Exploring Southeast Asia's SuperApp Landscape

Last updated: 23 September 2022

Actionable Insights

  • Southeast Asia's internet economy is on the rise and there is ample room for growth.

  • The region however while vast, is not homogeneous and demands localization to achieve success.

  • Much like in China, the region is seeing its share of homegrown superapps. Notable players include SEA and Grab.

Industry Background

Southeast Asia's Internet Economy Is Growing Driven By Rising Internet Penetration And Rising Incomes

Southeast Asia's internet economy is expanding. Yet there is room for growth; just three of Southeast Asia's 11 countries have an internet penetration rate higher than 90% as of 2020 according to latest available data from The World Bank (Brunei at 95%, Singapore at 92%, and Malaysia at 90%). Combined these three countries have a population of approximately 40 million, representing only 6% of Southeast Asia's nearly 700 million population, which suggests a vast offline population numbering about two hundred million. Many of the region's offline population are in countries such as Indonesia (approximately 277 million population of which 54% use the internet), the Philippines (approximately 114 million population of which 50% use the internet), Vietnam (approximately 103 million population of which 70% use the internet), and Myanmar (approximately 57 million people of which 35% use the internet).

Although these countries offer the biggest opportunities for internet user growth, they are also on the lower end of the income scale in Southeast Asia.

Nevertheless, most countries in the region have been enjoying steady economic growth (Myanmar is the exception as its economy contracted severely in 2021 partly driven by political turmoil and a surge in the third wave of covid infections in the country) leading to rising disposable incomes and consumer spending power. Rapid economic activity coupled with a vast offline population that is increasingly accessing the internet for the first time opens tremendous growth opportunities in Southeast Asia which numerous internet economy players, local and foreign alike, are keen to exploit.

Fragmented Market A Challenge, Localization Crucial For Success

With a population of nearly 700 million, Southeast Asia's market is large but is not homogeneous; all but one of the region's 11 member countries have vastly different cultures, languages, demographics, and regulations (Brunei is the exception with the country speaking Malay, similar to that of Malaysia). Except for Indonesia and Malaysia (whose official languages, namely Indonesian and Malay share many similarities and are both written using Latin script) and Vietnam (whose language is written using Latin script), all other languages across Southeast Asia have completely unique scripts.

Indonesia is the largest country in terms of population (with a population of 277 million people), and the population is largely Muslim (Muslims accounts for 87% of the population). Indonesian is the national language, however more than 700 languages are used in Indonesia. The Philippines is the second largest in terms of population (114.5 million) and nearly 80% are Roman Catholic. Filipino is the main official language but several other dialects are spoken. Vietnam is the third biggest in terms of population (103 million) and most of them are culturally Buddhist. The official language is Vietnamese. Thailand is the fourth largest in terms of population (69.6 million) and nearly 95% are Buddhist. The official language is Thai. Myanmar is fifth biggest in terms of population (57.5 million) and nearly 88% are Buddhist. Burmese is the official language. Malaysia is sixth largest in terms of population (33.8 million) and 61% are Muslim. Malay is the official language. Cambodia is the seventh largest in terms of population (16.7 million), and 97% are Buddhist. Khmer is the official language. Laos is eighth largest in terms of population (7.7 million) and 65% are Buddhist. Lao is the official language. Singapore is ninth largest in terms of population (5.9 million). About a third are Buddhist, nearly a fifth are Christian, and another fifth have no religion. English and Mandarin are the most widely spoken languages and make up the country's official languages along with Malay and Tamil. Timor-Leste is tenth largest in terms of population (1.45 millions) and 97% are Roman Catholic. Tetun Prasa and Portuguese are official languages but a variety of other native languages are spoken. Brunei is the last in terms of population (478,000) and 81% are Muslim. Malay is the official language.

Given Southeast Asia's fragmented demographics, localization is often viewed as crucial for success. A localization strategy however is costly (for instance in terms of product development, and marketing) compared to a cookie-cutter approach, and accordingly players with better financials may stand a better chance of emerging as the region's superapp leader. Singapore-headquartered superapp SEA's position as one of the front runners in Southeast Asia's superapp race is likely in part thanks to its highly profitable online gaming business, which helped build its eCommerce platform Shopee, both of which are tremendously popular in most countries in across Southeast Asia thanks to a successful localization strategy. SEA's in-house developed battle royale game Free Fire was localized to suit Southeast Asian gamers from day one, with the mobile game developed to ensure it demanded considerably less in terms of mobile phone specifications, making it very popular among Southeast Asian gamers who tend to have lower spec smartphones compared to gamers in developed markets. Meanwhile, SEAs eCommerce arm Shopee ensured its marketing is heavily localized with advertisements in local languages to locally popular celebrities being roped in as brand ambassadors. In Thailand for instance Shopee works with popular Thai model and actress Devika Hoorne, and in Indonesia, Shopee works with Indonesian actor Joe Taslim. As yet, none of Southeast Asia's super app contenders boast online gaming and eCommerce businesses comparable to SEA.

Notable Competitors


Brief Overview

SEA's superapp ecosystem is comprised of three main consumer service offerings namely online gaming, eCommerce, and fintech. Other revenue streams such as food delivery and online groceries are a relatively small portion of the overall business.

SEA's revenues jumped 127.5% YoY to USD 9.9 billion for the financial year ended December 2021 with all three business segments reporting triple digit percentage revenue growth.

eCommerce, SEA's biggest segment by revenues, saw revenues rise 136% YoY to USD 5.1 billion. SEA's eCommerce segment covers revenues from its eCommerce operations which largely comprise its online marketplace platform (Shopee), and services offered to merchants such as fulfillment services and last-mile delivery services (Shopee Xpress). Shopee has a presence Southeast Asia and Latin America. In Southeast Asia, Shopee competes against Alibaba-backed Lazada, and Indonesian eCommerce giants Tokopedia and Bukalapak.

Digital Entertainment Services, SEA's second biggest segment by revenues, reported a 114% YoY jump in revenues to USD 4.3 billion. Digital Entertainment Services covers revenues from its mobile gaming business, Garena, which is involved in developing and publishing its own mobile games (notably Free Fire), and titles from third party publishers such as Tencent. Free Fire which has been released globally is highly popular, particularly in emerging markets such as Southeast Asia and Latin America. Free Fire competes against PUBG Mobile from South Korean game developer Krafton Inc.

Digital Financial Services, SEA's third biggest segment by revenues, saw revenues skyrocket 672% YoY to USD 469 million. This segment covers SEA's financial technology businesses primarily comprising its mobile wallet (ShopeePay), buy now pay later (SPayLater), and digital banking services (SeaBank). In Southeast Asia, ShopeePay competes against GrabPay (owned by Singaporean superapp Grab), GoPay (owned by Indonesian supeapp GoTo), and Google Pay among others.

One Of The Best Positioned Players In Southeast Asia's Superapp Race, SEA's Unrivaled Superapp Ecosystem And Geographic Reach Are Key Strengths, But Threats To Online Gaming - Its Cash Cow - May Thwart Superapp Ambitions, And Potential Competitive Threats To eCommerce May Hinder Fintech Ambitions

There are reasons to be optimistic about SEA's prospects. SEA Ltd arguably wields one of the strongest superapp ecosystems in Southeast Asia comprising online games, eCommerce, and fintech.

  • SEA's online games are highly popular across emerging markets worldwide including Southeast Asia, and SEA is the only Southeast Asian super app contender with a major online gaming business.

  • SEA's online marketplace platform Shopee, has an unrivaled presence across Southeast Asia and SEA is the only Southeast Asian super app contender with a geographic presence across most major Southeast Asian countries. The only other Southeast Asian superapp contender with a major eCommerce business is Indonesian super app GoTo, however their eCommerce business - Tokopedia - is largely focused on Indonesia and thus does not have the same geographic reach as SEA's online marketplace platform Shopee.

  • Fintech is still at an embryonic state in Southeast Asia but SEA has a major competitive advantage in this space thanks to its eCommerce business which performs a critical role as an independent third party intermediary facilitating payments and helping bridge the trust deficit between consumers and merchants (Shopee's escrow services are offered through its Shopee Guarantee feature). SEA's path to potential mobile wallet dominance on the back of a strong eCommerce business follows a strategic playbook similar to Chinese eCommerce giant Alibaba whose rise to pole position in China's mobile wallet rankings was partly helped by its position as China's biggest online eCommerce platform. It is not far fetched to envision SEA banking on a strong mobile wallet market position to subsequently build out other fintech businesses such as credit lending and insurance.

SEA's rise to being among the front runners in Southeast Asia's super app arena is in large part thanks to its highly profitable mobile gaming business. SEA's Digital Entertainment business which covers its online gaming business, generated a segment profit of USD 2.5 billion for the financial year ended December 2021. By comparison, rivals such Singapore-headquartered Grab (whose superapp ecosystem is largely comprised of ride-hailing, food delivery, and fintech) generated USD 345 million in segment profit for its ride-hailing business (its only profitable business) for the financial year ended December 2021. Indonesian superapp GoTo (whose superapp ecosystem comprises ride-hailing, food delivery, eCommerce and fintech) doesn't breakdown segment profitability however with revenues of around IDR 17 trillion (approximately USD 1.1 billion) for the FY ended December 2021, GoTo's revenues are dwarfed by SEA's USD 9.9 billion revenues for the same period, and are lower than SEA's Digital Entertainment segment profits of USD 2.5 billion.

SEA's cash cow is a key strength which enables it to finance its expanding (and currently unprofitable) ecosystem of online consumer services notably eCommerce and financial technology services such as mobile payments. In the latter, the company has been acquisitive lately, particularly in Southeast Asia's fintech space, an early stage industry where much of the building blocks are still in the process of being set, and the pecking order has yet to be established. SEA acquired Indonesian bank PT Bank Jago in January 2021, and is reportedly eyeing acquisition targets in Indonesia's insurance space.

A strong financial position could give the company the necessary flexibility to drive growth through further acquisitions in the future. No other superapp player in Southeast Asia boasts the kind of solid cash cow SEA has, giving SEA a major competitive advantage in its quest to build the one app to rule them all. Winning the superapp crown could amplify network effects such as user loyalty, user retention, and user spend, and thereby further strengthen its competitive position and market share in the long run.

The crown jewel in SEA's crown - online gaming - has ample room for growth; SEA is focused on expanding Free Fire's user base beyond its core emerging markets and towards online gamers in developed markets such as North America and Western Europe where consumer spending power is much higher but at the same time where consumer preferences and expectations (in terms of game quality for instance) are much higher. In response, SEA rolled out Free Fire MAX, a higher quality version of its original Free Fire mobile game featuring better graphics and higher smartphone memory requirements, aimed at users with higher mobile phone specs. The push could not only increase its registered user base (which is currently around 450 million, largely comprised of Free Fire's primary target market - 13 - 18 year olds - located in emerging markets such as Southeast Asia, South Asia, Central and Eastern Europe, and Latin America) but also potentially boost Average Revenue Per User (ARPU) as well. Meanwhile the growing popularity of eSports in Free Fire's core emerging markets such as Southeast Asia and Latin America could boost user engagement and average spend as online gamers, keen to qualify for highly lucrative eSports tournaments, spend more to rise up the rankings.

Potential threats to its primary cash cow - online gaming - however could potentially thwart the company's ascent to superapp supremacy. Free Fire's developed market push may not pan out and competitive pressures are growing in its home market Southeast Asia. Regulatory risks are another possible concern.

Chinese tech giant Tencent is increasingly looking beyond its home market of China to fuel growth, while ByteDance, parent company of globally popular short video app TikTok, is intensifying focus on non-Western markets amid heightening political scrutiny. Southeast Asia, with its favorable market conditions, notably a high corporation of Chinese-speaking people (collectively, Southeast Asian Chinese account for about 80% of the world's diaspora population), is becoming increasingly attractive for both Chinese tech giants. ByteDance's mobile gaming unit Moonton (which ByteDance acquired in March 2021) has already found tremendous success in Southeast Asia with its mobile game Mobile Legends: Bang Bang which has been named as the most popular game in Southeast Asia. Tencent has yet to gain comparable traction in the region but they may be readying a plan to take action. Tencent is an investor in SEA, and the two collaborate strategically in areas such as games publishing (the company inked a five-year deal to sell Tencent games in Southeast Asia). That five-year deal however will expire in 2023 (the agreement was signed in November 2018), and in January 2022, Tencent trimmed its stake in SEA (albeit by just a few percentage points bringing its stake to 18.7% from 21.3%). Tencent reportedly intends on retaining its stake in SEA but their recent moves and their timing may indicate a gradual shift in priorities.

In August 2021, China introduced new rules that limit video game hours for Chinese minors (aged 18 and below) to three hours per week. Minors happen to be Free Fire's primary target market and although governments across Southeast Asian countries have so far maintained an open stance towards video games, the possibility of a change of tune, similar to that seen in China cannot be ruled out.

Around 2020 relations between China and India began to weaken, and in January 2022, India banned Free Fire, among 54 other apps that the Indian government believed were sending user data to servers in China. Although SEA is headquartered in Singapore, SEA's founder Forrest Li was born in China and gained Singaporean citizenship after moving permanently to the city state.

eCommerce is on a tear in Southeast Asia and Shopee's broad reach across the region makes it well positioned to benefit. Continued scaling of the platform could help improve unit economics and profitability. SEA expects Shopee to achieve positive adjusted EBITDA before allocation of headquarters' common expenses in Southeast Asia and Taiwan by the end of 2022.

However, competitive threats to SEA's eCommerce business, upon which its nascent fintech business derives part of its competitive advantage, may hinder SEA's fintech ambitions as well. Chinese tech giant ByteDance's short video app TikTok is ramping up its eCommerce operations in Southeast Asia, while Malaysia-headquartered budget airline AirAsia is also foraying into eCommerce as part of its superapp ambitions. Alibaba-backed Lazada is also intensifying focus on Southeast Asia as growth in its home market China, slows.

Moreover, while SEA has been expanding its in-house logistics infrastructure, it is still arguably not as strong compared to rival Lazada for instance who not only has their own extensive and expanding logistics infrastructure but also enjoys the additional advantage of having operational support from parent company Alibaba's logistics arm Cainiao Network. While both Shopee and Lazada have roughly the same delivery times and both offer free shipping, Lazada has been noted to be ahead of Shopee in terms of delivery times (sometimes as fast as under 24 hours versus Shopee customers who have to wait as long as five days or more), a competitive advantage derived from their in-house logistics operations which is heavily supported by Cainiao Network. This advantage is particularly evident in facilitating cross-border parcel delivery, particularly from China, a highly popular destination for Malaysian cross border online shoppers, and where Cainiao Logistics has extensive infrastructure and operational experience. Cross border eCommerce in Southeast Asia is expected to see exponential growth in the coming years and Lazada, whose parent Alibaba is intensifying focus on Southeast Asia to drive growth amid slowing growth in China, holds a logistics advantage barring a move by SEA to address this weakness.


Brief Overview

Singapore-headquartered superapp Grab started life as a ride-hailing platform before rapidly branching out into food deliveries, online grocery, and fintech. Grab is the number one player in Southeast Asia's ride-hailing and food delivery space.

Grab's revenues jumped 44% YoY to USD 675 million for the year ended December 2021 driven by strong growth in deliveries and financial services.

Deliveries segment revenues surged to USD 148 million from USD 5 million in 2020 driven by 56% YoY increase in GMV to USD 8.5 billion and an increase in deliveries commission rate from 16.6% in 2020 to 18.2% in 2021, partially offset by a 98% YoY drop in Q4 2021 revenues to USD 1 million from USD 98 million the same quarter a year earlier as Grab invested heavily on incentives to maintain category leadership and increase adoption of new services. Grab's Deliveries segment covers the company's food delivery (GrabFood), grocery delivery (GrabMart), cloud kitchens (GrabKitchen) and parcel and courier services (Grab Express). In Southeast Asia, GrabFood competes against German food delivery giant Foodpanda, SEA's ShopeeFood, and GoTo's GoFood. GrabMart competes against GoTo's GoMart while GrabKitchen competes against Rebel Foods. Grab Express meanwhile competes against Shopee Xpress, Lalamove, and GoTo's GoSend among numerous other local players.

Grab's biggest and only profitable segment - Mobility - saw segment revenues rise 4% YoY to USD 456 million in 2021, a sluggish performance which was largely due to limited consumer mobility for the most part of the year as a result of the covid pandemic. Grab's Mobility segment covers its ride-hailing operations such as metered taxi hailing (GrabTaxi), ride hailing (GrabCar and JustGrab), and motorcycle e-hailing (GrabBike). GrabCar and Just Grab compete against Indonesia's GoTo along with many other local players.

Grab's nascent Financial Services segment saw revenues rise to USD 27 million in 2021, a dramatic improvement from 2020 when revenues were USD -10 million. The increase was helped by a 22% YoY increase in GMV to USD 4.5 billion in 2021 thanks to a roll-out of new offerings during the year. The segment covers Grab's mobile wallet (GrabPay and OVO), and pay later (Grab PayLater). GrabPay competes with SEA's ShopeePay and GoTo's GoPay as well as numerous other local mobile wallet players such as TnG and Boost in Malaysia, LinkAja and Dana in Indonesia, FavePay in Singapore, and GCash in the Philippines. Grab PayLater competes with GoTo's GoPayLater and Atome among others.

Ride-Hailing And Food Delivery Businesses' Extensive Geographic Reach, Brand Awareness And Market Leadership Are Key Strengths, Leveraging On Which Grab's Rapid Expansion To New Consumer Internet Services Such As Online Grocery And Fintech Positions The Company As A Formidable Superapp Player In Southeast Asia

Grab is a clear ride-hailing leader in Southeast Asia, and the company is the only ride-hailing app with a presence across most Southeast Asian countries (specifically Grab has ride hailing operations in all Southeast Asian countries except Laos, Brunei, and Timor-Leste) and in almost all countries where Grab operates, the brand is among the market leaders. Grab's food delivery arm - GrabFood - enjoys a similar level of geographic reach and enjoys a leading position in almost all markets it operates in. Except for Foodpanda, no other food delivery player boasts the geographic reach and brand strength that GrabFood enjoys, a key competitive advantage Grab has been quick to exploit with the company swiftly expanding into other verticals across Southeast Asia such as online grocery and fintech.

Online grocery and fintech have enormous growth potential in Southeast Asia. The mobile wallet space in Southeast Asia is a sunrise industry; more than 70% of Southeast Asia's population is unbanked or underbanked which is fertile ground for mobile payments growth. Moreover, 90% of Southeast Asians do not own a credit card, making Buy Now Pay Later (BNPL) a massive opportunity.

While fellow Singaporean superapp SEA follows a strategic playbook similar to Alibaba by leveraging its massive eCommerce marketplace - Shopee - to build its mobile wallet and fintech business, Grab who doesn't have an eCommerce business to rival Shopee has turned to a different strategy instead with the company leaning on the grocery segment (offline and online) to capture mobile payments share. Although food delivery is a crowded market, online grocery is as yet largely untapped, and Grab has been swiftly and very aggressively moving in. The company acquired Malaysian mass-premium supermarket chain Jaya Grocer and then hired Chinese retail veteran Hardy Cao to spearhead Grab's online grocery ambitions.

With all Jaya Grocer stores adopting GrabPay and GrabRewards, the acquisition would bolster GrabPay's offline merchant network which the company has been aggressively expanding lately; GrabPay tied up with Japanese retailer AEON and then Starbucks in 2022. The acquisition offers logistics advantages as well; with Jaya Grocer's network of 40 stores (most of which are located in Malaysia's Klang Valley, a densely populated urban area whose residents are relatively affluent and time-constrained making the locality well suited to offer online grocery services) the acquisition could potentially galvanize Grab's logistics capabilities, giving it a critical competitive advantage in terms of delivery speed in the online grocery space.

This is an advantage as yet, online grocery rival Shopee Supermarket doesn't enjoy, and while Shopee parent SEA certainly has the financial muscle to make a similar acquisition, it remains to be seen if they would follow a similar path as Grab; grocery retailing is a notoriously low margin business and acquiring a supermarket chain would mean Shopee would have to give up its asset-light business model, a model that has many advantages notably a better ability to scale.

Moreover, online grocery is a high cash burn business and has witnessed numerous casualties lately; Singaporean food delivery and online grocery player Honestbee shut down most, if not all, of its operations in 2019. Indonesian travel firm Traveloka shut its online grocery business in August 2022, and was followed by fellow Indonesian online grocery rival HappyFresh which shut down their Malaysian operations in September 2022. Grab too was not spared with the company shutting down their dark stores in Singapore, Vietnam, and the Philippines to costs. A similar picture is unfolding overseas as well; over in India, homegrown social commerce player Meesho shut is online grocery business in India.

Nevertheless, amid the wave of consolidation in Southeast Asia's online grocery space, Grab, who has an advantage both online and to some extent offline, may end up as one of the last men standing.

Threats to Grab's online grocery ambitions include the possibility of supermarket chains diving into online grocery themselves. Grocery retailing is fiercely competitive and there are plenty of reasons for supermarket chains to turn to in-house fulfillment from capturing every cent of savings to owning customer purchase data. This trend is playing out in the U.S. for instance, with American grocery giant Kroger announcing its intention to shift from third-party to in-house eCommerce fulfillment. Such a scenario could potentially leave Grab as a niche player in the online grocery space. Moreover, Grab's acquisition of Jaya Grocer only gives it exposure to one area within Malaysia and it may be financially challenging to rapidly scale to the rest of Malaysia, let alone the rest of Southeast Asia which means established supermarket chains, who already wield an advantage in terms of a ready store network, are likely to have plenty of time to carve out their own share of online grocery sales.


Brief Overview

Southeast Asia's online food delivery market is expected to reach almost USD 50 billion by 2030, a three-fold increase compared to 2021 according to consultancy firm Frost & Sullivan. Grab is Southeast Asia's leading on-demand food delivery player with a market share of around 47.8%, followed by Foodpanda with 23.2%, and GoTo's GoFood at 13.8%. Other smaller players including Deliveroo and Line Man account for the remaining 15.2% according to Frost & Sullivan.

Foodpanda has no plans on becoming a superapp, however with food delivery rivals such as Grab and GoTo morphing into superapp giants and reaping the advantages that come with such a status (such as bigger userbases and therefore bigger troves of consumer data, network effects, and cross-selling opportunities), the possibility of Foodpanda being forced to reconsider this decision cannot be ruled out.

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