🏍️ Southeast Asia’s battle of the superapps


January 7, 2021

PLUS: The security startup that sold Google 1m dongles.

January 7, 2021
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The Big Idea
Earth

Southeast Asia’s superapp battle, explained

Eleven nations make up Southeast Asia (SEA): Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Timor-Leste, Thailand, and (this writer’s country of heritage) Vietnam!

While this market is not nearly as big as China or India, its relatively young combined population of 650m+ people is nothing to sneeze at.

And this week, 2 of SEA’s biggest ride hailing and delivery apps — Grab and Gojek — made big plays to win the prize.

The startups are aping the playbook of WeChat

The Chinese superapp basically combines DoorDash, Uber, Paypal, Cash App, WhatsApp, and Twitter all into one platform.

As many developing nations lack fully developed services (e.g., communications, finance, transportation) there is white space for a single app to be a one-stop shop.

Take Grab: In 2018, it ended a bitter ride-hailing feud with Uber (now, a minority owner in the startup) and launched a fintech business. Yesterday, that fintech unit raised $300m to expand its payments, loans, investments, and insurance products, according to The Information.

Grab was in talks to merge with Indonesia-based GoJek…

… but the deal ultimately fell through, partially around antitrust concerns of combining the region’s 2 biggest ride hailers.

GoJek is now in merger talks with Indonesia’s top ecommerce firm, Tokopedia, per Nikkei Asia. The combined entity would be valued at $17B+, more than Grab’s $14B+.

While both Grab and GoJek operate across the region, Indonesia has the largest population (~268m) in SEA and a GoJek-Tokopedia merger could secure that prize.

Grab and GoJek are going after the biggest fish in the pond

SEA’s superapp leader is Sea Limited, a $100B+ consumer internet beast that combines games, ecommerce, and finance.

The region’s only publicly listed superapp, Singapore-based Sea, saw its valuation grow more than 4x in 2020, giving it a source of cheap capital. To compete, Grab and GoJek will likely have to go public.

Literally and figuratively, keep an eye on this space:

Source: WorldAtlas

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Snippets
  • Trump app ban: The President signed an order banning transactions with 8 Chinese apps including AliPay and CamScanner. The bans won’t take effect until February, so President-elect Joe Biden will make the final call.
  • It’s not just apps, either. The NYSE is ready to delist 3 Chinese telecom stocks (after previously flip-flopping), and US officials may also ban Americans from investing in China’s 2 biggest tech companies (Alibaba, Tencent).
  • Literally, the Everything Store: Amazon — which typically leases aircrafts — made its first outright purchase of 11 planes (expanding the fleet to 80+). We wrote about its massive logistics business here.
  • House Hunters: Amazon. The (literally) Everything Store pledged to spend $2B+ building affordable housing units in Seattle, Nashville, and Arlington, Virginia.
  • Ticketmaster is in the hacking business: Well, out of it now. The company agreed to pay a $10m fine — service fees included — after admitting to hacking now-defunct rival Songkick.
  • Net neutrality won big in Georgia. Democrats’ success in Tuesday’s Senate runoff elections opens the possibility for legislation that writes net neutrality into law.
  • A trilly: On the strength of Bitcoin and Ether rallies, all cryptocurrencies crossed $1T in value for the first time ever.
Programmatic Ads Gone Bad
Uber

Uber was swindled out of $100m in ad spend and no one is talking about it

Nandini Jami blew our collective minds when she resurfaced this story over the weekend.

In 2017, her internet watchdog organization Sleeping Giants was nipping at Uber’s heels over ads the rideshare company placed on Breitbart.

Uber responded by cutting ~$15m worth of ads

Surprisingly, the rideshare leader saw no significant drop in user acquisition.

On closer inspection, Uber exec Kevin Frisch found all sorts of problems with their ad partners, like:

  • Impossible numbers: The number of daily ad clicks reported by some networks were higher than their total active users.
  • Slimy practices like spying on users’ mobile app store usage, then claiming credit for organic sign-ups.

In the end, Uber cut ⅔ of their ~$150m ad budget — with no negative effects — and launched the first major ad fraud lawsuit.

Up to 99% of programmatic ad spend is being wasted…

… says digital marketer and independent fraud researcher, Dr. Augustine Fou.

Click farms generate billions of clicks per minute, and most marketing teams are slow to question what looks like excellent data. When they do, they’re often surprised by the findings:

  • P&G cut $200m in digital ad spend and increased its reach
  • Chase dropped 99% (395k websites) from its display ad network and saw no business change
  • Ebay killed paid search after finding that most of its spend went to existing users

In totally unrelated news, The Hustle just found $200m in ad inventory lying around (👋  P&G marketing team!).

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In Hand
dongles

The security startup that sold 1m 2FA dongles to Google

“What if [insert Big Tech firm] competes against us?” It’s a question every startup asks itself.

There’s the flip side too, though: What if a Big Tech firm becomes your startup’s biggest customer?

This is exactly the case for Yubico, the hardware maker of the popular

security dongle called Yubikey.

Yubico was founded in 2007 in Sweden…

… and for years was an “obscure security firm” with only 5 full-time employees, according to The Information.

The company was trying to solve a problem with the ubiquitous two-factor authentication (2FA) process:

  1. First factor: username + password
  2. Second factor: one-time password via text, email, or authenticator

There are actually a number of ways to bypass 2FA, from phishing to intercepting tokens. Yubikey partially solves the problem by requiring a user to plug its dongle into a USB port as another layer of security.

Yubico’s first big client, Google (which has bought 1m+ dongles)

While the ~$45 dongle is not a silver bullet (it could not have prevented the SolarWinds hack), organizations are snapping them up.

Today, 9 out of 10 of the biggest tech companies as well as world leaders (e.g., Angela Merkel) use Yubikey. Banks have rolled them out to high net-worth individuals (not me) and it could be coming to your office next.

With 300 employees now, Yubico expects revenue to rise 70% this year (from $200m in 2020) and may be prepping another key startup question: “When’s the IPO?”

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Company of the day
Sea Limited logo

Source: Seeking Alpha

Sea Limited is a fascinating company. Founded in 2009, the Singapore-based internet company recorded sales of $3B+ last year and is worth $100B+ after seeing its stock ($SEA) more than quadruple since the end of 2019.

Strategy and UX consultant Julie Young has a great breakdown of Sea’s 3 main business arms:

  • Garena is a leader in digital entertainment. Its big coup was securing the exclusive gaming rights (in SEA and Taiwan) for uber-popular League of Legends from Riot Games. The deal also formed a relationship with China tech giant Tencent, which owns Riot.
  • Shopee is described as the “Amazon of Southeast Asia.” Per Young, the Shopee app ranks first across most of the region by downloads, MAUs, and time spent.
  • SeaMoney offers various financial services for a region that is extremely under banked (only ~27% of the population has a bank account and even fewer have a credit card).

Young is particularly impressed by the company’s long-term vision.

“Look at the basic food groups of life: entertainment, retail/consumption, payments/financial services… and food… That’s a big chunk of GDP right there,” says Sea’s President Nick Nash.

“The human needs are there for technology to be applied to solve basic problems. As long as that’s there, we’ll be working hard to try and solve those problems for people.”

We sea you, Nick!

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