The Mobile Market in South East Asia

smartphone market

I had the impression mobile market was paramount in South East Asia even before moving here for my university exchange. I browsed real estate websites looking for a house to rent in Singapore and contacted dozens of agents via email, but nobody answered me. Upset, and with my departure date approaching, I tried to call the agents. To my surprise, they asked me if I had WhatsApp and invited me to negotiate by instant messaging. As a 21-year-old born and raised in Europe, this sounded to me rather personal and inappropriate: no Western real estate agent would ever do that. Nevertheless, I received pictures of the house and a copy of the rent contract on my phone, and in a few hours we closed the deal.

Southeast Asia has a population of 600 million, twice as the US. Smartphone adoption in these countries is expected to enjoy significant growth in the next two years. A major driver of this growth is demographic: youth tend to adopt new technologies more readily than older age groups and Southeast Asia is the home to one of the world’s largest youth populations.
Another reason is the push by mobile operators to expand high-speed networks like 4G/LTE in the region. According to a recent report by Sony Ericsson, WCDMA/HSPA is set to eclipse GSM by 2019 and LTE/4G is on track to grow to 60% coverage by the same year. In other words, the technologies supporting smartphones are spreading throughout the region, helping to make smartphones themselves more viable and accessible to more people.

Southeast Asia is at the crossroads of two major socio-technical forces creating the perfect storm scenario: the convergence of “no tail” and “mobile leapfrogging”.

mobile tech

The “no-tail” phenomenon is caused by the fact that China and most of SEA countries never really went through the Web 1.0/1.5 boom. If we compare Internet penetration data from the US, China, and Thailand (the latter as a proxy for SEA, excluding Singapore), we’ll notice that the US went through the Web 1.0 and “Web 1.5” booms while having significant double-digit Internet adoption rates. In China and Thailand, these numbers were in the miserable single digits during the same periods. It wasn’t until Web 2.0 that China and Thailand started to see Internet adoption take off rapidly.
The effect of no tail is the development of Asia-specific business models. The Web 1.0 and, more importantly, Web 1.5 developments in mature markets like the U.S. and Western Europe led to an eco-system with a long-tail of publisher content on platforms such as and WordPress that gave rise to ad networks like Google AdSense. Hence, in mature markets, startups and internet companies have a tendency to go with advertising as their default stream of income – see Instagram, Pinterest, and recently Snapchat.
Because of the lack of this long tail in China and most of Southeast Asia, the online advertising industry has lagged behind, forcing both established firms and startups to look for non-advertising based monetization sources such as e-commerce and digital goods (value-added services).
Mature markets in Asia, such as Korea, Japan and Singapore, have a better-developed online advertising ecosystem due to the presence of a long-tail publisher ad inventory. As a result, these markets are less likely candidates for benchmarking the development of ad technologies, Internet, and e-commerce in SEA.

mobile market

For what concerns the term “mobile leapfrogging”, Southeast Asia has almost skipped the desktop computer era and has gone mobile-first.
The average Thai user has 1.49 mobile phones, or a 149% adoption rate, while the US and China are only seeing 91% and 77% adoption rates respectively. What is striking about Thailand is that only in 2009, mobile penetration was just 1%. However, in 2013, after the launch of 3G network, the figures jumped to 56%, beating mature markets.
In most countries computer adoption is still high, but smartphone adoption has overtaken computer adoption for the first time in the past year. There are appears to be no countries outside Asia where smartphone penetration is higher than computer penetration.
In Asia, consumers are living in a mobile-first world that needs new products and services built with mobile in mind, not as a nice-to-have. Local companies are noticing this trend and quickly adapting to it. How? Again, through mobile commerce.
Lazada, for example, an e-commerce firm headquartered in Singapore with the goal of being “the Amazon of Southeast Asia”, makes more than 50% of its traffic from mobile channels. In addition, large players such as Rakuten, Alibaba and SingPost have already moved into mobile commerce.

International players should stop looking at the US, China or even Korea or Japan for inspiration about the future of mobile, because it is not happening there. Those mature and developed markets carry heavy legacy of the internet desktop era, whereas Southeast Asia started with a clean state, in a unique position to experiment and develop new business models on mobile.    There is a great chance for Asian businesses to lead the world in mobile-first innovation by reacting fast to the revolution that has happened on the streets right outside their office doors. And we expect B2C, C2C and “impulsive buy” buttons to be the new black.

Valeria Savatteri – Tech@B