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Here’s what you should know today.

1. Singapore’s Shopmatic raises $5.7m to expand to Indonesia, the Philippines

Shopmatic is an ecommerce enabler for small businesses as well as individual entrepreneurs. Apart from building and managing their own stores, sellers can use it to get on to multiple ecommerce marketplaces, put ‘buy’ buttons on their social media pages, and so on.

Today Shopmatic announced pre-series A funding of US$5.7 million led by Singapore-based VC firm ACP and Spring, which is an agency of Singapore’s ministry of trade and industry.

Shopmatic will, similarly, partner with local payment gateways in Indonesia and other markets. It has also focused on the needs of mobile-first markets like India and Indonesia.

Read the rest of the story here.

 

2. Google and Indonesia reach agreement in tax dispute

Indonesia’s government reached a settlement with Alphabet Inc.’s Google over a long-running tax dispute, Finance Minister Sri Mulyani Indrawati said.

Indonesia has been more strictly enforcing tax payments since Minister Sri Mulyani took office last year. Other technology giants like Facebook and Twitter with large user bases in Indonesia could be targeted next.

Part of the problem is the complexity of Google’s corporate structure, which makes it difficult to determine where revenues are generated. The firm is facing similar issues elsewhere. It settled for $185 million in its tax dispute with the UK last year.

Read the rest of the story here.

 

3. Community Chatter: Uber CEO Travis Kalanick is taking a leave of absence 

The announcement was made via a letter sent to employees Tuesday afternoon, in which Kalanick vowed to return to the company as the “2.0” version of himself. The letter demonstrates three key leadership strengths: a desire to improve, humility and the willingness to openly discuss grief in the workplace.

“For Uber 2.0 to succeed there is nothing more important than dedicating my time to building out the leadership team,” he writes. “But if we are going to work on Uber 2.0, I also need to work on Travis 2.0 to become the leader that this company needs and that you deserve.”

Read the rest of the story here.

In his seminal presentation at DLD15, NYU professor and serial entrepreneur Scott Galloway coined the term “The Four Horsemen” to describe the four most dominant companies in digital that have a combined market cap of $1.3 trillion (2014). These companies are Amazon, Apple, Facebook and Google.

 

Galloway’s Four Horsemen theory assumes a Western-centric view; the moment we move east, we start to see different pockets of power, most notably in China, and increasingly in Southeast Asia – the following are these differences.

Romance of the Three Kingdoms

China’s version of the Four Horsemen is called BAT, representing the three kingdoms in China – Baidu, Alibaba and Tencent.

Baidu: The Search Giant

Often considered the “Google of China”, the bulk of Baidu’s revenues come from search advertising. Unlike Google, Baidu has struggled to stay relevant in an environment that has rapidly shifted towards mobile and ecommerce. Discovery on mobile is increasingly favoring apps over search – ask yourself, do you find yourself searching less on mobile than on desktop?

And then there’s ecommerce. With the dominance of Alibaba, product searches are moving away from Baidu and straight onto Alibaba properties like Taobao and Tmall. The very same is happening to Google with over 55% of product searches now starting on Amazon and this is not even accounting for the damage Alexa aka Amazon’s next trojan horse may inflict on Google.

Alibaba: Ecommerce & More

Alibaba is the king of ecommerce, responsible for over 80% of online sales in China (B2C and C2C combined). Over the last 20 years, Jack Ma’s empire has grown into one that puts even Jeff Bezos to shame.

With expansion and investments in areas like advertising, health, entertainment and transportation, Alibaba is more than ecommerce nowadays. Its digital advertising business last year surpassed Baidu to become the number one in China in terms of net digital ad revenue share (28.9% vs. 21.3%), and is estimated to reach 33.7% by 2018 (vs. Baidu’s 17.6%).

Tencent: Gaming & WeChat

Tencent, the biggest among the BATs in terms of market cap – $300 billion vs. Alibaba’s $288 and Baidu’s $60 billion, 2017 – is best known for its popular messaging app WeChat. Its main revenue sources are gaming and value added services like virtual goods, etc.

The company has dabbled in ecommerce since the early 2000’s until it gave up on organic growth and took an investment in Alibaba’s competitor JD. Today, Tencent is JD’s biggest shareholder with 21.25% ownership, surpassing the 16.2% stake of JD Founder and CEO Richard Liu Qiangdong.

Three Kingdoms become Four Horsemen

With the global rise of on-demand and ride-sharing, China’s Didi Chuxing has cemented itself as the fourth horseman in China. The company is the result of a civil war between Didi Dache (backed by Tencent) and Kuaidi Dache (backed by Alibaba) and the newly merged entity subsequently assimilated Uber China to become the third most valuable private company globally, only trailing Uber ($68 billion) and Ant Financial ($60 billion).

Didi’s recent funding round of $5.5 billion values the company at $50 billion and gives it the ammunition needed to expand internationally and invest in self-driving technology.

With Baidu at risk of becoming the next Yahoo, many have looked at news reading app Toutiao to become one of the Four Horsemen in China. Launched in 2011, the company has benefited from the mobile and vertical media wave in China to become one of the most prominent digital media properties in the country.

Valued at $11 billion based on its recent $1 billion funding round, Toutiao is said to have 78 million daily active users and 175 million monthly active users with users spending an average 76 minutes on the app per day.

Southeast Asia: A Proxy War for Chinese Horsemen

The Southeast Asian tech space, despite being very nascent, has provided plenty of promising local successes to root for. There’s Tokopedia and Go-Jek in Indonesia and of course Grab, Garena (which owns Shopee) and Lazada regionally.

However, if we look beneath the surface, we’re seeing signs of a looming proxy war between Chinese tech giants, with expected local casualties through collateral damage.

Alibaba made its big entry into Southeast Asia through its Lazada purchase, Jack Ma’s biggest international acquisition to date. Its ongoing tour-de-force has led many local ecommerce players to join forces (e.g. Orami) or throw in the towel (e.g. Ascend Group).

JD entered Indonesia organically in 2015 to test the waters and it is now said to be in talks to invest millions into Tokopedia. All this follows the news of Tencent, JD’s biggest shareholder, leading the recent $1.2 billion investment into Indonesia’s Go-Jek, valuing the on-demand motorbike startup at a massive $3 billion.

Then there’s Didi Chuxing, who, through its acquisition of Uber China, “participation” in the anti-Uber alliance, and a crisp $350 million investment in Grab should know quite a lot by now about operating in international markets and Southeast Asia in particular.

Fresh off a massive $5.5 billion round, Didi may be going after its “allies” in Southeast Asia. What’s that phrase again? Keep your friends close and your enemies closer…

With an Alibaba camp (Lazada), a Tencent fraction (potentially Tokopedia, Go-Jek, and Shopee), and Didi Chuxing, there’s room for one more Horseman in Southeast Asia.

But it won’t be a Chinese company, the fourth Horseman in Southeast Asia is either going to be Facebook or Google, with my bets on the social media giant.

The whole Facebook vs. Google story in Southeast Asia deserves an entire article by itself but it basically boils down to:

  1. Google’s assets are narrowed down to search-only due to the lack of long-tail publisher inventory in Southeast Asia, which is required for a thriving display ad ecosystem to compete with Facebook;
  2. Southeast Asia is already mobile-first or, in some cases like Myanmar, mobile-only and less people are searching on mobile (same issue Baidu faced in China); and,
  3. The rise of ecommerce in Southeast Asia is eating into Google’s lucrative product searches. Post-Alibaba acquisition, Lazada is set to replicate Tmall’s ad monetization strategy. It has already started recruiting for its Marketing Solutions team as seen from job postings on its site. Survey data from ecommerceIQ for Indonesia shows 57% of users start their online shopping journeys with product searches on marketplaces like Lazada and Tokopedia, bypassing the Google tollgates.

Why Southeast Asia? Not for the obvious reasons.

Why all this sudden interest in Southeast Asia from our Chinese neighbors? The obvious, often reported, reasons:

  • Geographically close to China;
  • Huge, untapped market with 600 million people and a growing middle class;
  • China’s economy is slowing down and the BATs are sitting on piles of cash to spend on (overseas) growth;
  • Cultural affinity: Southeast Asia is home to the largest community of overseas Chinese (over 25 million across the region)

However, the main reason is that Southeast Asia–and with Southeast Asia I mean emerging Southeast Asia (i.e. Thailand, Indonesia, and Vietnam)–is very similar to China about 10 years ago. This is especially true when we look at aspects like prevalent business models, digital advertising landscape, and mobile adoption.

Primary Business Model: Ad-Driven vs. Commerce-Driven

Whereas US companies’ de facto way of monetization is advertising, Chinese firms have historically looked at ecommerce and transactions as a way to generate revenues. The poster child for this is of course Tencent. In 2016, only 18% of Tencent’s revenues came from advertising, up from 9.5% a decade earlier.

71% of Tencent revenues came from value added services (VAS), driven by online gaming, virtual goods sales and digital music downloads. Compare this to Facebook, who generated 98% of its revenues from advertising in 2016.

Another more recent example is Quora, the unicorn Q&A app now worth $1.8 billion after its latest $80 million funding round. After 8 years, the best Quora could come up with are intrusive, text-based contextual ads that were pioneered by Google in 2003.

On the other side of the world, Fenda, a Chinese Quora/Reddit hybrid, has gone beyond advertising and built a $100 million business by monetizing transactions. Technode explains how this model works:

“Users who are knowledgeable about a particular topic can set a price, usually between 1-500 RMB for their answers and get paid for answering questions from others. If they don’t reply within 48 hours, the money will be reimbursed to those who raised the questions.

In addition to connecting questioners and respondents in the Q&A chat interface, Fenda has an eavesdropping feature to engage more listeners. Anyone who is curious about the dialogue can listen to the reply for 1 RMB, which is split between the user who asked the question and the user who answered. After the completion of dialogue, Fenda will take 10% from the overall income from both parties.”

Non-Existent Long-Tail Publisher Ecosystem

At the very root of the ad-driven vs. commerce-driven dichotomy between US and China (and increasingly Southeast Asia) is an immature online advertising environment, perpetuated by a “chicken-and-egg” problem of supply and demand issues:

Supply-Side Issues

Internet adoption in China and emerging Southeast Asian countries didn’t reach critical mass until the mid-2000’s. These markets skipped most of the Web 1.0 and “Web 1.5” booms and jumped straight into Web 2.0, resulting in digital content creation happening mainly on closed social media platforms like Facebook or on vertically-integrated portals like Sina and Sanook.

Unlike in the US, there aren’t millions of long-tail websites and blogs that form the basis for the many ad networks and programmatic advertising. To make things worse, closed platforms like Facebook and portals like Sina sell most (if not all) of their ad inventory direct to consumer, bypassing exchanges for higher margins. We call this phenomenon a “No-Tail” ecosystem.

Demand-Side Issues

Aforementioned lack of quality ad inventory has led advertisers to buy directly on big portals and closed systems like Facebook. As a result, the lack of demand for ad networks like Google Display Network in Southeast Asia has suppressed RPM rates (revenue per 1,000 impressions) for local ad networks, providing little incentive for content creators.

In turn, content creators have found other ways to monetize. In Southeast Asia, peddling merchandise to your Facebook and Instagram audience has been one of the most popular and lucrative ways to make money. In Thailand, this has led to estimates of 33% of ecommerce GMV coming from social commerce.

In China, content creators are leveraging WeChat and increasingly live video apps to sell merchandise and generate revenue off virtual goods transactions. Meanwhile in the US, the de facto ways for bloggers to make money is still to create content and monetize through AdSense and affiliate marketing.

Mobile-First, Mobile-Only

The other striking similarity between China and emerging Southeast Asia is that both are mobile-first and in some areas mobile-only. Granted, some coastal areas in China developed pre-mobile era but given the size of China, many people are still coming online and these are mobile-first or mobile-only.

Unlike in the US, new startups in China are frequently building for the mobile user first then later expanding to desktop users. Fenda started out on WeChat followed by its own apps and website while Toutiao started out as an app.

In Southeast Asia, ecommerce players like Lazada already see over half of their orders coming from mobile. Indonesia’s BaBe, the country’s leading news aggregator app backed by China’s Toutiao, followed a similar path to its majority investor by taking a mobile-first approach.

Learning From Past Mistakes

All of these ecosystem similarities mean that Chinese companies entering Southeast Asia will have a higher chance to succeed.

It’s not the first time that Chinese BATs have ventured abroad, winding up with mixed results. Baidu announced its international expansion plans as early as 2006, launched in Japan with Baidu.jp in 2007 then later shut it down in 2015 after lack of traction.

This time around, Alibaba, Tencent and perhaps Didi Chuxing are hopefully smarter and are more confident playing on familiar grounds – Southeast Asia.

Apparel and tech gadgets are two things that are almost synonymous with online shopping. According to Statista, ecommerce sales in fashion and the electronics & media categories make up more than 50% of total online sales in Southeast Asia.

Statista estimates ecommerce sales in the electronics & media category will reach $5.26 billion this year across six Southeast Asian countries (find below), while the online fashion market will reach $4.464 billion.

websites where online shoppers buy fashion and mobile phones in SEA

Fashion online sales in the region are expected to double within the next five years and electronics & media are expected to increase 1.5 times. Where are customers going online to look for these products?

Google’s Consumer Barometer has some answers and based on the data, a couple of online channels in Southeast Asia stand out for buying clothing & footwear and mobile phones.

Where are shoppers buying clothing & footwear?

Consumers mostly buy apparel on general online marketplaces and e-shops that predominantly focus on selling fashion and footwear. Less people report buying on brand.com but until only recently did well known brands such as Adidas, Zara, Uniqlo, started to offer their products online in Southeast Asia.

Other popular online shopping destinations include social sites such as Instagram and Facebook and apps like Shopee and Carousell who are dominating C2C market sales in the region.

websites where online shoppers buy fashion and mobile phones in SEA

Where are shoppers buying mobile phones?

As for electronics, there is a larger variety of channels shoppers use to buy mobile phones. In Indonesia, classifieds sites and mobile phone brand stores are the most popular choice for shoppers.

In Vietnam, shoppers favor online shops of mobile retailers and big box retailers, while in Thailand people shop on general e-retailers. websites where online shoppers buy fashion and mobile phones in SEA


Sign up for the eIQ Brief for ecommerce insights once a week here.

Google’s Brand Team for Consumer Apps has released a report on the definition of “Cool” for Generation Z in the United States. Unironically, Google has named the report “It’s Lit”.

Cool is what these Post-Millennials – teenagers aged 13-17 – are paying attention to, it’s what gets them excited and what determines which brands they choose to spend money on. This new generation has gained media attention because of their influence as truly digital natives with high degree of brand awareness. They are ultimately the next wave of shoppers.

Gen Z has the power to define which business has the capacity to do well and which will slowly fall into irrelevancy.

There are approximately 60 million Gen Z teenagers in the United States, more than 25.9% of the country’s population. Collectively, their purchasing power is at $44 billion annually and could reach $200 billion if we factor in their impact on household purchases.

As the influence of the United States can be witnessed throughout Southeast Asia from music taste and fashion trends to dining choices, businesses should be aware of what’s factored as ‘cool’ in the west because it will very likely make its way east.

Pink represents female choice. Blue represents male choice. Source: It’s Lit report.

So what do these teens find cool?

“Cool” in Google terms means to bring joy or happiness and stands out from everything else.

According to 13-17 year old boys, they find: technology, sports/outdoor activities and video games the coolest (no surprises here) and choose their activities based on friends and fads.

According to 13-17 year old girls, clothes/fashion/beauty, music and technology rank among the coolest activities because of the way it makes them feel.

Brands such as NYX is popular with younger girls as it is affordable, sold at mass stores such as Target and has a strong online presence, as they tap into the influence of bloggers and social media.

Out of the biggest brands circulating around today, Youtube was ranked as the ‘coolest’. Out of the top 10, six of them involve digestion of media i.e. Netflix, Xbox, Google, Playstation, GoPro and Chrome.

Source: It’s Lit report

The other brands on this list are consumer brands with a strong online presence. Doritos, for example, released the most viral advert during 2016’s Superbowl and Oreo has successfully reinvented its traditional ‘pantry’ brand to become “an agile, culturally prolific marketer”.

This was thanks to Oreo’s aggressive pushes online through its “Twist, Lick, Dunk” mobile app and cheek-in-tongue tweets that garnered a lot of attention among young people. The app became the the best performing branded game ever launched.

“We have a lot of mature brands and culture gives brands rebirth, it breathes life into the room,” says Dana Anderson, CMO of Mondelēz International, parent company of Oreo.

Social media use?

For Gen Z, social media is for consuming and connecting, not sharing.

The most popular social media platforms are Snapchat, Instagram and Facebook. And while this makes them potential marketing channels for brands, only Facebook has a streamline ad platform whereas Snapchat lacks the ability to accurately target certain audiences.

Source: It’s Lit report

New tools for brands range from Instagram stories to Facebook Live.

Being connected all the time means Gen Z consumers have a constant pulse on trends.

Below is a spectrum of brands ranked based on their prevalence in the minds of Gen Z out of 122 brands in total.

(Click to enlarge) Source: It’s Lit report

Tech companies with a ‘cool’ factor:

  • Facebook
  • Instagram
  • Samsung
  • Amazon
  • Apple
  • Snapchat

Who has lost a bit of ‘cool’ factor?

  • Line (this would be very different in Asia, where 69% of its 1 billion active users reside)
  • Zara
  • Uniqlo
  • Lululemon
  • Supreme

What can businesses learn from this?

Gen Z never knew the world without the internet. Teenagers around the world today value stimulation, instant gratification and information and this in turn, changes the way brands need to position themselves.

Gen Z consumers are familiar with finding information and tech products, which means that brands need to appeal to this new wave of consumers by attaching a strong message to its product instead of trying to promote a meaningless item.

There are good ways to do this – see Nike – and terrible ways to achieve this – think Pepsi’s PR disaster with Kendall Jenner.

Among the top 10 brands that Gen Z strongly identify with, all have been documented to make efforts to appeal to digitally dependent consumers through apps, viral ad campaigns and a strong social media voice.

Nike has released a stream of buzzy marketing collateral such as its “Pro-hijab campaign” and using high profile Asian celebrities to promote products (Kiss My Airs). Consulting firm Accenture found that more Americans are streaming shows through Playstation Vue and Netflix, making cable TV almost obsolete.

Southeast Asia’s young population is young, over 70% are under 40 years of age and experiencing a surge in spending power – set to contribute 34% to consumption growth by 2030, compared with the global figure of 25%.

A maturing consumer demographic, combined with flexibility to spend means that Southeast Asia’s Gen Z are ones brands have the opportunity to target early, especially knowing the trends overseas.

Google “It’s Lit’ report can be found here.

Here’s what you need to know today.

1. eBay’s Q2 profit forecast falls short of estimates

eBay’s shares fell 2.5% to $33 on Wednesday after its second-quarter profit forecast fell short of analysts’ estimates of 47%.

The company expects Q2 adjusted profit of 43-45% per share and maintain its forecast for the full-year adjusted profit of $1.98 to $2.03 per share. 

eBay has been spending heavily to lure more shoppers to its platform. Sales and marketing costs climbed 4.5% to $562 million in Q1, while product development expense jumped 16.3% to $278 million.

The company’s net income rose to $1.04 billion, 94% per share in the quarter to 41% per share year-on-year.

Read the rest of the story here.

2. The Body Shop launches new mobile-first ecommerce experience

The Body Shop has launched a new mobile-first ecommerce platform as part of a three-year £10 million ($12.7 million) digital expansion project.

The platform is a hub for all of their contents, featuring a live appointment booking service for in-store consultations with a personalised skincare diagnostic tool. 

It also varies from region-to-region to suit each market’s consumer preferences. The mobile web experience has been launched in 11 countries – including the UK, USA, Canada, France, Germany, Brazil, and Indonesia – with plans to roll it out to 20 more countries in 2017.

According to the company, 52% of its existing online traffic comes from mobile – with 11% came from tablet.

Read the rest of the story here.

3. Program to get Singapore’s SMEs go digital launched

Squared Online, a program to equip SME with the knowledge and skills to improve digital capabilities, has been launched yesterday in Singapore.

Nanyang Optical, Old Seng Shoo, and Love Bonito are among companies that have signed up for the initiative.

The 24-week program was developed by Google and conducted by Avado in collaboration with Spring Singapore and Infocomm Media Development Authority.

“By offering a dedicated digital marketing program for SME leaders, we hope to help them export using the web, grow their customer base and thrive in an increasingly mobile-first world.” said Ghislain Le Chatelier, Google’s Global Marketing Solutions for Southeast Asia.

Read the rest of the story here.

Here’s what you need to know today.

1. The Philippines’ ‘First Circle’ raises $2.5 million to help small businesses grow

The startup gives loans to small and medium-sized enterprises (SMEs), based on its own credit scoring process that factors in multiple data sources, such as social media, ecommerce transactions, and banks.

The assessment period takes only 24 hours, and after that funds become available immediately.

If loans are made available to the right kind of business in a non-bureaucratic way, sales and profit can soar.

First Circle likes working with ecommerce merchants because their sales revenue is transparent, which makes risk assessment easier. It partners with Lazada and other major ecommerce sites. But non-ecommerce businesses can also qualify for a loan.

Read the rest of the story here.

 

2. Singapore has a new S$21 million mail sorting facility to boost ecommerce

The S$21 million eCommerce Airhub will increase mailbag processing capacity by more than three times. Occupying 6,000sqm of space in Changi, the facility leverages automation to reduce mailbag processing time by 50%.

It is managed by air freight handling giant SATS and co-funded by the Civil Aviation Authority of Singapore.

Read the rest of the story here.

 

3. Google makes fashion image searches more like Pinterest

The company recently launched a “Similar Items” feature on mobile web and Android to point users to more products they’ll love – like handbags, sunglasses, and shoes, for example – and today it’s expanding that functionality to include apparel.

More notably, it’s also introducing a new feature called “Style Ideas,” which will surface inspirational lifestyle images and outfits that show off the fashion product images you had been browsing.

Ultimately, the goal here is to shift a portion of those initial, exploratory shopping searches away from search engines like Google and onto Pinterest itself.

Read the rest of the story here.