Google-Temasek study sees $330b S-E Asia Internet economy by 2025

Joanna Estrada
November 21, 2018

Indonesia is leading the way to ecommerce in Southeast Asia, reaching US$12 billion in 2018 and accounting for more than US$1 in every US$2 spent in the region.

Southeast Asia's nine internet unicorns, Bukalapak, Go-Jek, Grab, Lazada, Razer, Sea Group, Traveloka, Tokopedia, and VNG, have received the majority of it, attracting $16 billion of the $24 billion invested in the region, the report's findings showed.

According to the report, there were 35 million active users of ride-hailing apps in 2018, and an average of 8 million rides per day - four times more than in 2015.

Every edition of the report has stressed that the growth forecasts are contingent on requisite levels of funding boosting the Southeast Asian startup ecosystem as a whole, so the fact that most capital is going to a few very big players is a concern.

And that is not all, Google also expects the market to reach a value of 240 billion Dollars by 2025, which is over twice what was predicted in previous years.

"With increased focus and investments from regional unicorns and local startups, we estimate that the Philippines could ignite growth beyond 30% compound annual growth rate (CAGR) and fully achieve its long-term potential", the study said.

However, these largely unilateral initiatives have led to a "fragmented landscape" of digital payment solutions that "are not compatible with each other and still lack widespread merchant acceptance online and offline", contributing to low adoption among Southeast Asian internet users.

The report is a multi-year research project that aims to shed light on Southeast Asia's internet company by covering four key sectors: online travels, online media such as gaming and subscription music, ride hailing in terms of transport and food delivery, and e-commerce.

Southeast Asia’s internet economy to exceed $240bn by 2025 –Study
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Singapore also punches above its weight in the online travel market, with an estimated US$5.5 billion in gross bookings value for this year, supported by the highest per capita spend in the region, the report said. This number is projected to exceed eight percent by 2025.

"Yet, internet economy companies headquartered in Malaysia, Philippines, Thailand and Vietnam also enjoyed a burgeoning deal flow, with more than 800 deals completed in total", the research highlighted.

Since 2015, Southeast Asian tech companies have amassed an estimated $24 billion; hence, investor confidence grows with the industry as well. To put it in perspective, in all of 2017 saw a total investment of US$9.4 billion. Companies in the rest of South-east Asia raised US$2 billion.

However, investors have also taken notice of smaller players and are pouring record amounts of funds into them.

"Amongst them, the most dynamic segment was that of companies valued between US$10m and US$100m", the firms said.

And the challenge perhaps prompted Google to team up with Singapore based investment giant Temasek to publish a report regarding SE Asia's booming digital economy.

Separately, 2018 is turning out to be a record year for fundraising, with US$9.1 billion raised in the first half of the year, almost as much as all of 2017.

This new "inflection point", as the study calls it, has made Google and Temasek raise their initial estimation of growth which was US$200 million in the next seven years to US$240 million.

Other reports by Click Lancashire

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