Yello Digital Marketing (YDM), the adtech arm of South Korea’s unicorn Yello Mobile, has been known for its aggressive acquisitions in Southeast Asia (SEA) startup markets. A subsidiary of internet startup Yello Mobile, which has over 80 companies and affiliates under its umbrella, YDM also has what it calls “family” of 22 members. The network includes six companies that it has acquired from the SEA region only within 2015: Adyim and Computerlogy (Thailand), Adplus and MediaTrac (Indonesia), GushCloud (Singapore) and CleverAds (Vietnam).
YDM continues to strive for the leading status in Asia as a digital marketing and adtech platform via the cross-border alliance model. The South Korean company has opened its global headquarters in Singapore, helping it better connect the invested companies across SEA and make bigger moves in this region.
YDM is focusing on five southeast Asian countries, which include Singapore, Thailand, Indonesia, Vietnam and Malaysia; and is also looking at opportunities from the Philippines.
“Since YDM is a startup and our goal is to become the leading digital marketing group in Asia, SEA is the place for us to penetrate in an early stage which will allow us to have the dominant position,” YDM chief executive David Lee told DEALSTREETASIA in an interaction. Edited excerpts.
What made you choose Singapore as your global headquarters?
For marketing, the location of the brand is important, and a lot of the major brands are headquartered in Singapore for Asia. Geographically, Singapore is conveniently located for travelling to other countries. That’s one of the reasons why we decided to headquarter our office here.
Do you think Singapore can be the gateway for investments into different companies in other SEA countries?
Rather than considering YDM entering this market, it’s more of a headquarters for family companies such as CleverAds and GushCloud to be able to utilise the hub. This place is meant to be a satellite office, so any company in the region that is part of YDM can come to register its business for Singapore or Southeast Asia; and also use it as a sales office. The purpose is more for family companies.
What are your plans once the Singapore headquarters become operational?
We are just in the beginning stage of expansion. We will continue to look for good partners and companies like CleverAds, GushCloud or Adyim, to join our family. So we all focus on bringing advanced technologies and some business models in Korea and creating collaboration with our Southeast Asian companies. We’ve already seen a lot of products rolled out from the joint projects.
What is your assessment of the south east Asian market?
In Northeast Asia, the digital market and digital marketing industry is quite mature, whereas Southeast Asia is in the early stages, where there’s a huge potential for growth. And there’s no doubt that the use of smartphone is increasing. Research also supports that SEA market will be extremely huge in the next few years. Since YDM is a startup and our goal is to become the leading digital marketing group in Asia, we feel that looking at the next few years, SEA is the place for us to penetrate in an early stage which will allow us to have the dominant position.
Are there other companies like YDM that follow a similar strategy for this market?
We haven’t seen similar groups in SEA yet. A lot of those groups are prioritising or focusing currently on Japan and China. But recently, we have started to see Japanese groups trying to make acquisitions in the SEA market, for example Cyberagent or GMO Group. But Cyberagent and GMO Group are more of investors or VCs whereas we are a very strategic group. We’d like to call it “alliance”. Technically, it’s M&A, but it’s our model as alliance. We have the utmost confidence about the potential in SEA.
What are the strategies or best practices from South Korean tech space that you would bring to south east Asia?
Simply put, technology continues to develop. It allows brands to connect with consumers at anytime. The technologies that transfer the information or media are our hands-on product. Within this environment, there are a lot of changes coming. So the media is becoming unified to more global media compared to segmented local media in the past. For example, Facebook in Korea and Facebook in Vietnam are actually the same platform. However, we see the media grow and develop in Korea a bit faster. A lot of technologies and monetisation models actively came out from Korea. It allows us to learn what type of business model works better, and which doesn’t.
Thus, we can bring our experience and the technologies to SEA, which will help entrepreneurs not go through the same challenge that we went through in Korea. Currently we are already rolling out joint projects utilising the technologies in the SEA markets together with our entrepreneurs.
Have you faced any difficulties making the investments in SEA, in terms of the legislation or business environment?
First, we have the difficulty of different languages, because in such early stage markets, communication is very important. It is important to deliver our vision to the entrepreneurs. That’s just one of the difficulties. The biggest one is actually finding a good target or a partner. Instead of looking at who’s the number one right now, we tend to look at who can be the number one in a few years from now.
How long does it normally take to close a deal?
We try to move very fast, so on average, it’s about three months.
What are the characteristics you look for in investee companies?
First of all, Southeast Asia is very big. Even though all of SEA is quite early stage, we try to target some more mature markets in this region. Singapore, Indonesia, Thailand, Vietnam, Malaysia – these countries are the first priority. Each of these markets has the potential to be the headquarters for their own region of the neighbouring countries, like Myanmar and Laos for example. So our goal is to find the leading companies in each of these markets, or companies with potential to become the leader.
We already created alliance with these companies. In my opinion, they are very good companies in two aspects. First, they are already profitable companies, they’re making money. That’s not easy to achieve in such early stage markets. The second thing is they’re entrepreneurs. Even though the market is young, the companies have been around for at least three years. It tells that these entrepreneurs have the ability of foreseeing the future of the markets.
Apart from the five focus countries, what will be your next targets?
These five countries will continue to be our priority. In digital marketing, it is hard to create balanced changes with one company. We have to fulfill four categories within the space: marketing strategy, content creation, targeting optimization, and publishing and execution. So we’re trying to keep a balance within these four categories per market by finding good companies for each area in these countries. At the same time, one other country that we’re carefully looking at is the Philippines.
What is your advice for companies which are looking at expansion and consolidation?
I think the word “consolidation” actually comes from the traditional way of doing M&A. What we’d like to do is to build an ecosystem. In this fast changing new media environment, we believe there needs to be a new form of ecosystem. There’s always a new form of media popping up, and companies have to be more specialized to build new technologies.
I think the digital space is really difficult to do things in the way they were done traditionally. So if I am to give advice to other companies, you have to find your own way of consolidation and building a new ecosystem. You may be able to build a company just by the traditional M&A method, but it will be difficult to sustain that business.
How have the invested companies changed after YDM’s investment?
It has been only a couple of months since we invested. So if I said they have changed strategically, it would be a lie. But we do have a few cases. Our deals in Indonesia and Thailand were more early, and these companies are working with Korean companies to launch solutions which were popular in Korea around three years ago, but it is the first time to see them in the Thai market, like the Adpocket lock screen advertising platform. It is one of the top downloaded apps in the category. Although it has just been launched, it seems to be creating a lot of buzz.