Business Case Study: The SuperApp Business Model

I recently read about this article on Tata Neu’s — the challenges the company has been facing since its launch and how the team has been making effort to make a comeback with a better user experience and winning strategy. This intrigued me to spend some time on understanding the business model for the super-app — its history, economics, and business strategy for its success. We will be focussing on the following -

• The Super App Model
• The Success Stories from the East
• The Super App Strategy for the West
• The latest super-app — Tata Neu and the story behind its genesis
• The Upcoming competition in the Super-App Space

The Super-App Model

A typical Super App

Mass Market Strategy

The traditional mass market strategy evolves using the production of the goods on the large scale for a large number of customers. These companies typically aim for between 50%-100% of the market share — the best example could be Coca Cola which had almost 70% share in the US market in the 1980s

In the context of the digital world, each user is considered the mass market since they demand various products and services — the mass market strategy, in this case, would be to provide as many services as we can for the customers. The technology companies here leverage the huge amount of data collected for their customers to provide better recommendations, cater to up-selling and cross-selling products

Digital Evolution in the emerging Economies

In the developed economies, the emergence of the smartphone came much after the internet. By this time most of the businesses were already evolved — Facebook for social media, Whatsapp for messaging, Uber as Cab Aggregator, Amazon as the e-commerce, Uber Eats for Food Delivery, etc. With the boom of smartphones in developed countries, the same companies created apps for these use-cases since they already had a good market share.

On the other hand, in the developing countries, the problems were different — with low internet penetration and less usage of the computers in average household — the smartphone with good internet had the power to leverage computing, and the internet, exposing these customers digitally to the businesses that had never got an opportunity to serve these customers

Low Margins for Services in the emerging markets

India’s GDP per capita, for example, is about US$2,000 (in nominal terms), compared to US$60,000 in the US. This makes it hard for the businesses to onboard new customers and starts charging money upfront since these customers have never tasted the convenience of using the services before.

To survive, an app needs to offer multiple services that gradually build an ecosystem around itself to increase its “stickiness” in the mass market — Insead

Success Stories from the East

WeChat

In the early 2000s, China started banning most popular websites like Facebook, Twitter, Google, and Wikipedia under the great firewall. This created void for the new local companies to fill and launch the Chinese versions of these apps. By this time most Chinese people have gotten acquainted with the taste of these American tech start-ups — social media, search engines, etc. At this time, smartphones were in the nascent stage, with the majority of the phones having less storage. This gave birth to the super apps which were trying to solve all the above problems in one app.

WeChat started as a messaging app, and later introduced social media and then payments into the ecosystem. WeChat supports video, voice, and text chat and has unique features like localized translation.

WeChat key statistics

• Tencent’s social network revenue was $17.4 billion in 2021, which accounts for 19% of the company’s total revenue
• In Q1 2022, WeChat had 1.26 billion active users
• WeChat has 3.5 million mini-programs on its platform, which transacted 2.7 trillion RMB in 2021
• 45 billion messages were sent daily in January 2019 on WeChat

GoTo

GoJek started in 2010 as a ride-hailing service — digitizing the already existing business of Ojek drivers giving rides to interested riders to help them reach their destination quickly given the traffic situation in Jakarta.

It later started GoFood offering the food delivery services, GoPay — the e-wallet, GoPulsa for Mobile Topup, GoInvestAsi for Buy/Sell Gold, GoPayLater for BNPL services and other services

GoTo Super App

Tokopedia started as an e-commerce company in 2009. Tokopedia also offers digital products such as credit bill payments, voucher and ticket purchases, insurance, etc.

Both GoJek and Tokopedia merged in May 2021 to form GoTo — the super app of Indonesia

GoTo Key Statistics

• The current valuation of GoTo is around 18B USD
• The super-app contributes to 2% of the Indonesian GDP of 1Trillion USD economy
• GoTo has around 100M MAU — monthly active users
• GoTo has more than 11M merchants on-boarded on the platform
• GoTo has around 2M drivers on the platform

Super-Apps from the World

Around the world, we have the following super-apps

• WeChat — China
• AliPay — China
• Paytm — India
• Grab — Singapore
• GoTo — Indonesia
• Zalo — Vietnam
• KakaoTalk — South Korea
• Careem — Dubai
• Momo E-Wallet — Vietnam

Super App Model for the West

Western companies already had successful companies solving user problems before the advent of smartphones — Uber for the ride services, Google as a search engine, Facebook/Twitter for social media, and UberEats for food delivery.

Given the above companies provide fierce competition and provide the niche service for their segment — the super app model for the west looks quite different.

Also, with strict laws for Data Protection — especially the GDPR laws in Europe — the governments would not want to give any specific company the power to control all the data for the users.

With the above limitation — the tech giants in the US are trying to on-board users and provide them the services in different ways -

• Apple with its hardware as the primary product provides additional services as in-built apps — AppleTv, ApplePay, AppleMusic, Apple Imessage, etc
• Google — with its Android Operation system — gives the Google Assistant, Google Search, Google Pay, Google Lens (integrated with shopping on the google app), Google Maps, Google Duo, Google TV, etc
• Amazon — with Alexa, Amazon Prime, E-commerce app, Amazon Pay, and the recent acquisition of iRobot to dominate the Smart Home market

All these companies are trying to grab the specifics of the markets to the primary product offering — considering the data laws within the country they operate in.

The Super App Strategy

With the above example from all the east and the west, we can try to connect some of the common points on which any super app is built -

1. Strong Core Use Case — With WeChat, Tokopedia, and GoJek — all the apps started with solving one of the core user problems efficiently and became the market leader for the same. WeChat with messaging, Tokopedia with its e-commerce offering, and GoJek with its ride-hailing platform
2. Good Payment System — Using the common payment system can be a game changer. The payment system can be used as a utility offering to the customer to get them hooked on the platform and use the data for identifying the customer’s purchasing preferences. This data is used to up-sell / cross-sell other products offered from the platform.
3. Third-Party Programs — These are the additional services provided either by the app itself or by integration with its third-party partners. WeChat offers mini-programs to integrate third-party offerings on the system to earn the commissions on same.

Tata Neu — the latest Indian Super App

Tata is already a well-established business in India — a company that is in business for about 150 years now. With the super app launch, Tata Group is looking to cater to onboard millennials — the rising Indian middle class with high purchasing power. Tata Group anyways provides these customers its offerings from the below offerings -

Credits: The Ken

• Curefit — with its fitness and health
• Bigbasket — for its grocery and household deliveries
• 1Mg — Tele consultation and Medicine Delivery
• IHCL (The Indian Hotels Companies Limited), Taj — for hospitality
• Starbucks — offerings for cafe
• AirIndia, Vistara, and AirAsia — Flight Offerings
• Zoya, Tanishq — Jewellery offerings
• Westside, TataCliq — for fashion
• Chroma — Retail Chain for Electronics
• Tata Play — Entertainment services
• Tata Cliq app
• StarQuik — Retail and Grocery app for Star Hypermarket

With its Super App, Tata Group is trying to hook these customers by providing the Loyalty Program with Tata Neu Coins for the customer’s past and new purchases -

The Loyalty Program for the Tata Neu

Tata Group has introduced the payments and is going to launch the UPI payments on its platform in the coming months. They also have plans to onboard third-party services on its platform in the upcoming months.

Current Challenges

1. Bad Customer Experience — the application’s app review has been bombarded with negative reviews since its launch in April during IPL but the app’s performance not being up to the mark with missing basic use-cases
2. Data Sharing Issues — Integrating with its offering the app has to pull the user’s past purchase data from its other systems which raise issues on the data sharing without the user’s consent

Other Players in India

Reliance with its Jiomart offering is already on the path to becoming the super-app for Indian consumers. Recently, Adani also announced the plans to build the super-app. How the super app ecosystem evolves in India would be interesting to see.