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Why Southeast Asia’s Internet Economy Is Booming

A Google-Temasek study projects it to grow to $200 billion by 2025

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BY Melissa G. Bagamasbad - 26 Jul 2016

PHOTO CREDIT: Getty Images

“It's an exciting time to be part of {Southeast Asia’s} internet economy,” says Ken Lingan, country head of Google Philippines.

It certainly is. Last May, Google Southeast Asia and Temasek projected Southeast Asia’s internet economy to grow to US$200 billion by 2025. Based on macroeconomic statistics, proprietary Google data, Temasek research on venture capital and start-up activity, and more than 50 interviews with entrepreneurs, investors, and bankers, the study took over five months to complete, according to Singapore’s Straits Times newspaper. It focused on six nations, namely Indonesia, Singapore, Malaysia, the Philippines, Thailand, and Vietnam.

Collectively, Southeast Asia already has the fourth-largest internet population in the world, with around 260 million internet users in the region, according to the study. And Lingan says this number is growing fast, with a projected number of 480 million internet users by 2020. Here are the key points that might be of use to Southeast Asian entrepreneurs:

 

1. There are many start-ups in the region but not enough funding

There are 7,000 start-ups in the area (mostly from Singapore, Indonesia, and Vietnam), according to the study, but the US$1.1 billion in funding currently available isn’t enough. By comparison, a small country like Israel got US$4 billion, while China got US$7 billion. Out of 7,000 start-ups, only 1,000 or so are funded. “It tells us that there are a lot of ideas for start-ups, but not enough funding,” Lingan said.

 

2. The main drivers for growth are access and a younger population

More Southeast Asians have internet access due to the dropping cost of smartphones. Southeast Asia also boasts one of the world’s youngest populations, with more than 70% of the region under 40. That is why when the Internet came to the Philippines, Lingan says, many adopted it with a passion, resulting in a social media and selfie boom.

 

3. E-commerce, online travel, and online advertising are growing fastest

Lingan says Southeast Asian e-commerce, in terms of total volume as well as individual country sizes, will grow. “If you look at Southeast Asia, every single country has the potential to be a US$5-billion {e-commerce} market,” he said.

Southeast Asian travel will grow from a US$22-billion online industry in 2015 to a US$90-billion industry by 2025. Lingan cited Cebu Pacific in the Philippines. “People in the Philippines actually get introduced to e-commerce because of Cebu Pacific,” he said. “They’re actually the biggest e-commerce player in the country.” Ride-sharing apps and their growth in the region will also drive growth.

Online media will also do well. Since more people are online, more is being spent for ads; as for gaming, the biggest driver for growth is annual mobile revenue. “When more people have disposable income, you see them purchasing [more games],” he said. “They won’t wait for Candy Crush. They won’t wait; they’re going to pay for it.”

See the complete study here