Southeast Asia's Digital Economy Could Reach $1T GMV by 2030

Southeast Asia's (SEA) top digital economies grew faster than expected in 2022 and are set to reach $200 billion in total value of transactions made this year, according to a report by Google, Temasek and Bain & Company. And in the face of economic headwinds, the future looks bright for SEA as the report says investors remain confident in SEA's long-term prospects and the opportunities they bring in up-and-coming countries and sectors.

Among the ten countries that are members of the Association of Southeast Asian Nations (ASEAN), which serves as a political and economic union of member states promoting intergovernmental cooperation and facilitates economic, political, security, military, educational, and sociocultural integration between its members and countries in the Asia-Pacific, the report focuses on ASEAN's six largest members: Indonesia, Malaysia, Philippines, Singapore, Thailand, and Vietnam. The report's key findings include:

• Navigating macroeconomic headwinds: Just as countries in SEA embarked on a return to pre-pandemic normality, global headwinds started to blow, threatening to derail a full economic recovery. Rising interest rates and high inflationary pressure have also been impacting consumer demand, particularly the discretionary sectors that sit at the core of the digital economy.
• Approaching $200B in rough seas: Despite these macroeconomic headwinds, SEA's digital economy remains on course to reach ~$200B in gross merchandise value (GMV) in 2022. In fact, it is reaching this threshold three years earlier than expected in the e-Conomy SEA 2016 report. Digital adoption continues to rise even today, albeit at a slower pace than the steep acceleration seen at the height of the pandemic.
• Urban consumers still drive the economy: Across urban areas, affluent consumers and their young digital native counterparts continue to represent the largest portion of the digital economy. For these two segments, the opportunity for growth lies in deeper engagement, including more frequent and valuable orders, subscriptions, or cross-selling services such as consumer lending. Meanwhile, adoption and spend by urban consumers 'on a budget' and suburban consumers remain lower, leaving digital players to figure out more economically sustainable ways to serve them.
• Sectors encounter different growth trends: SEA's digital economy sectors are following three distinct trendlines. E-commerce follows an S-shaped growth curve, in which it continues on its growth trajectory, but from a higher starting point after the steep acceleration during the pandemic. Others, such as food delivery and online media, are returning to their trendlines after a two-year spike. And lastly, travel and transport are moving along a U-shaped recovery, with pre-pandemic levels still some miles away.
• Favorable conditions uplift financial services. The adoption and usage of digital financial services (DFS) have flourished across the board, propelled by a shift from offline to online and the positive financial market conditions of the last few years. With rising interest rates and a riskier lending environment, however, fintech players, platforms, and newly launched digibanks will see their business models stress-tested. Meanwhile, banks and insurance companies are rapidly digitalizing their services and maintaining a stronghold on affluent consumers.
• Prudence clouds tech investments. Tech investments in SEA remain robust this year. However, the funding landscape tells a tale of two ends: early-stage deals are continuing with strong momentum, while late-stage deals are seeing more pronounced dips and a pause in IPOs. Meanwhile, DFS has overtaken e-commerce in investment volume. Investors will be cautious in the short-term as most do not expect a return to 2021 deal activity and valuation peaks in the next couple of years. Nonetheless, most investors remain bullish in SEA's medium- to long-term potential, and have $15B dry powder on hand. The report notes that increasing interest in emerging markets, like the Philippines and Vietnam, and in nascent sectors, like SaaS and Web3.
• Towards a sustainable digital economy. The SEA digital economy is expected to produce 20MT of emissions by 2030—significant, albeit an order of magnitude lower than other environmental impact-intensive sectors. Digital players have been rolling out reducing and recycling initiatives, but more can be done to further lower impact by up to 30-40% over time. In the meantime, platforms can play a positive role in raising awareness among SEA consumers, and move towards closing the prevailing ‘say-do’ gap.
• Economic contribution meets social concerns. On the social front, the digital economy has created 160K high-skilled jobs and indirectly supports nearly 30M jobs, while platforms have enabled over 20M merchants and 6M restaurants to grow their businesses online. Concerns exist, nonetheless, around the welfare of worker-partners, necessitating dialogue between institutions and platforms.
• Charting the course for the digital decade. SEA's 'digital decade' has just begun. The course to exceed $300B by 2025 depends on the shape of recovery amid today's uncertainties, while the path to a $600B-1T digital economy in 2030 remains geared on SEA's economic fundamentals. A growing emphasis on sustainable growth means profits may become as relevant as GMV when it comes to measuring progress.

Existing enablers like payments and logistics have come into place, but the talent challenge is now shifting from quantity to quality. New enablers, like digital inclusion of consumers ‘on a budget’ and suburbanites, are key to unlocking SEA's full potential. Progress has been limited, however, with institutional support potentially the missing link to bridging the divide. All in all, SEA's digital economy is grounded on strong social and economic fundamentals, and offline to online trends, which provides much to be optimistic about especially as the region settles into its digital decade.'

Over the past 20 years, I have observed Southeast Asia's impressive economic rise. When my clients supporting the digital economy ask which global markets should they consider for corporate expansion, Indonesia, Malaysia, Philippines, Singapore, Thailand, and Vietnam are almost always at the top of my list. Despite economic headwinds, I remain optimistic about the sustainable development of the region's digital economy which could reach $1 trillion GMV by 2033 provided such growth is pursued in a sustainable way.

What are your thoughts about SEA's future economic outlook?

Aaron Rose is a board member, corporate advisor, and co-founder of great companies. He also serves as the editor of GT Perspectives, an online forum focused on turning perspective into opportunity.

Report Focuses on How Asia-Pacific Is Leading the Way in Emerging Media Consumption Trends

A report published by The Economist Intelligence Unit (EIU) asserts that "although smartphones are now ubiquitous across much of the planet, Asia is at the cutting edge of innovation when it comes to their use." Digital upheaval: how Asia-Pacific is leading the way in emerging media consumption trends further says: "Already, across much of the region there has been fundamental change in media consumption and communication. Thanks to smartphones, which have brought millions online for the first time, many countries have leapfrogged the traditional intermediate stages of media consumption, and individuals have taken control. They can now access what they want, where and when they want it." Commissioned by The Trade Desk, a Ventura, Calf.-based technology company that empowers buyers of advertising, the report is based on in-depth research, including interviews with 16 experts and executives.

Based on my frequent travels to Asia over the past several years, I concur with the report's assertion that "the region's entrepreneurs have been quick to seize the opportunity, creating new networks of information and entertainment, and finding innovative uses for technologies such as multi-functioning messaging apps and quick-response (QR) codes."

Moreover, the report, which is available in English, 简体中文, and 日本語, explains, "All of this has opened up new channels of communication between businesses and consumers. It has also been a boon to the region's creative industries, notably small-time content producers such as individual live streamers. Further media-related innovations popularized in Asia, like the ability to link micropayments to these live-streaming platforms, are proving this region's inventive prowess to the rest of the world."

Regarding the Middle Kingdom, the report accurately notes:

China's unique digital ecosystem is a vital part of the story, giving rise to platforms like WeChat that have pushed the boundaries of technologies in areas such as payment and financial services, and paved the way for artificial intelligence (AI)-enabled chatbots to do things such as aiding customer interaction. Chatbots are just one new avenue companies are using to talk directly to individual consumers—QR codes are another, while digitally informed segmentation of markets for advertising campaigns can help brands forge new connections between data, clicks and purchases in the region.

Alongside the exciting advances, however, "there are concerns: Asia's frantic surge in smartphone-enabled media consumption has led to worries about media literacy. For example, Carol Soon of the National University of Singapore warns that Asian consumers have less awareness of data-privacy concerns than in Europe or North America, where it is a major issue. In the advertising space, tracking online metrics can be difficult for marketers used to channels such as TV.

"The story of Asia's digital media consumption, however, is predominantly about burgeoning opportunities and clever leaps, echoing the region's recent dramatic economic growth. Although most of these innovations can be found outside the region, in Asia their development, use, scale and impact are distinctive in several ways."

The following key advances in media consumption in Asia are addressed in the report:

Hyper-functional messaging platforms (China)
Platforms such as WeChat have become mutifunctional, especially with financial services. This is both threatening the ecosystem of app proliferation and upending payment models.

Live-streaming services (China)
Mass live streaming, an entirely new digital media category, has become especially popular among internal rural migrants, who number nearly 300 million and use it to forge informal networks of support in new environments. This has sparked new innovations in micro-payments between audiences and content creators.

QR codes (China)
Companies are finding innovative uses for QR codes, which allow them to communicate directly with individual customers in on-the-go situations.

K-pop's digital underpinnings (South Korea)
K-pop has become internationally popular thanks to a clever combination of world-leading digital infrastructure and innovative cross-border social-media marketing.

Social media as migrant social network (Indonesia, the Philippines)
Previously isolated overseas domestic workers are using social media on personal smartphones to build virtual communities of support, information and entertainment.

Long-form narrative advertising (Thailand)

Bucking the trend elsewhere for short and sensational digital adverts, Thai businesses are using the opportunities afforded by digital production to make longer narrative adverts that resemble mini-soap operas.

Natural-voice interfaces (Asia-Wide)
The region is at the fore of developing voice-enabled interfaces between users and software (including chatbots).

What innovative ways have you observed in the use of smartphones in Asia?

Aaron Rose is an advisor to talented entrepreneurs and co-founder of great companies. He also serves as the editor of Solutions for a Sustainable World.

Reflecting on Yeeko's First Year of Operations

While most Americans (and perhaps people worldwide) pondered on the first year of Donald Trump's presidency on Nov. 7, 2017, I took the day to reflect on the first year of Yeeko, Inc.'s business operations. Incorporated on Nov. 7, 2016 in the State of Washington, Yeeko is the publisher of Yeeko Magazine, a periodical that produces content on culture and literature for Chinese readers worldwide.

From Idea to Product to Revenue

"I do not have any experience in the media sector" is a reply I give when asked about my past work with media companies. My interest in co-founding Yeeko began when my colleagues from ROI3, Jingyan Zhang and Lei "Niki" Tao approached me in Oct. 2016 about their desire to launch a business focused on publishing a periodical. Jingyan, Niki, and a group of their friends from China attending the University of Washington in Seattle knew that a formal business had to be formed, but did not posses the experience of doing so. Committing myself as a co-founder of Yeeko simply resided in supporting a group of young, ambitious young adults with a clearly-defined vision.

After identifying the co-founders, a company needs to determine the number of members who will serve on the company's board of directors. The seven founding shareholders of Yeeko appointed five individuals to serve on the initial board of directors including me serving as its chairman and treasurer. While each corporation may prescribe a set of specific responsibilities for its chairman, my view is the chairman's primary role is to serve as the corporation's principal advisor. More succinctly, as chairman, I counsel Yeeko's executive management on establishing the company's strategic direction and achieving its long-term goals.

Once the governance structure was put in place, managers needed to be identified for the purpose of building the operational team. Jingyan took on the position of Yeeko's president and publisher of the magazine. Boya "Shirley" Ouyang, a co-founder and director, served as the magazine's editor-in-chief. Niki took on the role as the company's initial director of human resources and Jiang "Carl" Wu, a co-founder and director, provided input on the company's sales and marketing strategy.

Cover of Issue #1 of
Yeeko Magazine

As chairman, I have to strike a balance of letting my colleagues make small mistakes with the intent they will learn from those mistakes versus intervening in the company's operations to prevent large mistakes from occurring. Observing how other Chinese students attending American colleges form their respective student clubs or for-profit businesses over the past several years, I witnessed a common mistake where those leaders create a team unnecessarily large for the entity's initial operations. Yeeko was no different as the initial operational team consisted of approximately 13 individuals and subsequently grew to over 20 within just a few months.

Cover of issue #2 of
Yeeko Magazine

Irrespective of my concern for the team's size, Jingyan and her colleagues were able to produce the first issue of Yeeko Magazine within two month of the business' incorporation. Funded entirely by its co-founders, 1,000 copies were published through a company in Beijing with 100 copies to remain in China and 900 shipped to Seattle for distribution to restaurants, retailers and other distribution points throughout the state of Washington. With a plan to publish on a quarterly basis, the magazine's business model is to offer it for no cost to the our readers with revenue deriving from advertisements.

The second issue of Yeeko Magazine was distributed in March 2017, which is the first issue to contain paid advertisements. The third and most recent issue to date contains enough advertising revenue that covered the printing and shipping costs, which represents the dedicated work by Yeeko's sales team. Reflecting on the three issues of Yeeko Magazine, I am impressed with the high-quality work produced by Shirley and her talented editorial team.

Plan for the Long-Term, but Prepare to Pivot on a Moment's Notice

Cover of issue #3 of
Yeeko Magazine

As a result of my penchant for corporate structure, I lead each meeting of the board of directors with a formal agenda and adhere to the parliamentary procedure set forth in Robert's Rules of Order. At a minimum, I call for a meeting of the board of directors on a quarterly basis to review the material activities that occurred during the preceding quarter, a presentation of the company's financial report (profit & loss statement and balance sheet), and provide the company's president an opportunity to present a guidance of what to expect in the next 6-12 months of the company's operations. Governing in this manner provides transparency and accountability necessary for a company to succeed. In other words, it is best to avoid any hidden surprises that may distract a company from its core mission.

Yeeko held its first annual meeting of shareholders on May 20, 2017 at the corporation's headquarters in Seattle, Wash. The purpose of this meeting was to elect individuals to serve on the board of directors until the next annual meeting of shareholders and for Jingyan, as the company's president, to present her vision for the coming year. While the attendance of shareholder meetings are generally limited to current shareholders of record, I felt individuals of the Yeeko team, whether or not they own shares of the company, should be invited to attend the portion of the shareholders meeting when Jingyan presented her report. A few individuals attended and had the opportunity to question Jingyan's vision.

To my surprise, however, I learned a few days after the first meeting of shareholders that a small group of Yeeko's team members wanted to make a strategic change to Yeeko's corporate structure. This small group proposed that Yeeko Inc. be dissolved and reformed as a student organization. While I disagreed with the proposal, I felt that it should be given its fair consideration out of respect for the proposal's supporters. Therefore, I called an emergency meeting of the board of directors and shareholders to entertain a motion to dissolve the corporation pursuant to Title 23B of the Revised Code of Washington (also known as the Washington Business Corporation Act). The shareholders voted against the motion to dissolve the corporation, which, in effect, allowed for the continuation of supporting Jingyan's vision.

Lessons Learned and Moving Forward

Those who supported to dissolve Yeeko Inc. decided to leave the company altogether. This, unfortunately, caused a halt in the production of our magazine. It does, however, present us with an opportunity to pivot our corporate strategy to focus on the creation of a digital platform via WeChat, a Chinese social media mobile application software developed by Tencent.

Mistakes were made during our first year of operations. This is normal for any company, but particularly so for a company like Yeeko where its operational team is comprised by a group of people in early 20s with very little business or management experience. I am confident lessons were learned that will lead to an improved management style as well as an effective execution of the business' operational strategy.

It was an exciting first year for Yeeko and I am optimistic about what our company will achieve in 2018 and beyond. For those of you who use WeChat, I invite you to follow Yeeko through our WeChat page by scanning the QR code below.

Lastly, I want to express my appreciation to my fellow members of the board of directors, Jingyan, Shirley, Carl, and Niki, for their time and commitment. I also appreciate all those who are or were part of the Yeeko team during our first year for producing an outstanding product of the highest quality. And to our readers and advertisers, a special "thank you" for your support.

Aaron Rose is a board member, corporate advisor, and co-founder of great companies. He also serves as the editor of Solutions for a Sustainable World.