According to the report, internet economy in the region, which spans ride-hailing apps to online travel, is growing at a compound annual growth rate (CAGR) of 27 per cent, outpacing last year’s projection of a 20 per cent 10-year CAGR.
Southeast Asia’s online economy, estimated at 2 per cent of the region’s GDP in 2017, is projected to reach 6 per cent of the GDP by 2025.
This growth is being driven by rising smartphone usage in the region, which will be home to an estimated 330 million monthly active internet users by the end of 2017. This makes Southeast Asia the third largest base of internet users in the world.
In fact, Southeast Asians are spending more time on the mobile internet than anyone else globally. They spend around 140 minutes shopping online every month, almost twice as much time as Americans in e-commerce marketplaces.
“In Southeast Asia, mobile is the internet, as more than 90% of Southeast Asia’s internet users are on smartphones. It is hard to overestimate the absolute prominence,” said the report.
Among sectors, online travel reached $26.6 billion led by growth in airline and hotel online bookings while online media touched $6.9 billion driven by online ads and gaming.
E-commerce and ride-hailing hogged the spotlight, growing the fastest at over 40 per cent CAGR, capturing consumers’ preferences with evolving business models, and attracting a majority of investments in the region.
According to estimates, e-commerce sales of first-hand goods will reach around $11 billion in gross merchandise value (GMV) in 2017, up from $5.5 billion in 2015, growing at a 41 per cent CAGR.
On the other hand, ride-hailing services have experienced dramatic growth in the past two years, and are ready to reach $5.1 billion in GMV this year, more than double from $2.5 billion in 2015.
“In light of strong acceleration in penetration and usage, we have revised our 2025 projections for the ride hailing sector to $20.1 billion GMV,” said the report.
With this unprecedented growth in the Southeast Asian internet economy, investors have also shown increased interest in the region.
The report shows that between 2016 and Q3 2017, Southeast Asian internet companies were able to raise more than $12 billion of capital, as compared to only $1 billion in 2015. The region is, therefore, well on track to meet the estimated 10-year requirements.
“Venture capital investments in Southeast Asian companies signal a strong vote of confidence in the potential of Southeast Asia’s internet economy by global and regional investors,” said the report.
The fundraising amounted to 0.18 per cent of Southeast Asia’s GDP in 2016, up from 0.04 per cent in 2014. This puts the region on par with India at 0.18 per cent of GDP in 2016, and narrows the gap with China (0.30 per cent of GDP last year).
Between 2016 and Q3 2017, there were 1,370 deals involving Southeast Asian internet companies. As with most regions, a majority of transactions were at Series A and earlier stages.
Of the total $12 billion invested in Southeast Asia since 2016, $9 billion was raised by its unicorns. Another $1.4 billion was raised by companies in the $100 million- $1 billion valuation range.
“This shows how global and regional investors have favored the largest and most established internet companies, while fundraising has remained challenging for Southeast Asia internet start-ups and smaller ventures,” said the report.
SINGAPORE & INDONESIA TOP BETS
Within the region, companies from Singapore and Indonesia stole the spotlight. Since 2016, Singapore-based companies accounted for around 58 per cent of the total funds raised in the region and 609 deals as companies such as Grab, Lazada, and Sea helped cement the city-state’s leading position in the region.
Indonesia-based companies received 34 per cent of the region’s total funds across 261 deals as the country continues to be one of the most attractive markets in the regions, given its huge population, burgeoning middle class, and rapidly developing digital ecosystem.
Malaysia, Thailand, and Vietnam each recorded close to 130 deals, collectively amounting to less than 10 per cent of total funds raised.