, according to CNBC.

Zero Zero is known for its $500 Hover Camera Passport drone, a lightweight drone specifically designed for taking selfies.

This isn't Snap's first move into the drone market — earlier this year it bought California-based drone startup Ctrl Me Robotics and The New York Times reported in March that the firm was working on building its own drone in-house — so it's possible the firm is trying to build out a team of industry veterans to move further into the space.

While Snap brings some advantages to the table, right now it appears unlikely it'll carve out a large share of the consumer drone market.

Snap's young, engaged user base might buy a drone if it made one. Snapchat has 166 million daily active users, 63% of which are millennials between 18 and 34 years old, and 22% are members of Gen Z between 13 and 17. And these users are more digitally savvy than their older counterparts, meaning they could be more receptive to a drone from Snap. That's especially true because millennials have previously shown a strong interest in drone ownership — the generation was a leading driver of drone sales doubling year-over-year in 2016, according to NPD.
But DJI's dominance will likely make it exceedingly difficult for Snap to break into the space. The Chinese firm controls 75% of the consumer drone market, according to BI Intelligence's last estimate. And more recently, it's been adding to its lineup to ensure it doesn't lose this large market share — last month it unveiled the small Spark drone to supplement its more expensive Phantom and Mavic aircraft. That could make it very difficult for a potential Snap drone to gain traction.

But if Snap does break into the market, the potential payoff could be large. Consumer drones right now are primarily owned by tech-savvy consumers hungry for the latest gadgets, but that'll change in the nest few years — global consumer drone spending will total $13 billion between now and 2020, according to Goldman Sachs. That means that if Snap can release a drone soon and carve out a share of the space, it could prove to be lucrative for the company as the market scales rapidly in the next few years.

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