Attendees at the recent SWiTCH 2023 event at Marina Bay Sands, Singapore
In the latest edition of the e-Conomy SEA report, Google, Temasek and Bain & Company revealed that despite global macroeconomic headwinds, the region’s gross merchandise value (GMV) continues an upward trajectory and is set to reach US$218 billion, growing 11 per cent year-on-year (YoY).
The report also reveals that the Southeast Asia (SEA) region’s revenue from the digital economy is poised to hit US$100 billion this year, growing 1.7x as fast as the region’s GMV.
Seeing this potential, the report highlights the need for startups (“digital companies”) to have clear pathways to profitability and prove to investors that they have dependable exit pathways.
This is especially true because SEA private funding has declined to its lowest level in six years after record highs, in line with global shifts towards the high cost of capital and issues across the funding lifecycle.
“These issues include a broader correction in valuations compared to the highs of 2021, uncertainty surrounding the profitability pathways of some companies and a challenging capital market environment which makes potential exits more difficult to achieve,” the report stated.
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“Funding declines cut across all investment stages, with late-stage deal flow slowing down the most. DFS continues to be the top investment sector due to its high monetisation potential. A growing portion of deal activity is funnelled into nascent sectors, signalling that investors are diversifying portfolios.”
The report also spotlighted the growth trajectory for various tech verticals in the region:
1. E-commerce
A continuing growth trajectory with a 22 per cent increase in revenue YoY, reaching US$28 billion. The sector’s GMV grew to US$139 billion in 2023 and is expected to reach US$186 billion in 2025, growing 16 per cent.
2. Online travel
Following the pandemic, the section is on track to recover by 2024 as flight passenger volume nears pre-pandemic levels. The sector’s revenue, as accelerated by inflation, will reach US$14 billion, increasing 57 per cent YoY. Its GMV grew 63 per cent YoY, reaching US$30 billion in 2023, and is tracking towards US$43 billion in 2025.
3. Transport
The sector is seeing a strong recovery boosted by successful monetisation efforts as its revenue reaches US$1.1 billion, growing 47 per cent YoY.
4. Food delivery
As its revenue hits US$0.8 billion in 2023, the sector grows 60 per cent YoY despite the return to in-person dining and a pullback in promotions. In the short term, the sector’s revenue growth is driven by increased take rate while user and order growth will drive it in the long run.
5. Online Media
As the sector’s GMV grows to US$26 billion, increasing 10 per cent YoY, advertising and video streaming are expected to remain its long-term revenue drivers as the sector heads toward US$34 billion GMV in 2025.
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For businesses to maximise these opportunities, there is a need to expand the depth of digital participation.
“While digital inclusion has made inroads in SEA over the past years, consumers outside of metro areas are at risk of facing a widening digital economic divide when it comes to digital participation – active involvement in the digital economy through consumption of products or services across sectors,” the report said.
“Areas beyond metros are particularly vulnerable due to the challenging unit economics. Addressing these gaps is the collective responsibility of all digital economy stakeholders. Removing barriers, such as supply and security issues, can improve the participation of non-HVUs and enable SEA’s digital economy to reach its growth ambitions.”
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