The Asian Platform business scene is worth over a trillion dollars in market value and is only the second most prominent after North America. The region’s thirty over publicly traded platform companies and thousand other startups is enough to make any investor exuberant over growth opportunities for expansion, acquisitions, investments and joint ventures.
Uneven Business Landscape, Full of Opportunities
Market conditions does differ from country to country, hence the contrasting maturity levels. Overall, favourable economic condition, trade policies, maturing infrastructure, growing middle class and an upswing in GDP, is paving way for incredible growth unattainable in developed markets of North America and Europe.
Leaders of the Pack – China, Japan and Korea
Growth is mostly fuelled by China, Japan and Korea where there is high domestic demand for online services, concentration of capital, available talent, a frenzy of innovation projects surrounding core technologies aimed to realise full business potential, enhance services and user experience. Alibaba, Tencent, Baidu, Softbank, Yahoo Japan and Kakao is clearly taking the lead in diversifying their businesses into multi-platform conglomerates, through series of acquisitions, investments and joint ventures.
Pioneers In Challenging Environment
India and Southeast Asia’s best performing platforms such Flipkart, Snapdeal, InMobi, PayTM, OYO, Lazada, Olacab, Garena and Grab on the contrary, are focusing on becoming profitable on well tested e-commerce, gaming, payment, ride sharing, transportation and advertisement models. They are making way for other players by addressing the region’s weak investment landscape, antique trade regulatory policies, uneven access and speed of Internet services. Though, the region is never short of startups. Arrival of newcomers such as Omise (Fintech), and TripAlly (Travel Platform) based out of Thailand, are just two examples reflecting the region's ongoing commitment to platform economy.
Noteworthy Observations on Business Model
The platform business model of the Asian region is centred on consumers and SMBs, unlike American platforms that evolve around enterprises mostly.
Online marketplaces for buying and selling goods, financial services, communication, gaming, transportation and travel are some examples of where good response is tracked in Asia. As such, Asian Platforms generate a significant share of revenue from transactions and trade as opposed to American platforms (e.g. Facebook and Google) which depend on advertising.
A massive population which is learning quickly to adopt consumer technologies for various lifestyle reasons, is a huge encouragement to the sector to digitise existing and create new innovative services.
Innovations centred on Artificial Intelligence, Blockchain and Robotics
China, Japan and Korea is pumping tons of cash on developing capabilities in artificial intelligence, blockchain architecture, virtual reality, augmented reality, Internet of things, cloud computing and robotics.
The breakthroughs are expected to help:
• Automate search ranking, recommendations, image classifications, image character recognition, speech recognition, natural language translation
• Improve experience for Asian customers whose native language characters are complex and cumbersome to type
• Last mile delivery automation with drone (e.g. Alibaba, JD.com)
• Build virtual assistants to enhance shopping, education and gaming (e.g. Baidu)
• Develop a Broader payment solution (e.g. Tencent and Alibaba)
• Establish transparency of supply chain (e.g. Alibaba)
• Ensure food safety (e.g. Tencent, Alibaba)
• Development of humanoids (e.g. Pepper, Softbank)
• Development of autonomous vehicles (e.g. Apollo, Baidu)
• Blockchain e-commerce (e.g. TripAlly)
Research and development centers are scattered between China, Japan, Korea, Hong Kong and Singapore. Government initiatives to utilise upcoming technologies to upgrade industries further aggregates efforts between public, private and government affiliates.
Investments in Stakes and Acquisitions
There is no doubt that Asian Platforms are stepping up their game in the international arena to compete with the likes of Amazon, Google, Apple and Facebook.
Softbank's $100 Billion Vision Fund
The $100 Billion Vision Fund's recent investment track record probably is the best evidence to point out how critical platform businesses are to generate expected return. The largest tech investment portfolio ever to be created, the investment dollars are spread to both international and many promising Asian Platforms such as Flipkart, OYO, Ant Financial and Didi Chuxing. Softbank is also aggressively pursuing stakes outside the scope of this fund in Asian Platforms such as online insurer Zhong An, Grab, OLA Cabs and Snapdeal.
Tencent versus Alibaba Race in Southeast Asia
Just before the arrival of Amazon in Southeast Asia, Rakuten shutdown operation in the region. This was later followed by Rocket Internet’s (operator of Zalora and Lazada) exit, selling most businesses it operated. But, what seemed like a drawback of key players from the region very swiftly started a healthy regeneration with close to $3 Billion in investment from Chinese players.
Some notable acquisition and investment news since then are;
• Softbank and Didi Chuxing took a large stake in Grab
• Redmart was acquired by Lazada at price point lower than initially raised
• Lazada was acquired by Alibaba
• Ant Financial acquired Hello Pay
• Ant Financial invested in Ascend Money, Mynt, M-Daq
• Tencent acquired Sanook
• Tencent invested in ABC 360, Go-Jek, Ookabee
The arrival of large Chinese players in the e-commerce, fintech and logistic space is certainly driving more pressure on regional groups such as Orami and Ascend Group that has been fighting for a clear marketshare for sometime. Nevertheless, this development can benefit the region by driving maturity of the sector, underlying infrastructure and regulatory designs.
The ‘Alibaba versus Tencent’ race may not necessarily create a conflict as many analyst cite. Close scrutiny may reveal that both companies are establishing dominance in different segments based on strengths. However, together the giants may impact advertising revenue for product search as consumers shift to their platform to conduct such searches.
Flow of Investments from China to India
Despite a large pool of skilled programmers, proficiency in English, and strong business ties with US and Europe, India’s platform startups continue to struggle to expand with uneven infrastructure, poor internet access, suboptimal government regulatory policies and lacklustre interest by other successful tech related public groups such as Reliance, Future Group, Aditya Birla, and Appollo.
But the potential of platform companies such Flipkart, Snapdeal, Ola and OYO is too good to be ignored by the Chinese giants, notably Alibaba, Tencent and Chinese Internet Plus Holdings who are constantly competing to get a stake in the countries platform scene. There is no mistake that these platform giants are building a ingrained presence in India at the moment.
Fuelling the Startup Eco-system
Programs such as SuSS by Alibaba and others by Tencent is quickly becoming a platform for entrepreneurs to connect and build business support structure. By encouraging platform startups in Asia, larger platform companies are able to cherry pick suitable acquisition targets.
Regulatory Challenges
Regulation over platform and online businesses remains a challenging area for governments in the region due to the border less nature of the business. Exposure to security and privacy matters, impact to local industries, government trade and taxation policies, flow of investments, and the overall economy are some of the factors which stifles effort to harmonise governance. Self-governance may be helpful for some policy concerns, but deeper cross border regulatory challenges require collective government effort to codify through regional and international trade agreements such as the Trans-Pacific Partnership (TPP) which provisions for e-commerce and other digital trade.
Superior Service or Protectionism is Driving Success?
Many experts argue that some of the largest Asian Platforms are perhaps growing out of government protectionism and inability of foreign platforms to operate freely from unfair data, trade, compliance and other domestic policies. Often the region is target for criticism and accusations over inability to innovate effectively, espionage activities, poor privacy and security control.
Inbound and Outbound Trade Gateway
Even if there is truth to this, it’s extremely hard to dismiss the fact that millions of people and thousands of businesses are still transacting over Asian Platforms. In fact, their reach is starting to grow beyond the region. For instance many of the sellers on Amazon and eBay place orders in Alibaba for their stocks. Alibaba acts as a trade exchange to connect Chinese businesses to global consumers and global businesses to Chinese consumers. For small businesses, this is a valuable and cost effective service which includes handling of cross border transaction.
Exceeding Customer Expectations
Similarly Yue Bao an online money market fund owned by Alibaba offers a annualised seven day yield of 3.4% to customers who wish to save their leftover money from transactions. Over 60% of holders in this fund have less than $1000 in their accounts. This fund is currently sized at $165 Billion, performs better and is larger than the JPMorgan Chase US Government Market Fund ($150 Billion).
Not All Strategies Work in Asia
Asian Platforms understand that superiority in technology stack alone is not sufficient for success in diverse Asia. Aligning technology, innovations, investments, and consumerism to address netizens’ needs and SMB growth challenges in buying, selling, conducting secure payment and managing the cross border processes are key to their success.
Criticism, both ill intended and constructive, was taken to build a better business. For instance Alibaba and Tencent took market advice to further improve platform transparency by launching blockchain and artificial intelligence intersects to address issues around unsustainable supply chain and food safety. They are on a journey to debunk all disapproving claims over effectiveness of Asian Platforms.
Uneven Business Landscape, Full of Opportunities
Market conditions does differ from country to country, hence the contrasting maturity levels. Overall, favourable economic condition, trade policies, maturing infrastructure, growing middle class and an upswing in GDP, is paving way for incredible growth unattainable in developed markets of North America and Europe.
Leaders of the Pack – China, Japan and Korea
Growth is mostly fuelled by China, Japan and Korea where there is high domestic demand for online services, concentration of capital, available talent, a frenzy of innovation projects surrounding core technologies aimed to realise full business potential, enhance services and user experience. Alibaba, Tencent, Baidu, Softbank, Yahoo Japan and Kakao is clearly taking the lead in diversifying their businesses into multi-platform conglomerates, through series of acquisitions, investments and joint ventures.
Pioneers In Challenging Environment
India and Southeast Asia’s best performing platforms such Flipkart, Snapdeal, InMobi, PayTM, OYO, Lazada, Olacab, Garena and Grab on the contrary, are focusing on becoming profitable on well tested e-commerce, gaming, payment, ride sharing, transportation and advertisement models. They are making way for other players by addressing the region’s weak investment landscape, antique trade regulatory policies, uneven access and speed of Internet services. Though, the region is never short of startups. Arrival of newcomers such as Omise (Fintech), and TripAlly (Travel Platform) based out of Thailand, are just two examples reflecting the region's ongoing commitment to platform economy.
Noteworthy Observations on Business Model
The platform business model of the Asian region is centred on consumers and SMBs, unlike American platforms that evolve around enterprises mostly.
Online marketplaces for buying and selling goods, financial services, communication, gaming, transportation and travel are some examples of where good response is tracked in Asia. As such, Asian Platforms generate a significant share of revenue from transactions and trade as opposed to American platforms (e.g. Facebook and Google) which depend on advertising.
A massive population which is learning quickly to adopt consumer technologies for various lifestyle reasons, is a huge encouragement to the sector to digitise existing and create new innovative services.
Innovations centred on Artificial Intelligence, Blockchain and Robotics
China, Japan and Korea is pumping tons of cash on developing capabilities in artificial intelligence, blockchain architecture, virtual reality, augmented reality, Internet of things, cloud computing and robotics.
The breakthroughs are expected to help:
• Automate search ranking, recommendations, image classifications, image character recognition, speech recognition, natural language translation
• Improve experience for Asian customers whose native language characters are complex and cumbersome to type
• Last mile delivery automation with drone (e.g. Alibaba, JD.com)
• Build virtual assistants to enhance shopping, education and gaming (e.g. Baidu)
• Develop a Broader payment solution (e.g. Tencent and Alibaba)
• Establish transparency of supply chain (e.g. Alibaba)
• Ensure food safety (e.g. Tencent, Alibaba)
• Development of humanoids (e.g. Pepper, Softbank)
• Development of autonomous vehicles (e.g. Apollo, Baidu)
• Blockchain e-commerce (e.g. TripAlly)
Research and development centers are scattered between China, Japan, Korea, Hong Kong and Singapore. Government initiatives to utilise upcoming technologies to upgrade industries further aggregates efforts between public, private and government affiliates.
Investments in Stakes and Acquisitions
There is no doubt that Asian Platforms are stepping up their game in the international arena to compete with the likes of Amazon, Google, Apple and Facebook.
Softbank's $100 Billion Vision Fund
The $100 Billion Vision Fund's recent investment track record probably is the best evidence to point out how critical platform businesses are to generate expected return. The largest tech investment portfolio ever to be created, the investment dollars are spread to both international and many promising Asian Platforms such as Flipkart, OYO, Ant Financial and Didi Chuxing. Softbank is also aggressively pursuing stakes outside the scope of this fund in Asian Platforms such as online insurer Zhong An, Grab, OLA Cabs and Snapdeal.
Tencent versus Alibaba Race in Southeast Asia
Just before the arrival of Amazon in Southeast Asia, Rakuten shutdown operation in the region. This was later followed by Rocket Internet’s (operator of Zalora and Lazada) exit, selling most businesses it operated. But, what seemed like a drawback of key players from the region very swiftly started a healthy regeneration with close to $3 Billion in investment from Chinese players.
Some notable acquisition and investment news since then are;
• Softbank and Didi Chuxing took a large stake in Grab
• Redmart was acquired by Lazada at price point lower than initially raised
• Lazada was acquired by Alibaba
• Ant Financial acquired Hello Pay
• Ant Financial invested in Ascend Money, Mynt, M-Daq
• Tencent acquired Sanook
• Tencent invested in ABC 360, Go-Jek, Ookabee
The arrival of large Chinese players in the e-commerce, fintech and logistic space is certainly driving more pressure on regional groups such as Orami and Ascend Group that has been fighting for a clear marketshare for sometime. Nevertheless, this development can benefit the region by driving maturity of the sector, underlying infrastructure and regulatory designs.
The ‘Alibaba versus Tencent’ race may not necessarily create a conflict as many analyst cite. Close scrutiny may reveal that both companies are establishing dominance in different segments based on strengths. However, together the giants may impact advertising revenue for product search as consumers shift to their platform to conduct such searches.
Flow of Investments from China to India
Despite a large pool of skilled programmers, proficiency in English, and strong business ties with US and Europe, India’s platform startups continue to struggle to expand with uneven infrastructure, poor internet access, suboptimal government regulatory policies and lacklustre interest by other successful tech related public groups such as Reliance, Future Group, Aditya Birla, and Appollo.
But the potential of platform companies such Flipkart, Snapdeal, Ola and OYO is too good to be ignored by the Chinese giants, notably Alibaba, Tencent and Chinese Internet Plus Holdings who are constantly competing to get a stake in the countries platform scene. There is no mistake that these platform giants are building a ingrained presence in India at the moment.
Fuelling the Startup Eco-system
Programs such as SuSS by Alibaba and others by Tencent is quickly becoming a platform for entrepreneurs to connect and build business support structure. By encouraging platform startups in Asia, larger platform companies are able to cherry pick suitable acquisition targets.
Regulatory Challenges
Regulation over platform and online businesses remains a challenging area for governments in the region due to the border less nature of the business. Exposure to security and privacy matters, impact to local industries, government trade and taxation policies, flow of investments, and the overall economy are some of the factors which stifles effort to harmonise governance. Self-governance may be helpful for some policy concerns, but deeper cross border regulatory challenges require collective government effort to codify through regional and international trade agreements such as the Trans-Pacific Partnership (TPP) which provisions for e-commerce and other digital trade.
Superior Service or Protectionism is Driving Success?
Many experts argue that some of the largest Asian Platforms are perhaps growing out of government protectionism and inability of foreign platforms to operate freely from unfair data, trade, compliance and other domestic policies. Often the region is target for criticism and accusations over inability to innovate effectively, espionage activities, poor privacy and security control.
Inbound and Outbound Trade Gateway
Even if there is truth to this, it’s extremely hard to dismiss the fact that millions of people and thousands of businesses are still transacting over Asian Platforms. In fact, their reach is starting to grow beyond the region. For instance many of the sellers on Amazon and eBay place orders in Alibaba for their stocks. Alibaba acts as a trade exchange to connect Chinese businesses to global consumers and global businesses to Chinese consumers. For small businesses, this is a valuable and cost effective service which includes handling of cross border transaction.
Exceeding Customer Expectations
Similarly Yue Bao an online money market fund owned by Alibaba offers a annualised seven day yield of 3.4% to customers who wish to save their leftover money from transactions. Over 60% of holders in this fund have less than $1000 in their accounts. This fund is currently sized at $165 Billion, performs better and is larger than the JPMorgan Chase US Government Market Fund ($150 Billion).
Not All Strategies Work in Asia
Asian Platforms understand that superiority in technology stack alone is not sufficient for success in diverse Asia. Aligning technology, innovations, investments, and consumerism to address netizens’ needs and SMB growth challenges in buying, selling, conducting secure payment and managing the cross border processes are key to their success.
Criticism, both ill intended and constructive, was taken to build a better business. For instance Alibaba and Tencent took market advice to further improve platform transparency by launching blockchain and artificial intelligence intersects to address issues around unsustainable supply chain and food safety. They are on a journey to debunk all disapproving claims over effectiveness of Asian Platforms.
