Writing a blog as a 23-year-old is weird. On one hand, I would love to pour out every single thought that I’ve been keeping to myself throughout the week, as that’s the original purpose of this blog, and it will continue to be. On the other hand, I don’t want to make it seems like I’m trying to lecture and provide guru-like insight. But I digress.
In last week’s issue, I explained my motivation for writing this blog, click here if you want to learn more about it.
The Senate acquitted Donald Trump this week. It was not surprising at all given the Republican majority. Firstly, I’m not a US citizen and I don’t currently intend to preach about my political affiliation or view in this blog. The event that I want to outline from the impeachment trial was Mitt Romney’s vote to convict the President. The Republican Senator made history by being the first Senator in history to vote to convict a sitting President from his own party. His action made me think about loyalty and how it can be a double-edged sword when implemented inappropriately. Blind loyalty is a dangerous thing — and Mitt Romney reminded us of it.
Looking at SEA
Recently, I’ve been paying attention to big tech companies in Indonesia (my hometown). In 2018, the combined GDP of all ASEAN states was $2.95 trillion. The region boasts strong economy growth amongst emerging markets and is home to more than 10 unicorns. Four (or five now) of them are based in Indonesia, the region’s largest economy.
I became curious about the latest developments and wanted to assess if there’s any correlation with US tech companies growth trajectories in the last three to five years. Because that’s usually how it goes. Talented individuals from emerging countries looked at what has been successful in developed countries and made a version of it in their own turfs. Another information that inspired me to ramble about this topic is a recent a16z presentation by Connie Chen on Super Apps, which made me ponder about future regulations and government policies in the emerging market pertaining to big tech companies. By now, its common knowledge that big tech is a prime topic in the upcoming US election. From Elizabeth Warren’s plan to “break up big tech” to the discussion surrounding the weaponization of social media in elections, the power that these big corporations have are now at the center attention of regulators around the world.
Two years ago, I spoke to some friend that decided to went back home after studying abroad (mainly in the UK & US) and asked them whether they’re going to start a new tech company. The answer that I got was generally the same: “It is extremely challenging, the big tech players are already doing everything”. To be honest, I was quite sceptical back then and assumed that it was because they didn’t want to directly face the risks that come with running a start-up right off the bat after being abroad for four years. Completely understandable.
However, the emergence of super apps made me realize the broader nuance of that answer. Arguably South East Asia two largest unicorns, Grab and Gojek, started as ride-hailing companies but are now offering services in retail wealth management, lending, food delivery, and many more. In emerging markets, there’s no direct historical example. For instance, Indonesia doesn’t have a similar case to Microsoft anti-trust that can serve as a guideline for the local regulators to take action when necessary. Combined with the existence of super apps, this feels like a recipe for an absolute monopoly on steroids
Then again, as a young professional in the investment management industry, I don’t see this in a binary way. It’s not a completely bad thing. Emerging countries need a couple of their own big tech companies (or monopolies) in order to retain their sovereign wealth. Otherwise, every single fabric of the digital economy will just be overtaken by FAANG — and as an investor, obviously, I would rather bet on monopolies.
The number one app that I use every time I’m back in Indonesia is Gojek. As mentioned, it provides services for anything that you can possibly imagine. From basic ride-hailing to food delivery and on-demand massages. In the past year, the two ride-hailing giants in the US (Uber & Lyft) have been facing scrutinies after they went public due to their questionable path to profitability and other management issues. From these issues, there’s one obvious fact that we can discern about the nature of their business, especially in the ride-hailing and food delivery sector.
Customer loyalty doesn’t exist.
That said, I would like to make the case that Gojek is in an extremely unique position and its biggest edge is -wait for it- loyalty. Going back to Indonesia, Gojek’s main competitor is Grab, a ride-hailing turned super app that’s based in Singapore. The two are now competing for market shares in various countries in South East Asia. As both these companies are still private, most of these assessments are qualitative and discretionary. They are purely based on my practical experience and second-hand information sources.
I believe it is fair to assume that both of these companies are not profitable. Grab even says they don’t plan to go public until they’re profitable. Both of these companies are well-funded, have cheap access to capital, phenomenal talents, charge similar fees — overall, arguably almost equal in every aspect of their business. As a customer ( I last used both apps in Summer 2018), I literally couldn’t tell any significant difference from a user experience POV that will deter me from one app or the other. Assuming that both companies are going to continue to perform toe-to-toe in all of the aforementioned aspects — at the end of the day, the final differentiator will be . Loyalty comes through great customer experience and branding. In my opinion, it is unlikely for Gojek or Grab to best one another purely through customer experience.
Indonesia is South-East Asia’s largest economy with a population greater than 250 million people. Grab, which was founded in Singapore, even calls itself an “Indonesia-focused” company. There are many studies which point that Grab now owns 2/3rd of South-East Asia ride-hailing market share. However, we all know that the ride-hailing business model is questionable and that’s precisely why all of the ride-hailing companies are branching out to other businesses.
Gojek should focus on gaining loyalty from the Indonesian market — and it has an absolute edge in this regard. It has a better narrative to convey as a natively Indonesian company. A recent initiative such as producing a podcast to better introduce the personalities within the company is a great example. Lastly, the chess-play that was made by Gojek’s co-founder and ex-CEO Nadiem Makarim, in my opinion, was an absolute genius. Albeit the fact that he will no longer be involved with the company as he took on the role of the country’s Minister of Education, the sheer brand image and network that Gojek will receive from this is tremendous and the strategic possibilities are endless.
P.S. We can talk about the overall state of the ride-hailing market in South-East Asia and how Grab is backed by SoftBank (yup … you heard that right) but that topic can be a full-fledged article of its own.
Originally published at https://www.marcomanoppo.com on February 7, 2020.