'Unprecedented growth' to see Southeast Asia's Internet economy hit US$50B in 2017: Study

'Unprecedented growth' to see Southeast Asia's Internet economy hit US$50B in 2017: Study

SINGAPORE: Amid "unprecedented growth", Southeast Asia's Internet economy is expected to hit US$50 billion (S$67.55 billion) this year, according to a study released by Google and Singapore-based investment company Temasek Holdings on Tuesday (Dec 12).

All sectors, including online travel, online media, e-commerce and ride-hailing, have witnessed "solid growth" in 2017.

With a compound annual growth rate (CAGR) of 27 per cent, which outpaces initial 10-year projections of 20 per cent, the region is on a "solid trajectory" to exceed an initial prediction for the web economy to grow to about US$200 billion by 2025, the joint research found.

Already the world's fastest growing Internet region, Southeast Asia's Internet user base is showing no signs of slowing down.

By the end of this year, there will be 330 million active Internet users monthly - representing an addition of more than 70 million new users since 2015.

Mobile has the "absolute prominence" as the access point and driver of the region's Internet economy, the study added.

More than 90 per cent of Southeast Asia’s Internet users are on smartphones. They spend an average of 3.6 hours per day on mobile internet, more than in any other region in the world.

E-COMMERCE, RIDE-HAILING SEE FASTEST GROWTH

Across sectors, e-commerce and ride-hailing services have taken the lead with growth at over 40 per cent.

For the former, growth factors include a boom in consumer engagement and a surge in marketplaces, such as Lazada and Shopee, which provide small and medium businesses with readily accessible platforms to transact online and reach new consumers.

In 2017, overall e-commerce sales in Southeast Asia are reaching US$10.9 billion, up from US$5.5 billion in 2015.

Speaking at a media briefing for the study, Mr Rajan Anandan, vice president and managing director for Google Southeast Asia and India, said these encouraging consumer trends mean that current growth rates in the e-commerce sector are likely to continue.

"Dramatic growth" is also happening for the region's ride-hailing services, which are expected to double their gross merchandise value (GMV) to US$5.1 billion in 2017, compared to two years ago.

The research noted that more than 6 million rides per day were booked on top ride-hailing apps, such as Grab and Uber, in the third quarter of 2017. That marks a more than four-fold increase since 2015.

Ride-hailing players are also creating employment and income opportunities with the engagement of more than 2.5 million drivers across the region in the third quarter.

With these players expanding to food delivery, courier services and digital payments, they are well positioned to become Southeast Asia’s horizontal personal services leaders given the large and growing base of users and drivers on their platforms, the study said.

This dynamism in the e-commerce and ride hailing sectors in Southeast Asia has attracted significant investment activity.

More than US$12 billion of capital was raised by Southeast Asia's Internet companies between 2016 and the third quarter of 2017, up from just US$1 billion in 2015.

The lion's share of about US$9 billion went to the region's unicorns, such as Indonesia's ride-hailing firm Go-Jek, Grab, Lazada, Razer and Sea Ltd.

This means that access to capital remains a challenge for Southeast Asian start-ups and smaller ventures that are unable to raise funds beyond Series A or seed deals.

"We need to see a few more success stories but as the Series A round companies continue to grow, they will be on the radars," said Mr Rohit Sipahimalani, joint head of portfolio strategy risk group at Temasek.

The shortage of homegrown tech talent also remains an area where continual focus and investments are needed in Southeast Asia.

In particular, the region lacks senior engineering and overall leadership talent that have the expertise to manage a hypergrowth environment, observed Mr Sipahimalani.

Source: CNA/ad

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