Superapps will starve the rest in Southeast Asia
SINGAPORE, Jan 2 (Reutersviews) – Southeast Asia’s apps-for-everything will dominate in 2019. Cash is being lavished on Grab and Go-Jek, as they dabble in everything from ride-hailing to groceries. It’s a Chinese approach to luring and keeping consumers who are moving online fast.
The region from Myanmar to Indonesia is one of the world’s fastest-growing Internet markets, with cheap smartphones, low connection costs and improving data speeds. On average, according to a 2018 study by Google and Singapore’s Temasek, Thai users spent almost five hours online daily – more than three times their Japanese counterparts.
That’s created more than 10 technology companies worth over US$1 billion. Yet the bounty is unevenly spread: out of $24 billion pumped in over less than four years, according to Google’s report, two-thirds will have gone into just nine companies. This year alone, Grab, which bought Uber’s local business, says it will have received $3 billion, almost one quarter of its valuation. Go-Jek, valued at $9 billion to $10 billion, is not far behind.
The result will be a widening funding gap between the two ride-hailing groups in particular, and some 400 or so start-ups seeking cash. Investors flock to those bearing the SoftBank or Tencent seal of approval, but are less interested in the middle – companies that are neither wholly proven, nor cheap in a region where consultancy Bain cites the average deal valuation in 2017 at a punchy 13.5 times EBITDA.
Part of the reason is the transformation of Grab and Go-Jek into apps-for-everything, along the model of China’s Meituan Dianping, which is to keep consumers coming back for payments, rides, massages and takeouts, among other things. It’s not easy to do it all: Facebook and Google parent Alphabet have struggled. But funds have been less forthcoming in Southeast Asia than in China, which has a deeper pool of domestic capital. And for foreign investors in untested markets, big players, with manifold partners, are hard to resist. It is a tough region too, with a patchwork of different needs: even Alibaba has found its Midas touch lacking, forcing it to shake up management at its e-commerce unit Lazada in 2018.
Ongoing uncertainty in emerging markets will keep investors wary into 2019, and initial public offerings distant. That will feed the superapps.
Ride-hailing-to-payments group Grab expects to raise more than $3 billion from investors in 2018, including cash from Toyota, Hyundai and Microsoft, the company said on Nov. 7, announcing a second Hyundai investment.
Grab was valued at more than $11 billion at its last funding round earlier in the year. The company’s President Ming Maa said the company does not yet have plans to go public.
Go-Jeks valuation is around $9 billion to $10 billion, based on its current funding round, according to Reuters and Breakingviews sources. The app began a trial launch in Singapore, part of its regional expansion, on Nov. 29.
(The author is a Reuters Breakingviews columnist. The opinions expressed are her own.)