Super-app arms race in pipeline

The next evolution of app-based services could see Kingdom follow China’s path

While the flying cars of cult classic film  Bladerunner are yet to materialise, despite this being 2019, the vehicles that currently careen through Cambodia’s roads are still a telling sign of technology’s nonstop advance into ever new territory of our everyday lives.

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In 2018, Google and Temasek reported that the Southeast Asian internet economy has reached $72 billion in Gross Merchandise Value.

The rapid development-spurt that app-based services have seen over the last decade has spurred a new evolution – the rise of the super-app.

This, it would appear, is the end-game for all apps; complete and total amalgamation of multiple products and services delivered through one parent app – the super-app.

 

Swiss Army Knife model

 

It’s the Swiss Army Knife business model of offering everything and anything through just one app, but usually involves the consolidation or merging of multiple other apps.

Boasting more than 1 billion users, Alibaba’s AliPay is one such example, but the app is currently locked into an expansionist turf war with Tencent’s WeChat Pay, which also claims to have around 1 billion users.

Both want to be the sole super-app of China – a market of 854 million internet users as of June this year, according to the China Internet Network Information Center.

Cambodia’s 2019 census, the preliminary findings of which were released this June, shows just 15.28 million – not quite the same market size as China, but that hasn’t stopped financial technology (fintech)  players from gearing up for the super-app arms race.

“It is a buzz word of the industry and you have to be careful about that,” says Matthew Tippetts, chief executive officer (CEO) and co-founder of Clik Asia – a local digital payment service aggregator set to begin operations next year.

 

‘Sexy idea’

 

“I don’t know if that’s the right way, because I don’t think there is a right way, but personally, am I a fan of the super-app concept? No, I have trouble seeing the value to users, but it’s a very sexy idea,” he muses.

The appeal of charging headlong into super-app stardom is growing, along with Southeast Asia’s predilection for all things digital.

A 2019 study by Google, Temasek and Bain & Co found reasons for optimism – between 2015 and 2019, 50,000 new people were joining the internet every single day.

Out of the 360 million internet users in the region, 90 percent of them get online using mobile phones.

About 90 percent of all Cambodian exports of organic rice to the EU last year belonged to Amru Rice Cambodia.

Chan Pich, general manager of Signature of Asia, who last year exported 1,500 tonnes of organic rice to the EU, said demand for organic rice in the European Union grows about 15 percent every year.

“Cambodia’s organic rice is sought after in the EU because it has good quality and real traceability,” Chan said.

According to Chan, a tonne of organic jasmine rice fetches $1,500 while organic long-grain white rice sells for about $950 per tonne.

E-commerce users shot from 49 million in 2015 to 150 million in 2019 and, over the same period, ride-hailing users in the region grew from 8 million to 40 million. So clearly, there is money to be made and even though Cambodia’s market is small – access to a region that is all too happy to kneel at the altar of apps sends dollar signs flashing in the eyes of would-be super-app creators.

Ride-hailing giant Grab for example, which declined to comment when approached by Capital Cambodia, has only existed for seven years, but now – with more than 10 services, 2.8 million drivers completing in excess of 6 million rides every day – is valued at almost $14 billion.

Of that, $1 billion was generated in 2018 alone, with many expecting to see double that by the end of 2019.

Does this just signify the increasing appetite for taxis in Southeast Asia?

Of course not.

Grab rebranded in 2016, going from GrabTaxi to just Grab. This cleared a path for them to venture into uncharted territory – providing food delivery, grocery delivery, hotel bookings, tickets for events and even on-demand video services.

GrabFood launched in 2018 – across 200 cities in Singapore, Indonesia, the Philippines, Thailand, Vietnam and their home-turf, Malaysia.

In short, they’re making rapid gains in the super-apps arms race – even if many of these services are yet to be rolled out in Cambodia.

Go-Jek, the Indonesian rival to Grab, is 9-years-old, offers more than 18 products and is thought to be valued just short of $10 billion, but has failed to find a foothold in Cambodia the way that Grab has.

“When you’re Grab and you’ve got billions to make it work, chances are you’ll make it work, because they’ve got the money to do so,” explains Tippetts, who says there is an obvious connection between ride-hailing and food delivery, but remains sceptical of Grab’s ability to branch out beyond these things.

“There are things like GrabFood, which really does work well together [with Grab’s ride-hailing] and I think all the delivery companies – when it comes to food delivery – are going to have a problem with Grab,” he says.

 

Remarkable growth

 

One such food delivery service is Meal Temple – a home-grown food delivery app that has seen remarkable growth in Cambodia of late, growth that could face disruption when GrabFood launches in the Kingdom.

“Currently Meal Temple is active in Cambodia and Laos,” explains Maxime Rosburger, the founder of Meal Temple Group.

“We made an investment in Myanmar’s food delivery Freshgora in June and now we are busy launching the service in Bhutan under the name Drukfood and we have two more countries in the pipe which should be active before end of the year.”

When pressed about going up against giants such as Grab, Rosburger remains confident.

“Our focus is on the Asian frontier markets where big players have not entered yet and can hardly enter because of their cost structure,” he says, stating that Meal Temple is willing to join the fray and is aiming for the super-app model to increase stickiness of the service and better scale up their operations in each country.

One Cambodian company already referring to itself as “Cambodia’s first super-app” is Nham 24, which is not just offering ride-hailing and food delivery services, but also couriers, groceries, online shopping and flower delivery services.

 

Fighting for small cake

 

Founder and CEO, Borima Chann, says he wants to avoid an arms race.

“It doesn’t make any commercial sense for each player to build their own super-apps and keep fighting for the small cake,” he says.

“I believe consolation or the merging of key local players are the best options for a Cambodian super-app, some discussions have already taken place between founders and I believe some good progress will be seen sooner or later.”

Chris McCarthy is chairman of Eurocham’s ICT Committee and CEO of MangoTango Asia – one of Cambodia’s leading digital agencies that dabbles in everything from market research and strategy, to creative work and production across a range of mediums.

“First thing is, I think Cambodia will go cashless faster than people think,” reflects McCarthy.

“The infrastructure is there; it’s more a question of adoption – it took China 15 years to go from all cash to today, where 90 percent of urban transactions are via mobile digital payments – Cambodia will surely be faster.

“About super-apps in Cambodia – for sure there will be a battle, as there is in many Asian countries,” he predicts.

 

‘Desktop real-estate wars’

 

“The super-app wars are funny, to me they seem like a new flavour of the desktop real-estate wars of the 80s and 90s, in which rival PC makers hard-wired third- party apps and services into their operating systems, or as default icons on the desktop (think AOL vs CompuServe in the early days, ‘bundled in’) and that all ended with the US Justice Department’s anti-trust ruling against Microsoft’s attempt to integrate their Internet Explorer browser into the Windows operating system, so super-apps are fighting an old war and creating the same casualties.”

The benefits of the super-app, he says, are fairly self-evident; high-quality user interfaces to online services, versus the many individual services and apps that are hard to use, or “seem like they were designed by a fish”.

McCarthy goes on to note that super-apps, by definition, are built with a robust user-experience at the heart of them – giving users a sense of familiarity across the range of services offered.

 

Winners and losers

tomas pokony
Tomas Pokorny, CEO of Pi Pay. KT/Siv Channa

Of course, in war there must be winners and losers – the arms race to create Cambodia’s best-loved super-app will be no exception. Innovation will see some players rise to the top while others will fade into obscurity.

“As for the casualties, those tend to be consumer choice, business innovation and, ultimately price, because [with] consolidation of market power – that doesn’t have to mean the end of innovation, just a shift in vision by startups,” he says.

“When people do build competing services, it’s often in the hope that WeChat or Grab or Flipkart will buy them.”

However, this optimism is not shared by all of the players in the game.

Tomas Pokorny is CEO and co-founder of Pi Pay – one of Cambodia’s most popular cashless payment services – and serves as community committee chair for the Cambodia Association of Finance and Technology.

For Pokorny, there is no super-app in Cambodia – at least not yet.

“It could happen in Cambodia too. There could be a super-app player that makes it, but before you can become that, you need to be everything, everywhere for everyone,” he argues, noting that around 80 percent of payments in Cambodia are still carried out using cash.

Pokorny sees major barriers to the super-app model in Cambodia – particularly in the form of the market size and the limited amount of finance available for such a venture.

“I don’t believe that AliPay has made back all of the money it invested – it invested such a sheer amount of money, it will take a long time to get it back, but it will get it back in the long run – in the brand value, the brand recognition – once it goes public, whether in China or anywhere else, then it can get it back,” he says, citing Uber as an example.

Uber, he explains, was running at a loss, but went public with an initial public offering on the New York Stock Exchange in May this year. After doing so, they were able to recoup their investments for their shareholders, but in Cambodia this would prove tricky.

“How do you justify somebody in Cambodia saying we will build a super-app, we will acquire 80 percent of the market – how are they going to make that money back?” he asks.

“If you say we’re not going to make money doing it, we’re going to build it and go public like Uber did, how much money will you make on going public in Cambodia? In a market of 16 million people? It’s a question of return on investments that will always be there. Is the Cambodian market big enough to justify not only the building of a super-app, but the execution of a super-app – to actually be a super-app, not just have the technology,” Pokorny points out.

 

Consolidated services

 

His argument rests on the idea that a super-app isn’t truly super until it’s acquired a large majority of the market and provides a range of services that are used universally – indicators that he doesn’t believe have been reached by any of the players in Cambodia.

“Anyone can build the technology for a super-app – everyone with it can say they’re a super-app, but until you have that big market share, you are the number one player and you provide those consolidated services, you can say what you want, you are not a super-app.”

 

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