Super apps have become a huge deal in Asia, from pioneers like Tencent’s WeChat to organic unicorns like Grab and Go-Jek. They make it look easy, but there are numerous of challenges involved. Perhaps surprisingly, regulation is not one of them. In fact, the biggest challenge to building a super app empire is finding enough talent.
Those were the takeaways from a panel at last week’s RISE conference that looked at what makes super apps work – particularly in Southeast Asia, where Grab and Go-Jek are competing head to head offering everything from rides and food delivery to house cleaning and massages.
The attraction of the super app in SEA is partly to do with the fact the region is primarily mobile-first, which means its more convenient to have one central app on a smartphone offering, say, 18 services that can be paid for with a single payment service than having to download 18 apps that offer one service and paying for them separately.
What really makes that work, said Go-Jek CTO Ajey Gore, is the ability to understand the pain points of the local market, which is also what gives companies like Go-Jek an edge over Western players like Uber.
“Any company that invests around understanding that [local] mindset will do well,” Gore said. “We are looking at the [local] pain points, and we are trying to remove the friction from the transaction and provide a much more organized market for consumers. It’s more about product excellence, and making sure the customer wins – not only that your driver wins or your restaurant guy also wins, but making sure everybody in ecosystem gets something out of it.”
Abheek Anand, managing director at Sequoia Capital, added that the horizontal model works better for developing countries than for developed countries in no small part because each of the verticals incorporated into the super app aren’t already dominated by a single app.
“If you’re trying to build a super app for a developed world where there is a winner in each vertical – there’s a winner in in payments, a winner in food, a winner in ride hailing – it’s very hard for a horizontal platform to really come in and compete effectively with vertical winners,” he said. “But in our part of the world, it’s quite different. A lot of these markets are extremely nascent. There is a lot of demand for these services, but there aren’t clear winners yet. And so what we’ve seen happen is these horizontal apps are able to come in and say, ‘Hey, I have a frequently transacting user base, what else can I sell to them?’ … [they’re] able to go horizontal, get a customer for one particular service, cross sell them on everything else, and really build a long term horizontal brand.”
Here come the regulators
While Southeast Asia may be a super app hotbed right now, it’s by no means easy money. There are plenty of challenges in making a super app work. Interestingly, regulation isn’t one of them, despite plenty of early challenges such as ride-hailing services being banned in certain markets and legal challenges to the attempted merger of Grab with Uber’s SEA operations.
That’s not to say there’s no regulation, or that it’s very light-touch – Go-Jek’s Gore said there are plenty of regulations his company must comply with, particularly in areas like payments, ride-hailing and delivery, and the regulatory regime in the company’s home base of Indonesia is quite strict compared to other countries.
However, he added, “They have very valid reasons why they are doing this. Indonesia is a largely unbanked population, so we have to make sure their interests are protected.”
Gore added that Go-Jek has found the best way to deal with regulators is to engage them, show them the value of super apps and help them craft regulations that make sense for everyone without reducing the service’s value.
As an example, Gore cited last year’s decision by the government to deal with Jakarta’s notorious traffic congestion problem by making certain roads one-way and imposing rules under which cars with even or odd-numbered plates could drive on different days. The initial policy banned motorcycles, so Go-Jek went to the government and showed them charts displaying how many merchants use Go-Jek, how many depend on motorbikes for their livelihood and how much money they would lose by having to use cars exclusively for Go-Jek services.
“The government actually listened to us, saying yeah, you guys are making sense,” said Gore, adding that the government eventually made an exception for motorcycles in its traffic policy. “The support from government has been phenomenal in terms of everything we do.”
Grow your own talent
The far bigger challenge for super apps in SEA is finding enough people with the right skillsets, Gore said.
“Talent is always scarce, because there are not many companies who have this kind of experience, he explained. “So either we try to get the experienced talent, which is very, very, very small, or we try to grow the talent within the company. And that works much, much better.”
Go-Jek has also opened engineering centers in Bali, Jakarta, Bangkok, Singapore, Bangalore and Delhi to train up talent. Employees have the option of either staying in their local market or relocating to wherever Go-Jek needs them.
“The talent pool is really global now – it shouldn’t be localized,” he said. “It’s fine to move around. If companies don’t do this, they will not be able to scale.”
Sequoia’s Anand agreed that human capital “is probably the number one challenge and opportunity in Southeast Asia right now”, adding that Sequoia helps its portfolio companies find and recruit talent for areas like tech and marketing.
It’s a long-term play
Another challenge for super apps is, of course, profitability. Companies like Go-Jek and Grab have attracted billions of dollars in financing, but it was only this year that Grab started reporting profits in its mature markets, while Go-Jek has said it’s close to seeing profits in all its businesses except ride-hailing. .
Anand admitted that super-app platforms do burn through cash as they expand into new services and markets – but at the same time, he said, their platform approach makes their capex relatively efficient.
“If you were to build individual vertical products separately, and acquire customers for them separately, and service them, and get revenue from each customer for one service, that business is going to be far less capital efficient than a super app, which is able to acquire a customer for one thing and then cross sell them on everything else,” he said.
It’s also a more efficient use of the underlying infrastructure supporting all of these services, he noted. “People use that same infrastructure in the morning and in the evenings to go to work and come back, and in the afternoon and in the evening to order food. … If you had to build those services independently, you’d basically have a bunch of riders sitting around not doing anything in the afternoon or not doing anything in the morning. And it does not scale as easily.”
Anand also said that while super apps are prone to pitfalls – Uber being the current poster child for this reality – these are ultimately short-term problems for what should be seen more as a long-term play.
“These pitfalls are all points in time – if you have a long-term perspective and you believe that the company is adding value – which is what we do as investors, we don’t care about what happens in the short term,” he said. “In the long term, is this a valuable business? Absolutely. They’ll go through the ups and downs, but that’s just part of the company-building process.”