It is a battle between the largest Chinese e-commerce platform versus dominating social media and gaming company, but not just Alibaba and Tencent alone and the battlefield is not limited to China anymore. In recent years, both tech-savvies have started to extend their networks and layouts to some of the most promising tech startups in Southeast Asian market.
It seems now two camps are forming: Softbank & Alibaba, versus Google & Tencent. Which side will win is hard to tell, since both parties are resourceful and have solid financial strengths. More likely both will be in the market for the long run, shaping the region’s tech ecosystem in a very interesting way.
SA
Eighteen years ago, Softbank founder Masayoshi Son, made a bet in Alibaba, which turned out to be a huge success.
Despite some skirmishes over the ownership of Ant Financial, Softbank remains Alibaba’s biggest shareholder at IPO.
The two did not stop there. Perhaps influenced by Softbank’s bold yet incisive decision-making culture, Alibaba is more courageous than most of its Chinese counterparts. In April 2016, Alibaba officially acquired controlling stakes from Lazada, starting a spree of major investments by Chinese tech giants into Southeast Asia.
Afterwards, Softbank allowed Alibaba to invest in Tokopedia (and prevented JD.com from doing so), Alibaba firmed up the stakes in Lazada to 81%, and rumours abound about a potential Alibaba investment in Grab, which Softbank & Didi jointly hold controlling stake.
GT
Being the world’s leading technology heavyweight, Google is also keen in procuring seats in Chinese and Southeast Asian market. We already wrote about Google’s recent investment into JD.com, a Tencent portfolio company that has a decent presence in Indonesia and a big joint venture in Thailand.
Both Tencent & Google also invested in Go-Jek, the major rival of Grab.
It is hard to believe that there is no synergy between the two.
Head-on clashes in logistics, payment and ecommerce
As both parties obtain market shares in logistics service, payment solutions and ecommerce platforms in Southeast Asia, the “clash of the titans” is inevitable. Let us break down individually to see what we can expect from the fierce competition.
1. Online ecommerce platform & Payment solution provider: Lazada & Tokopedia vs. JD.com & SEA (Shopee)
Bearing an uprising population and penetration rate of internet and mobile users, the potential for ecommerce in Southeast Asia is unlimited. That includes generating traffic for online stores and achieving sales goals through successful payment solutions.
Payment-wise speaking, SA has been affiliated with Ant Financial to get a grip on Southeast Asia payment gateways. Strategies are made clear, Alibaba took helloPay of Lazada in for re-branding and invested largely in Thailand-based Ascend Money, Philippines-based Mynt, doing brand-boosting and educate the Southeast Asian market on payment services simultaneously.
The prevalent issue in Southeast Asian market is that, though nascent, these nations are, in general, relatively politically unstable, causing inconsistent policies towards foreign investments. On top of that, differences in culture, religion (the contents displayed in the storefront might be inappropriate for some) and economic development maturity (citizens are not familiar with and don’t have faith in online payment system) might be a obstacle that deter services to be widespread. However with that said, being a believer in this market is still the best choice to make.
2. Mobility provider: Grab vs. Go-Jek
After Uber backed out from Southeast Asian market, sold all its shares to Grab and Go-Jek entered in Singaporean market, the tension between Grab and Go-Jek escalated precipitately. Objectively speaking, the two enterprises possess familiar strengths: flexible with strong backer, notable market capitalization value and were a huge success in its original niche market.
But there’s no guarantee who will dominate or monopolize Southeast Asia region for ride-hailing industry. Though Grab has more market shares, ride-hailing companies throughout Asia have relied heavily on discounts and promotions to attract riders and drivers. In the long-run, this situation will spoil customers’ appetite towards service fulfillment and drive down profit margins.
Furthermore, service of Go-Jek is more diversified, ranging from normal on-demand ride services, to courier, food delivery, housekeeping/ cleaning, and grocery delivery. All these are effective to keep supply and demand parties closely in the business loop.
To wrap up, in the fast-growing market of logistics, one should pace itself to overcome the legislative and technical hurdle and cater to local needs for a final triumph.
What to do amidst the fight
Overall, the two teams have different methods to penetrate in Southeast Asia: SA is more ambitious, active and diametric when picking targets while GT claims to be a big believer but rather counter-attacking the decisions made by SA chiefly.
After series of negotiations and acquisition taking place in Southeast Asia, here are some advice for tech conglomerates wishing to enter this market and local startups seeking potential VC/ VBs.
For tech conglomerates, be courageous and active to secure collaborative partners onboard. According to Momentum Works previous talks and experience in Indonesia’s business operations, knowing the leads in various industries is the key to success.
As for local startups, besides perfecting current service and products provided, if condition permits, picking the most beneficial backer is crucial. Additionally, necessary diversifications should be made to widen one’s influence on market to create a win-win situation for more business opportunity and broadened networking.
—
Thanks for reading The Low Down, insight and inside knowledge from the team at Momentum Works. If you’d like to get in touch with us about any issues discussed on our blog, please drop us an email at [email protected] and let us know how we can help.
