What does a mobile-first economy look like and how is Asia's approach to this model effecting the western countries? Read this article by TechCrunch to learn more!
Asia Pacific leads the global digital infrastructure as home to half of the world’s mobile phone subscribers and the largest number of wireless Internet connections.
However, the region also has historically attracted less than one-third of global mobile marketing spend — making its role in the digital economy largely underrepresented amongst its Western counterparts.
The potential for that role to change was galvanized by a late-2014 Google survey, which highlighted that mobile penetration in Asia was far greater than any other region in the world, even surpassing computer use, thus ushering in Asia’s “mobile-first” consumer.
As we approach the 10-year anniversary of the smartphone era, are there further lessons to be gleaned from Asia’s mobile-first economy?
The mobile-first consumer has fueled double-digit annual sales growth over the past five years for Asia Pacific tech companies — twice the pace of traditional retailers in the region. Although the growth trajectory is similar to the North American experience, differences in underlying drivers have the potential to elevate Asia Pacific’s sphere of influence in the digital economy.
While North American technology players have traditionally relied heavily on advertising, the Asian tech scene is more diverse. The West’s largest online companies — Alphabet and Facebook — generate more than 90 percent of their revenue via advertising.
By comparison, Asia’s largest player, Alibaba Group, doesn’t even operate on an advertising model, and the region’s next largest incumbent, Tencent Holdings, relies on advertising for less than 20 percent of its income.
As a result, popular consumer mobile apps in the region, such as WeChat, Line and KakaoTalk, are synonymous with multipurpose functionality, incorporating e-commerce, payments processing, games and other digital goods and services.
Their success has been a recent source of inspiration among Western counterparts, with Pinterest, Twitter, Instagram and Facebook all launching actionable “buy it” buttons in their platforms during 2015.
Are these initiatives set to open new rivers of gold for the West’s social media incumbents? To date, the West’s foray into social commerce remains in the experimental phases.
To soften investor curiosity, industry leader Facebook has promoted its new functionality as a mechanism to enhance the value of existing advertising services rather than as an independent monetization strategy.
While Facebook and Alphabet command half of all mobile advertising dollars, the pursuit of alternative revenue strategies may remain a covert affair.
The region’s two most active private equity houses — Sequoia and Tiger Global — have together during the last six months helped anchor for local tech startups funding rounds nearing $2 billion.
If their portfolio allocations are a proxy for near-term trends in the region, enterprise software, agency and financial services are set to become a greater part of the East’s mobile commerce mix.
Accounting for 40 percent of recent deals in the region, on-demand services are driving a boom in agency funding. Also referred to as online to offline (O2O) businesses, the likes of Uber and Airbnb have pioneered this model in the West.
However, in a hallmark characteristic of the East, local incarnations are not just relying on the pure agency model to drive revenue.
Indian car hire provider Ola marked the region’s most significant agency deal over the past six months with a $500 million funding round in September from a consortium that included Tiger Global. Proceeds are helping the company broaden its horizons with the launch in November of a new payments service, Ola Money.
A reverse situation appears to be transpiring at Practo Technologies. After operating an enterprise management platform for doctors and medical clinics since 2008, the business now has an ancillary opportunity on the consumer side to facilitate on-demand medical bookings and advice.
Practo attracted $90 million in August from a consortium that included Sequoia, Tencent Holdings and, interestingly, Google Capital.
Practo Technologies represents the largest Asia Pacific tech deal in which Google has participated (to date). It also is the largest deal involving Google outside the U.S. and U.K. As smartphones approach their 10-year anniversary, could this be a sign of even larger deals ahead?
Horizontal integration is poised to become a critical theme in the West as the value of North American tech IPOs reached a three-year low during Q1 2016. As competition for funding and users ultimately tighten, one-dimensional consumer applications that are characteristic of the West may pave the way to multiple functionalities in the pursuit of additional revenue.
The “buy it” buttons experiments embarked on by Pinterest, Twitter, Instagram and Facebook during 2015 have yet to reach a verdict. The risk facing multi-revenue pursuits is a complication of the user experience. However, could hesitations from consumers to utilize the multiple functionalities, e.g. “buy it” buttons, create opportunity for more nimble, focused players?
Such players to enter the space, specifically in the Asia Pacific region, include on-demand services and e-commerce startups, including ServisHero, which has three locations in South East Asia and RedMart in Singapore.
These startups are shaping revenue pursuits based on a deep understanding of the audience, catering to localized consumer services. While we are seeing startups engineer products around defined markets, it’s still a nascent trend in the West for consumers to engage in multi-dimensional platforms.
However, as opportunity beckons for masters of their audience, this new wave of engineering could provide a natural stepping-stone for consumer apps in North America.
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