Outlook 2023: APAC POV
How brands can navigate the interregnum and continue to ride the wave of great changes still underway in APAC
Written by: Sharon Soh, Chief Planning & Audience Officer, UM APAC
The meteoric rise of Asia-Pacific (APAC) as the center of the world economy in the 21st century has been well documented by experts and pundits. Home to more than half of the world’s population, the region has climbed from low-income to middle-income status within a single generation, with the likelihood to generate more than 50% of world GDP and account for nearly 40% of global consumption, by 2040. As the center of gravity shifts toward APAC, the legacies of the West still looms large, for its influence and impact over the past many decades has helped shape the region into what it is today.
In history, interregnum refers to the intervening period between successive reigns, one that is marked by uncertainty whereby everyone knew the old world was ending but had little idea of what was to come, taking years for this transition to resolve. Certainly, it does seem like the APAC region has been experiencing an interlude, ready to harness and accelerate the regional momentum, whilst still grappling with myriad global forces at play, and navigating new paradigms and behaviour patterns emerging at the lightning speed that characterizes the region.
Even before the pandemic, the consumer trend of “localism” had already been burgeoning in APAC. In a 2019 McCann Worldgroup study that included nine APAC markets, it was reported that local love was definitively increasing with preference for local brands over global brands increasing by up to 19% as compared to three years ago, across sectors like health and beauty, technology and automotive. According to a more recent research done by Kantar, the pandemic has driven a further surge in “localism” with Chinese consumers feeling most strongly about championing local produce at 87% followed by consumers in South Korea at 76%. The biggest success factor for Asian brands is being Asian. With a finger on the pulse of constantly evolving consumer trends and a deep understanding of local culture, Asian brands have a better appreciation of local consumers’ likes and dislikes and are able to combine the innovation of multi-national companies (MNCs) with the preferences of the local market.
Naturally, this inclination also extends to media consumption behaviors. TikTok has been chipping away at Google’s and Meta’s foothold of the region whilst ecommerce players like Lazada and Shopee has given Amazon a run for their money in Southeast Asia markets. Netflix too has been challenged by the leading regional OTT players like Viu and iQiyi.
APAC’s consumer markets are not only a story of scale and diversity, but also one of rapidly shifting preferences and digital behaviors. Retail purchase across the region has already moved from traditional formats to ecommerce as the norm, with the expansion into social commerce and livestream shopping closely following. Online-to-offline commerce has also been increasingly experimented with, from click-and-collect services to more sophisticated social retail store concepts that bring together the virtual and physical worlds. The phenomenon of super apps also came to prominence in this region and has since cemented its utility in consumers’ lives, encompassing aspects from social media to healthcare to mobility, and integrating across different lifestyle domains.
APAC’s consumer markets are not only a story of scale and diversity, but also one of rapidly shifting preferences and digital behaviors.
This rapid digitization of one’s everyday life has resulted in APAC consumers being some of the most demanding in terms of personalization, with high willingness to share their data in return for every aspect of their digital journey to be personalized. In addition, this region has the most enthusiastic adopters of new and innovative technology products. For instance, many are already gaming, socializing, attending concerts, and purchasing items on early-stage metaverse platforms. The region is also primed to register the fastest web3 revenue growth rates, ahead of other global markets, driven by positive consumer attitudes towards cryptocurrencies and blockchain.
Clearly, local preferences will continue to rise in significance in the region, but global innovation and trends enjoy much greater influence. How can brands navigate the interregnum and continue to ride the wave of great change still happening in APAC? We unpack four ways to which this plays out in the region, highlighting the opportunities and identifying the watch-outs.
The End of the Digital Media Duopoly
While the digital media landscape in APAC has never been a true duopoly to begin with, Google and Meta have both had significant success across many markets here in the last decade and more, including populous areas like the South and Southeast Asia sub-regions, as well as smaller markets like Hong Kong and Taiwan. As the penetration rates for both internet and smartphone usage have yet to hit the ceiling in some of these markets — India, for example, is currently at 47% for both, Google and Meta will likely continue to grow as they remain the easiest entry points into search, mobile video, and social. However, as the local digital ecosystems mature with more options made available, consumers will surely and quickly diversify into other platforms.
As the local digital ecosystems mature with more options made available, consumers will surely and quickly diversify into other platforms.
Traditional search-led discovery has already started to shift directly into ecommerce marketplaces. As reported by Lazada, Southeast Asia’s leading e-commerce player, 57% of shoppers in the sub-region now search for products on e-commerce marketplaces, establishing these platforms as the new search engines. In TikTok, the short video sharing sensation that emerged from China, we have seen the convergence of video and social — a hyper-effective combination especially in Southeast Asia, Hong Kong, and Taiwan. Across these markets, TikTok usage has grown significantly since it first launched internationally in 2017 and, according to the most recent Global Web Index data, it now has 53% of all internet users using the platform at least once a week, steadily catching up with Facebook’s 75% and YouTube’s 80%. Capitalizing on its success in Southeast Asia as well as the ecommerce boom there, TikTok launched its TikTok Shop in Indonesia in 2021, rolling it out across the rest of the sub-region in 2022. Although still in its infancy, their current average monthly Gross Merchandise Value (GMV) in Indonesia is $200 million, on par with the market’s third largest ecommerce marketplace, Bukalapak’s $650 million average monthly GMV.
This convergence has also taken place in markets like Japan and South Korea. LINE, Japan’s most popular social media app with an 80% penetration of the market, first started out as a messaging service, but has since evolved into an all-in-one digital platform that offers a wide range of functionalities and services. Likened to China’s WeChat superapp, LINE today is not only a fantastic messaging app, but it also houses an in-app news feed alongside entertainment features like OTT streaming, games, and digital comics, as well as a cashless payment feature that is connected to its ecommerce shopping component. Found on most phones in South Korea, KakaoTalk similarly started as a messaging app more than a decade ago, and has since become a universe unto itself, with services covering banking and payments, ride-hailing, maps, and games. With these super apps so integrated into the lives of APAC consumers, suffice to say, we are now seeing the rise of oligopolies to uproot Google-Meta duopoly’s foothold in the region. On one hand, this presents an exciting opportunity as these platforms can keep their users within their ecosystem throughout the entire consumer journey, enabling brands to reach and engage consumers from end-to-end. On the other hand, some of these platforms operate as “walled gardens” limiting access to data that facilitates more effective marketing, and resulting in planning, implementation and measurement that becomes siloed.
These challenges are certainly not new to APAC marketers for the most powerful platforms in China — Baidu, Alibaba, Tencent, and Bytedance, collectively known as BATB — have been infamously siloed since its inception. Each platform occupies a territory that has endeavoured to lock users in and keep rivals out. This prevalent approach has resulted in limited ad tracking, creating challenges for marketers to implement even basic reporting automation. Nevertheless, within each of these sizeable walled gardens are sophisticated automation and data-driven possibilities alongside expansive paid, owned and earned media, as well as integrated commerce opportunities. Perhaps there could soon be a light at the end of the tunnel. In September 2021, China’s Ministry of Industry and Information Technology (MIIT) issued an ultimatum to internet companies to open up their walled gardens and allow rival links on their sites or risk regulatory action. Though reservations remain as to whether unrestricted connectivity will increase the difficulty of supervision and the dismantling of these walls will take time, this crucial step towards terminating monopolistic practices in the market has been welcomed by many. Since then, many of Alibaba’s platforms have started to offer WeChat Pay as one of the payment options alongside Alibaba’s own Alipay service. Tencent’s WeChat now also allows links to rival platforms to be shared in one-to-one chats.
Beyond China, many of the other APAC markets have also taken up arms against big tech companies, applying existing antitrust tools to pre-empt potential anti-competitive conduct whilst contemplating new rules to rein in the digital market. A watershed moment in 2021 saw South Korea’s National Assembly approve amendments to the Telecommunications Business Act, which impose new restrictions and mechanisms of greater regulatory scrutiny over app operators prohibiting them from leveraging their positions to enforce specific methods of payment on app developers. In India, a 16-member digital competition law panel has been appointed to examine anti-competitive practices, and develop a new regulatory framework to regulate anti-competitive business practices by big tech companies on its platforms. Japan also recently closed an investigation against Rakuten for “abuse of superior bargaining position”, after the ecommerce marketplace submitted changes to its ‘free shipping’ policy.
In the digital era, digital and internet technologies have not only become intertwined with consumers’ daily lives, they have also increasingly become a critical driver for economic growth. The dark side of which has been that application and commercialization have led to negative impacts including monopoly and violation of data privacy. As the race towards “super app supremacy” continues in APAC, the winners will likely be the platforms that not only cater to multiple aspects of a consumers’ life in as personalised manner as possible, but also elicit trust from the consumer and the brands that they partner with.
Twenty Twenty Me
Most Asian cultures are predominantly collectivistic in nature. A community or group identity is encouraged and the notion of a separate, autonomous self is deemphasized. In comparison to individualistic cultures where the motivation to stand out is driven by the desire to be admired, individuals who ascribe to collectivistic values are more inclined to conform to group norms. Across the world, we are seeing a rise in individualism. In APAC, economic progress and social reforms have accelerated household incomes, spending power and the breadth of choice, resulting in a new age of individualism that has started to upend the region’s traditional culture of collectivism. Whilst this growing sense of individualism in APAC came to prominence among the Millennials, it has become more pronounced with the Generation Z.
A research conducted by Asia Research Media saw that Indonesians are indeed becoming increasingly individualistic with Gen Zs leading the charge. For instance, enabling self-expression via consumption choices was found to be important to 42% of Indonesian Gen Zs, compared with only 26% of Indonesian Millennials. One of the ways young Indonesians are expressing themselves is through customising and personalising existing traditions, adapting the ways in which they choose to celebrate them. Designer Ria Mirandawants for example produces culturally appropriate clothing with a modern twist, encouraging religious Indonesians to embrace new colours and designs while still adhering to their religion.
This sense of individualism is also especially apparent in younger consumers in China. According to research from global insights firm Agility, Gen Z consumers in China, who now wield significant spending power, put individuality and self-expression first when deciding which brands best represent them. The campaign by haircare brand Vidal Sassoon, ‘I Follow Me’, for the China market called on consumers to cast aside societal pressures and express their true selves, with the #ifollowme hashtag created to encourage Chinese youth to explore life from new perspectives. The need for self-expression has also increased the demand for personalization and many brands are tuning into the trend. Some like Louis Vuitton’s ’Hot Stamping’ program enable customers to stamp monograms on their leather products. Others like Burberry have partnered with tech platforms to create unique AR shopping experiences in-store, enabling them to drop limited editions aimed at specific shoppers, in real-time.
Gen Z consumers in China put individuality and self-expression first when deciding which brands best represent them.
Whilst rapid economic growth has helped shape a more self-orientated mindset in the APAC Gen Z, growing up with technology, the internet and social media in a region that has transformed so dramatically probably had the most profound effect. From the content recommendations on OTT platforms, to tailored products being showcased on the home pages of ecommerce marketplaces, to video content shared on social media feeds, the algorithmic culture of today’s internet alongside the number of platforms jostling for consumer attention has enabled mass personalization and further fuelled this sense of self. The advent of web3 and the metaverse has also put a new spin to self-expression. From showing up as an avatar on an online gaming platform like Fortnite to personalizing one’s avatar with virtual accessories on Zepeto, the metaverse-like social networking platform, APAC consumers are loving these new and novel ways of expressing their individuality. Launched only in 2018, Zepeto has become the largest such site in APAC with an active monthly user base of up to 20 million users predominantly in South Korea, Japan, and China. Many brands have since jumped onto the Zepeto bandwagon. The Gucci collaboration in 2021 for instance allowed users to dress their Zepeto 3D avatars in pieces from Gucci’s latest collections, at the same time driving the aspiration to own the brand in the offline world.
This trend of self-centered digital expression is also reflected in the fast-growing passion economy. Many digital creators started out by sharing their personal passions and interests online, and only to find ways to monetize the content they create later, thanks to the various social content platforms. From product reviews to how-to videos to self-help discussions, it is now easier than ever before to earn revenue through content created around interests. Nearly any topic or subject has monetization potential, providing equal opportunities for everyone to access and create alternative income streams. Specifically, creators in APAC are becoming less motivated by monetary gains and more by self-expression and entrepreneurship. Around half of creators say their top motivation is to express themselves, do something fun, or explore some of their interests and passions. For Gen Z creators, many seek new and future-leaning creative endeavours that can also lead to becoming business owners down the track. In Australia specifically, 37% of creators aspire to become a business owner. In addition, many want to positively impact social causes and 95% of creators are taking action to advance or support causes or issues important to them.
This trend of self-centered digital expression is also reflected in the fast-growing passion economy.
As brands and marketers grapple with the ongoing cultural and technological shifts, there needs to be the realization that individuals can now have many different personas. Who they are in person and who they are on social media or on an online game may not necessarily be the same. Consumers today also do not just want to use news ways to consume and engage, they want to use them to create, remix and express themselves, on platforms and in communities that relate to their different personas. As brands seek to connect with consumers with all of the ‘me’s’ rather than just ‘me’, what can help bring them altogether would be authenticity, participation and trust.
The Rise of Synthetic Media
The emergence of APAC as a pioneering force in artificial intelligence (AI) has been observed even as the global adoption and implementation of AI continues at pace. APAC is the fastest growing market in the world with spending on AI systems expected to rise from $17.6 billion in 2022 to around $32 billion in 2025, as reported by global market intelligence firm, IDC.
One of the use cases of AI is synthetic media. Also known as generative media, it represents any type of media content — be it text, image, video or sound — that has been generated by AI algorithms. The launch of ChatGPT late last year, an artificial intelligence chatbot developed by OpenAI, has brought much attention to the rise of synthetic media. Suffice to say, tech companies in APAC have quickly responded. For example, one of South Korea’s biggest telecommunication operators, SK Telecom, is planning to fully launch its own artificial intelligence chatbot, though it is looking like a very different product from ChatGPT. A beta version — “A.” (pronounced ‘A dot’), based on generative AI was already launched in May last year and the company plans to launch the full version into the market later this year. Their end game, however, is to create a super app out of A. by integrating SKT’s various services, ranging from music streaming to ecommerce and payment apps, into the chatbot. Another South Korean company, Xinapse, a generative AI technology start-up that has focused on AI voice technology, has launched a software ‘HyperReal’ that enable users to easily and quickly create natural and human-like AI voice content by simply entering text. Even voices that are new and have never existed before can be created by adjusting various voice characteristics or synthesizing different voices into one. This technology has since been applied to various industries such as animation, TV commercials, audiobooks, and broadcasting media.
Whilst South Korea has been developing their own generative media technology, other markets have started to adapt and apply global technology as a means to improve customer insight, increase employee efficiency, and accelerate decision making. India is now home to a ChatGPT-powered AI chatbot called Lexi. Launched by Velocity, a financial technology company, the chatbot helps ecommerce founders by providing them with business insights in a simplified way. In Singapore, it has been reported that the government has plans to integrate the technology into their productivity work tools and progressively roll them out to 90,000 civil servants, starting with the Smart Nation and Digital Government Office (SNDGO). The ChatGPT fever has even reached tech emerging markets like Vietnam whereby several tech firms in the market are using it to do different tasks, from writing codes and bug checking to data analysis and report creation. Whilst programs designed to find bugs are not something new in the programming field, what sets ChatGPT apart is how quickly it can explain a problem and reach a solution. Across many markets, even as businesses start to embrace AI tech such as ChatGPT to gain a competitive advantage, consumers are also joining in for the novelty and fun. Many platforms like LINE for instance are leveraging the hype as well. The popular Japanese instant messaging app recently added a ChatGPT-based bot account that allows users to chat with it, and saw a surge in users with 200,000 new users joining the app in just three days. Users can simply add the bot, known as “Al Chat-Kun” as a friend on LINE, to start chatting right away.
Across many markets, even as businesses start to embrace AI tech such as ChatGPT to gain a competitive advantage, consumers are also joining in for the novelty and fun.
Since the onset of the pandemic a few years ago, changes in the consumer’s digital behaviors have resulted in a shift towards precision marketing with the demand for addressable content or personalization growing alongside. One of the key challenges for delivering personalization at the speed and scale that leverages the available data signals, is in the development of content that is truly dynamic and can be deployed in real time. The use of AI generative technology would not only address this problem, it could also help marketers better manage what is currently a labor-intensive and rather cost prohibitive content development process. Rephrase.ai, a start-up founded in India, has built an AI-powered synthetic video creation platform that enables videos to be created with text as inputs using AI. The company offers generative AI, facial mapping, audio cloning, and video creation for personalised messaging campaigns as well as uses cloning avatars of celebrities and influencers for brand promotions. Cadbury implemented a Diwali campaign with Rephrase.ai that had them create a digital avatar of India’s biggest celebrity — Shahrukh Khan. 500 video ads were created and targeted to specific PIN codes on Facebook and YouTube with each video referring to local stores in that area. A microsite was also built where shopkeepers across the country could enter their store’s names and receive a personalized video of Shahrukh Khan endorsing their store. The shopkeepers were also encouraged to use the videos to promote their stores across social media.
Indeed, synthetic media looks incredibly promising with multiple practical applications in place to sustain interest and its development. As we look forward to its further development whereby it could help enable even more complex digital creations, marketers will need to keep in mind that this democratized creativity will sit with both the brand and the lay consumer or everyday creator alike. In this level playing field, brands will have to work harder at creating content and experiences that keep pace with the consumer’s newfound creativity.
A Return to the Kitchen Table Internet
For a new world order to be born, this transitional period we are entering will bring increased activities among start-ups and a return to the “kitchen table” DYI approach to innovation. The oligopolies that have emerged in APAC today were mostly the start-ups and unicorns of yesterday. Four of the world’s top ten technology companies by market capitalization are Asian, and, according to a McKinsey study, the region accounts for 43% of global growth in start-up funding. Unsurprisingly, China leads the way in tech entrepreneurship in the region and it is also home to 26% of the world’s unicorns. While the start-up scene in the West is being shaken up after over a decade of ample venture capital funding and unbridled growth, here in APAC (outside China), start-ups are just starting to charge ahead, as many are exploring what’s possible with the next wave of advances in technology, eager to help solve entrenched social, financial, and environmental challenges in the region or within their local markets.
Like some of the global markets that have seen start-up funding fall significantly over the last 12 months, China also saw far less capital invested in their start-ups, its worst performance for the last 5 years. Due to regulatory pressure on the technology sector and a strict zero-COVID policy, venture capital funding in Chinese start-ups decreased by 46.4% to USD57.4 billion in 2022 from 2021, according to data and analytics firm GlobalData. Big tech companies like Tencent Holdings and ByteDance, identified as major drivers of tech and internet funding in China, have been slowing down since the COVID outbreak. There has also been a decrease in dollar funding for Chinese start-ups as large international investors pull back from the market. Since then, the government has stepped up support of its most promising tech start-ups, particularly in the sectors of robotics, quantum computing, and semiconductors, with as many as 9000 being designated as “little giants”, an official stamp that comes with access to preferential treatment such as state investment, cheap loans, tax breaks, and help recruiting talent.
Even as China shifts its attention to more local funding and small and mid-sized tech start-ups, the start-up scene in emerging economies like Southeast Asia has been more vibrant than ever before. The start-up ecosystem had already started to prosper for a number of years but the pandemic brought millions of new people online for the first time and it became an accelerator for digital services, in turn fuelling remarkable growth in start-ups. In addition, the governments of this sub-region have put in place measures incentivizing the development of new tech start-ups, both international and local, attracting larger investments into their markets. Whilst in the past, Southeast Asian start-ups would traditionally focus on offering services to individuals and following a B2C model, newer start-ups are now more focused on emerging technologies. According to a report by Google, start-ups in this region are more likely to explore AI, decentralized finance (DeFi), fintech, ecommerce, health technology, and sustainability. In particular, the ecommerce vertical remains rich in opportunity and continues to be an area of interest for the region’s investors and entrepreneurs. Within that, specific areas of interest include quick commerce and social commerce. Reseller-led social commerce for example could facilitate access to Tier 2 and Tier 3 markets via more streamlined and cost-effective acquisition, distribution, and fulfilment channels, whilst quick commerce and live commerce could tap into the digital-first and fast-paced lifestyles seen in Tier 1 cities. The growth of blockchain and Web3 companies in the region also cannot be understated. According to Tech in Asia data, blockchain-related businesses that raised funds increased from 2.1% in 2020 to 9.2% as of May 2022.
Whilst in the past, Southeast Asian start-ups would traditionally focus on offering services to individuals and following a B2C model, newer start-ups are now more focused on emerging technologies.
2022 has also been a remarkable year for Indian start-ups. It was recently reported that there were 84,012 start-ups registered in the country till November 2022, up from 452 in 2016, and the market has secured the 3rd most prominent position in the world, after US and China, as an ecosystem for nurturing start-ups. This has also brought more jobs to India’s economy. In 2022, there were about 230,000 jobs that new-age companies created, up from 190,000 in 2021, with the expectation that it would further increase. A notable point is that not all were formal employees on company payrolls. A survey of 500 start-ups reported that over 90% of founders of companies such as Zepto and Dunzo said more than 70% of their total employees were gig workers. This shift in the market to a more semi-gig workforce is very much driven by the tech sector, in part to address the industry’s talent crunch. On the other hand, it has also been welcomed by these workers with new-age technology skills such as artificial intelligence and machine learning, as it gives them the opportunity to explore a range of options and gain broader skillsets in an industry that is dynamic and evolving. In the past, the best talent in the nation was limited to big corporations only. Now, with the elements of entrepreneurship and freelancing seeping in, more and more are inclined to use their creativity in their own style empowered by the new tools and technology that is imbuing everyday life, and this reverse flow of talent will inspire the start-up sector in new ways.
The evolution of technology in the last decade of APAC has been incredibly multi-dimensional. Yet, when it comes to the speed of technology and digital adoption, the last two years have been incomparable. Looking ahead, technology will continue to be the biggest driving force for the region and as the world seeks to resolve the interregnum and adapt to rapidly changing landscapes, brands in APAC should confidently stride forward.
