The Economist - 04.12.2021

66 Business TheEconomistDecember4th 2021

utions,whicharenotdoneina fragmented

way.Theydon’twantsixwallets,theydon’t

wantfivee­commerceoptionsandthree

food­delivery companies,” explains Pat­

rickCao,presidentofGoToGroup.

ThetriumphofGoToGroup,Graband

SeacameattheexpenseofpowerfulAmer­

icanandChineserivals.Alibabastillhasa

localpresencethroughe­commercefirm

Lazada,but,havingledonlytwoyearsago,

thefirmhasslippedintothesecondtierof

competitors.SinceUberbeataretreatin

2018 (itsoperationswereboughtbyGrab),

noAmericancompanyhasbuilta signifi­

cantpresenceine­commerceorinride­

hailing.Aslocalfirmsseeit,thatisample

proofwereit neededthata focusonlocali­

sationhasbornefruit.

Actlocal

Consolidationandscaleshouldintheory

leadtoprofits.Thefirmscanbundleser­

vicestogether,anddifferentlinesofbusi­

nesscancomplementoneanother.Ming

Maa,presidentofGrab,notesthatinthe

secondquarteroftheyear,66%ofthetwo­

wheeleddriversinIndonesia,Vietnamand

Thailandwereworkingonbothdelivery

andtransport,upfrom58%inthesame

periodin2020.Thatlowerscosts.

Howsoonwillprofitsarrive?Itispro­

misingthatGrab’stakerate—revenueasa

proportionofthevalueofridestakenor

deliveriesmade—hasrisenfrom9.5%in

2018 formobilityand5.6%fordeliveriesin

2018 to21.7%and17.1%respectivelyinthe

thirdquarterof2021.Grab’spreferredpro­

fitmeasure—adjustedearningsbeforein­

terest, tax and depreciation relative to

grossbookings—ischosentoflatter,butat

leastthe12%marginitshowsformobility

ismorethantwiceashighasUber’s5.5%.

Thefirm’sargumentthatlackofprofitsisa

choicelinkedtoexpansionisnotwholly

unconvincing.Butthethreefirms’ambi­

tionstoaddfinancialservicestotheirsu­

perappswillmeanadiversionfromthe

path to profit. Grab’s financial services

goalswilldragonprofitability,asMoody’s,

a credit­ratingagency,recentlynoted.

South­EastAsia’stechboomisbyno

meansrestrictedtolargecompanies.There

are 35 unicornsin aseancountries, ac­

cordingtoCreditSuisse,a bank.Ofthose,

19 reachedunicornstatusthisyear.True,

AmericaandChinaalreadyhavehundreds

oftechfirmsvaluedinthebillionsofdol­

lars. But that is a recent development,

notesNickNashofAsiaPartners,anin­

vestmentfirmfocusedonthesector.The

twocountriesonlyhadtensuchunicorns

asrecentlyas 2013 and 2014 respectively,

beforethenumbersbegantosurge.

Farfromthestereotypeofcash­bleed­

ingstartups,someSouth­EastAsianfirms

havebeendisciplinedinfundraising.Mr

NashusestheexampleofsciE­commerce,

which specialises in cross­border retail

and helps international brands access

South­EastandEastAsia.Ithasbecome

oneoftheregion’sfastest­growingfirms,

havingraisedlessthan$70m.Itsrevenues

havesurgedtoover$100min 2020.

Andalthoughthetechfirmsthathave

emergedinSouth­EastAsiahavedoneso

onlyfroma fewsectors—suchasride­hail­

ing,consumere­commerce,fooddelivery

andonlinegaming—themixisbroaden­

ing.ListingsbyfirmsasvariedasSinga­

pore’sDoctorAnywhere,whichoffersvid­

eoconsultationswithdoctors,andMalay­

sia’sCarsome,anonlinemarketplacefor

used­carsales,areintheoffing.

Fornow,mostattentionisfocusedon

South­EastAsia’sleadingtrio—Sea,GoTo

andGrab.FirstamongequalsisSea,whose

recentexpansionoutsideitshomeregion

setsit apart.Sea’shighly­profitablegaming

arm,Garena,isresponsiblefor“FreeFire”,

apopularmobile gamewhich gives the

firma footprintgloballythattheothertwo

lack.Itsmoveabroadine­commerceisno

smallbeer.AccordingtoApptopia,a Bos­

ton­based research company, Shopee is

nowLatinAmerica’smostpopulare­com­

merceapp,comingfroma standingstartat

theendof2019.ItlaunchedinPolandand

Spainthisautumn,andhasquietlysetup

shopinIndia,too.

South­EastAsia’stechchampionsfol­

lowa modelflourishingelsewhere.Aswell

asMercadoLibreinLatinAmerica,South

KoreahasbothKakaoandCoupang,with

market capitalisations of around $50bn

apiece.GiventheturmoilinChina’stech

sector,suchfirmsarepopularandlikelyto

becomemoreso.Takeoneleadingfund,

the JPMorgan Pacific Technology Fund,

with$1.5bnofassetsundermanagement.

AttheendofSeptemberitcountednoChi­

nesefirmsamongitstopfourholdings.Its

largestsingleexposure,at7%,istothefirm

called Sea that is coming to epitomise

Asiantech’sseachange.n

Catch the wave

Sources:Bloomberg;Dealogic *To November 24th

Sea,marketcapitalisation

$bn

200

150

100

50

0

2019 20 21

60

50

40

30

20

10

0

1995 1510052000 21*

South-East Asia, M&A deal value

Computing, internet and electronics, $bn

Socialmedia

Exiting the

Twittersphere

“T

he company is  ready  to  move  on

from  its  founders,”  explained  Jack

Dorsey,  chief  executive  of  Twitter,  a  dis­

tributor  of  short  messages,  as  he  an­

nounced on November 29th that he would

step down and hand the reins to the firm’s

chief  technology  officer,  Parag  Agrawal.

“About  time,”  was  the  grumpy  reaction  of

more than one stockmarket analyst, many

of whom had long criticised Mr Dorsey for

spreading  himself  too  thinly  by  running

both  Twitter  and  Square,  a  fast­growing

fintech company where he will continue to

serve as chief executive. 

Mr Dorsey’s very first move, on Decem­

ber  1st,  was  to  give  Square  a  new  name:

Block.  The  firm  has  existing  plans  to  ex­

pand in blockchain technologies; if it is to

satisfy  Mr  Dorsey’s  interest  in  bitcoin,  a

cryptocurrency,  it  will  have  to  move  fast.

(The  chairman  of  The Economist’s  parent

company is a director of Block.) 

For  Twitter  the  timing  of  Mr  Dorsey’s

departure makes sense. Over the past sev­

eral years he has pushed through changes

at  the  firm  that  only  a  founder  could  (he

launched Twitter with friends in 2006, was

ousted as chief executive in 2008 and took

over  again  in  2015).  He  was  almost  shown

the  door  again  in  early  2020  when  Elliott

Management,  an  activist  fund,  amassed  a

stake  of  4%  and  pushed  for  his  exit.  After

some drama a deal was struck, and Mr Dor­

sey took a more hands­on role.

Since then Twitter has undergone a re­

boot  of  sorts.  It  has  ditched  its  custom­

built technology infrastructure and moved

most of its computing to big clouds such as

Amazon  Web  Services.  As  a  result,  it  can

more  easily  introduce  new  product  fea­

tures. It has also rebuilt its advertisement

platform,  allowing  it  to  target  ads  better.

S AN FRANCISCO

Jack Dorsey leaves Twitter for a fintech

firm now known as Block