Baba Stock – Gojek and Tokopedia: It’s a Race for Superapp Supremacy in Southeast Asia.
How many winners can take all in any given internet market? Two recent events brought that question into focus in the promising Southeast Asia region.
Indonesia-based rides and deliveries powerhouse Gojek merged with e-commerce player Tokopedia to form GoTo Group.
(ticker: SE), whose online games and Shopee merchandise site already have regional reach, reported a 147% year-over-year jump in first-quarter revenue, its 11th straight quarter of triple-digit top line growth.
The two face formidable competition in Grab, another ride-hailing group that initiated a merger via a special purpose acquisition company, or SPAC, and is expected to trade on Nasdaq this summer; and Lazada, a subsidiary of Chinese e-commerce giant
Alibaba Group Holding
((BA)(BA)). A GoTo IPO is expected later this year. “These big four are plying their wares in basically the same sandbox,” says Brendan Ahern, chief investment officer at exchange-traded fund provider KraneShares. “It’s a battle royale.”
Chinese internet has been the most exciting story in emerging markets for many years. It’s showing its age a bit. China does more than a third of its shopping online now, compared with single digits for Indonesia, Southeast Asia’s most populous nation with 274 million, or the Philippines, home to 108 million. Alibaba’s revenue grew by a mere 40% in the latest quarter. “China has emerged. A lot of other places are still emerging,” says Andy Tian, CEO of Asia Innovations Group.
The digital land grab is also more wide open in these other places than in China, not to mention developed markets. With much of the population getting their first smartphones, companies can combine elements of
(EXPE) from scratch into a superapp. With a huge unbanked cash economy, these superapps can take over payments and financial services. “All the companies are competing on the payments front,” says Jerry Goh, an investment manager at Aberdeen Standard Investments. “That makes things quite complicated.”
Sea is the industry leader for the moment, because its games easily cross borders and bring in $100 billion annually, Tian says. But Sea’s Shopee platform trails Tokopedia in Indonesia and Lazada in the Philippines and Thailand. The company is priced for success, too. Shares have tripled over the past year.
The GoTo merger stiffens competition for Sea, and threatens to box in Grab, which wanted to acquire Gojek itself to consolidate ride-hailing. Shares in
(AGC), the SPAC vehicle swallowing Grab, have plunged by a quarter since the deal was announced April 13. “There was too much euphoria around Grab,” says Angus Mackintosh, founder of CrossASEAN Research.
Grab is hardly out of the race, though. Advantages include a broad regional footprint for its Grab Taxi and a strategic stake in Indonesian payments system Ovo.
Southeast Asia, which includes Thailand, Vietnam, and a half dozen smaller countries, offers more than 600 million consumers. The key economies are growing 5% a year or more, and are starting the leapfrog process from corner shops dealing in cash to digitized sales, deliveries, and payments. Investors won’t want to overlook the opportunity. “We are super-excited about the Indonesian unicorns planning to list,” Aberdeen’s Goh says.
But China’s experience shows that the ride won’t be smooth, and picking winners won’t be straightforward. Remember when
(BIDU) was supposed to be a superstar like Alibaba? Proceed with cautious enthusiasm.