Super apps and the heating battle in Vietnam
In normal English, globally we would say “Text me”, “DM me”, “Add me on Facebook”, “Follow me on Instagram”, “Pay me money through Venmo”,…
Strange it may sound, these phases to be translated into Chinese would definitely be: “WeChat me”, “Add me on WeChat”, “Pay me through WeChat”,…
So what is that magic verb-noun WeChat?
With 1.08 billion monthly active users (yea Billion, aka *World Population/7*), WeChat cracked the door to a new era of applications that nowhere else in the world has seen anything like that. Before WeChat — nobody. But after WeChat — definitely someone wants to sneak in through that door to discover that era too. Funny how the copycat of Asia now has copycats following.
WeChat is more than just “one app” on the smartphone. To describe, office workers use it for work communication, ride hailing, payment. Parents use it to talk with children, transact money, pay for bills, household stuff. Teenagers use it for entertainment, chat. Even the generation that lags behind technology like the elderly over 60 use it to keep in touch with their family, or make friends, maybe? Come to the most traditional market in China, find a small grocery stand of a wrinkled lady, you’ll find that she accepts WeChat Pay too, no need for cash.
45 billion WeChat messages sent on a daily basis, 410 million audio and video calls per day, 170 million WeChat mini program users per day, those were hell of statistics any existing app is after.
Not much as an app, WeChat seems more like an OS for the whole China. It’s a super app.
1. The concept of Super App
A super app is simply an app that does everything.
Akin to the ecosystem of Silicon Valleys with startups, incubators, accelerators, VCs, mentors,…. for a startup to access any kind of resources, a super app is an ecosystem of services for users, for any daily activities.
Some super apps to name in the world nowadays would be, for sure WeChat, GoJek, Grab, potentially some friends from India like Careem, Paytm, or in Vietnam Zalo and Now are probably giving it a try. These apps are integrating every single service that covers our daily activities in one portal for users to access.
The story of a normal Chinese family would be something like this: “YU HUI, a boisterous four-year-old living in Shanghai, is what marketing people call a digital native. Over a year ago, she started communicating with her parents using WeChat, a Chinese mobile-messaging service.
Like most professionals on the mainland, her mother uses WeChat rather than e-mail to conduct much of her business. The app offers everything from free video calls and instant group chats to news updates and easy sharing of large multimedia files. It has a business-oriented chat service akin to America’s Slack. Yu Hui’s mother also uses her smartphone camera to scan the WeChat QR (quick response) codes of people she meets far more often these days than she exchanges business cards. Yu Hui’s father uses the app to shop online, to pay for goods at physical stores, settle utility bills and split dinner tabs with friends, just with a few taps. He can easily book and pay for taxis, dumpling deliveries, theatre tickets, hospital appointments and foreign holidays, all without ever leaving the WeChat universe.” (The Economics)
Why Super App?
The idea behind this is simply expanding product/service lines to obtain more revenue streams. Each app comes from a firm background, master its function and once it has user’s buy-in, services will be expanded to serve more needs, get more loyalty. And more than revenue, in this digitalized world, super apps promise a new mode of connecting with customers and an opportunity to amass a vast data trove about their preferences and purchasing behavior.
Once it has reputation and a strong user base, offers to get in the platform will come from other small apps. That’s the time when mini programs come to live on the Super App, and that’s the time when the Super App becomes an OS, an OS for a whole city/country. Like the founder of Gojek, Makarim said: “As you digitize these movements of humans, goods and tracking transactions, you create a new layer of visibility around how the cities actually operate.”
2. The battlefield in South East Asia.
After WeChat, we have seen the friend GoJek from Indonesia in a head-to-head combat with Grab from Malaysia for the position of the first super app in South East Asia.
Grab, having raised $14B so far — the first decacorn of SEA has claimed the plan to concentrate on Vietnam and Malaysia to augment super app efforts with the $1.4B deal from SoftBank this year. GoJek, after building a firm product that offers 21 services in its homeland Indonesia, has reached its hands to other countries with 4 services in Thailand and 3 in Vietnam. Although less appearing on news like Grab, GoJek definitely does not want to waste its resources by missing the chance to be the super app of SEA.
Other smaller friends in this battle may be named Careem — a ride hailing app from India with the aim to become a super app by joining force with Uber through a $3.1B deal this March, and in Vietnam specifically, I would say that Zalo and Now have the same dream too.
Super app — SEA but not an American dream.
“Super apps will definitely have a future in South-east Asia,” said Mr Tan Yinglan, founding managing partner at venture capital firm Insignia Ventures. He noted that the region’s Internet penetration rate is five years behind China — where super apps have found success — but growing twice as fast.
For sure SEA battle among super apps is heating. But most of the super app names we have heard belong to SEA region. Why does that even happen when Asia lags behind US for almost 10 years of technology?
First thing first, difference in Internet stages.
This could be explained in the chart below.
In a Tuesday interview in 2010, Steve Jobs said we’ve reached the beginning of the post-PC era. At that time I was playing with Facebook for the first time ever in life. The PC era of US started from a long time ago, since the emerging market of producing chips and hardware in the 70s. Then came the software era, and the Internet era in the 90s. By the time US reached the Internet era, people were already familiar with PCs. And by the time it reached the mobile era, PCs had already done a good job with the Internet. Facebook, eBay, … had been so familiar with users, and changing to the mobile era only meant changing the devices while the well-developed functions and the reputation of every single publisher still remained the same. Each app solves a problem at their best, and users use each one for each need, their behaviors are molded.
They went through the PC to the mobile stage. They belong to the PC-first group.
But we do not know yet. Maybe the giant Facebook will be the next representative to have this American dream as recently Mark showed his regret not to follow WeChat earlier ^^
Different story it is, to SEA countries. By the time the Internet came, we had a short, or no time at all getting familiar with PCs.
We leapt from the pre-web era straight to the mobile one, skipping the PC. We are the users of mobile-first group.
We got to the Internet with the existence of smartphones, therefore we have no clue about the specialization of Facebook, eBay,… and we are more eager to experiment things that the wonderful smartphone brought to us. ur behaviors are still not molded and are able to change.
From 20% penetration rate to Internet, after 5 years from the introduction of the iPhone to Asia in 2009, the figure doubled.
Second thing, let me guess, it boils down to data privacy issues.
Building a super app like WeChat means accepting services to dig into your data, too see your preferences, loathing, to understand you better than even you do. That means, exposing all your flesh and blood to the technology holders.
Data privacy need is in US’s blood. As the Internet came to them earlier, they soon became “older” than us Asians in terms of “technology experience”. They came through a long way of using the Internet, and their awareness of data privacy surely is of a higher level than us. Several proposals on cybersecurity has been put up since 2000s, and in 2015 Obama officially signed for a Cyber-security Act and in 2016 a Cyber-security National Security Action Plan. Only after 3 years did Vietnam brought the Cyber-security law into effect.
3. The future of super apps in Vietnam
As the heating race went on, Grab announced its plan to build super apps in Vietnam and Malaysia as one of its first steps to dominate the Asian market. In Vietnam the key players, I would say Grab, Zalo and Now.
The background of Grab is what everybody knows. Starting from a ride hailing app and now the dominant player in this field in Vietnam, Grab claims that 2/10 Vietnamese use it for vehicle booking. With its no1 position in Vietnam, Grab extended its services to food delivery and express, gradually integrating into Vietnamese people’s life by a great strategy of merchant acquisition — from daily needs to weekly needs — monthly needs …
Another Vietnamese representative would be Zalo — no 1 messaging app from VNG. With more than 100M accounts and takes advantages of great resources from the only unicorn of Vietnam, Zalo seems to have a plan to follow WeChat’s story by building a super app gradually from a messaging app with great user base. Zalo once launched in trial the Zalo Taxi and Zalo Food, then Zalo e-Government and developing official accounts like what WeChat did, this giant from Vietnam may have a chance to make the Chinese history happen in Vietnam.
Now is a different kind of service. Starting from a food delivery service, Now acquires a great network of drivers and well, a great user base too. With the trial of NowMoto in 2018 as a new use of the large network of motorbikes, Now seems to want to get in the race.
How could super apps affect Vietnam?
From the positive side:
Certain and most important thing, it helps accelerate the cashless process.
Dung Vu, senior account manager of Kantar Worldpanel Vietnam, said, “The daily transactional needs of consumers will be based on the Internet, which will benefit providers. In terms of payment, these super-apps promote the cashless economy by giving discounts on card or e-wallet payments.” This aligns well with the State Bank and the Government of Vietnam, which plans to turn Vietnam into a cashless country in the next decade.
Another thing is it would revolutionize the way business is done in Vietnam.
Vietnamese consumers, due to their increasingly busy lifestyle, are now willing to pay more for services and products that offer them convenience, hence the rising popularity of 24/7 convenience stores, packaged foods, online shopping sites, and home delivery. As a result, a one-stop app is likely to be welcomed by time-poor users, who can access multiple services such as ride hailing, food delivery, and messaging within one single application. Traditional retail outlets, service providers,… therefore have to learn to adapt with the modern needs.
From the negative side:
Surely the threat comes from the protection of user privacy and data. If not careful, these apps may face the same backlash as Facebook, which was under fire throughout 2018 for mishandling user information. In Vietnam last year, major retailers such as Mobile World Corporation, Con Cung JSC, and FPT Corporation have also been accused of leaking thousands of customer card details.
So what does it take to build a super app and who got the keys in Vietnam?
I guess 3 points:
- Strong user base
- Payment
- Other criteria like political approval, financial potential,..
Firstly strong user base.
Every super app we see nowadays come from different fields of services, but one thing they have in common is a strong user base when they decide to build a super app. Strong user base means they have proved their values in their strongest and specific field to users, gain trust and loyalty, then came to engage users with other services. Satisfy one — Satisfy further.
Not only having many users is enough, analyzing and targeting the right group of users is essential too. Let’s take a look at WeChat user report
As 2 years went by the age distribution shifted gradually to silver-haired users. Why is this significant? Because tech adopters like youngsters can happen to use any apps, and they are of less loyalty. Silver-haired use an app and they will never change as they no longer have the ability to adopt new tech. Having increasing number of elderly using one app means that app is essential to users’ life other than “entertainment” for the youth.
That’s the time when the app proves its essence to users’ daily life.
Zalo got this strength clearly in Vietnam, with over 100M accounts opened when the population of Vietnam is only 97M. It surely has access to almost all Vietnamese preferences and loathing, thus a strong point is given to Zalo.
With a 30% of Vietnamese use Grab as updated in 2017, Grab won Vietnamese people with a revolution of ride. Becoming the dominant in Vietnam, Grab surely has a potential to exploit users to build other services
Now comes from the base that Grab is doing in Vietnam — food delivery. No clear figure has been made but with 40,000 orders everyday, the user and driver network of Now is not to be messed with.
But in this point about user base I would give a clap for Zalo, as Grab and Now may win users from 18–35, but Zalo has the heart of 71% population of Vietnam aged 35+.
Secondly payment.
“The biggest moat GOJEK built is payment. Once you’re handling money for a user, you can build a castle of services within it.” — said GoJek.
Payment accounts for almost all of our daily activities. Taxi booking, food ordering, online shopping, room renting,… all requires money. Therefore the super-app-to-be all have their plan to integrate payment into their platform.
Grab acquired Moca, Zalo developed its own Zalopay, while Now — acquired by SEA Group is now doing its business with the help of Airpay from the same parent company. These steps are wise, as fewer and fewer e-wallets have been approved.
In this battle I would say that the winner has to be best at two criteria:
- Convenience
- Security
Users do not need a wallet that could be used at one shop, and cannot be used at another. And users do not want to use a wallet with low level of protection.
After some analysis, I would say that Grab has the strength in convenience, as the merchant acquisition strategy of Grab goes from daily needs to weekly needs then monthly needs then other big needs, and this helps cover all the needs from users, but Grab lacks security as the app could be used to transact money without any layer of verification like passwords or fingerprint.
Zalopay is better at security, however the merchant network is worse than the other 2 players. Therefore the result is yet to be known.
Last, I would mention political and financial criteria.
“Why not create a new social network to replace Facebook since Facebook’s philosophy is no longer suitable for the world? We need a social network where the value created by the community is shared, not funneled toward one person.” — said the Minister of Information and Communications of Vietnam in a recently held IT Conference, with a call to create a Vietnamese social media network and search engine to replace Facebook and Google.
Vietnam is realizing the exploitation of foreign products to access and acquire Vietnamese people’s data, as Facebook recently. Therefore the future for a foreign app to dominate Vietnam, I do not know, if it happens. As be from Vietnam has been released to fight directly with Grab, Luxstay to localize the needs of room booking in Vietnam, … I do not know if a foreign app is in a better position in this battle. If not, Zalo would definitely take the chance, as a Vietnam native app.
And why financial potential. As building a super app requires super money. Grab has raised in total of $14B, with a great amount used to build super apps in SEA. If it is the case, in Vietnam there is no one better than Grab.
This is just a shallow view of a 98-er. If I have any mistakes, down there in the comment box is where I wait to grow up.
