I`ve been reading, listening to podcast interviews with top product management execs, and researching a lot these days on the Asian super app business model that has successfully established itself in the region over the last decade, but failed to gain traction in the West, despite some notable attempts by the well-known tech giants. That`s why I decided to get deeper into this matter and find out the reasons behind it. What could be driving the Super-App business model to such huge popularity and success in Asia, while at the same time, we see the West being less receptive to this model and less willing to recognize it? Why it`s not working in the Western, developed world? Does it have something to do with the regulatory and economic landscape or is it something on a consumer`s level? Perhaps, it`s both?
In this article, I`m summarizing the top 5 reasons for this disparity that I came up with after my thorough research on this very exciting topic. Let`s delve into them together!
1. Market Conditions and User Behavior
In many Asian countries, especially emerging markets, super apps often provide the first mass-market internet experience for users. These apps offer a comprehensive range of services on a single platform, which is highly appealing in regions where digital infrastructure might not be as mature. In contrast, users in Western countries often have established preferences and loyalties to specific platforms dedicated to particular services (like Amazon for shopping, WhatsApp for messaging, or PayPal for payments).
Here are some examples:
Southeast Asia:
- Grab: Originally a ride-hailing service in Malaysia, Grab has evolved into a super app offering food delivery, payment services, and even financial products across several Southeast Asian countries like Indonesia, Thailand, and the Philippines. For many users, Grab provides a gateway to online services beyond just transportation.
- Gojek: Similar to Grab, Indonesia’s Gojek started with ride-hailing and expanded to include a vast array of services like food delivery, payments, and more. It serves as a comprehensive digital platform, especially in Indonesia, where it has profoundly impacted how people access and use various online services.
South Asia:
- Paytm: In India, Paytm began as a mobile payments system and quickly expanded to become a full-service digital ecosystem that includes e-commerce, financial services, and entertainment. Paytm’s wallet and payment features were many Indian users’ first experience with digital payments, especially significant post India’s demonetization in 2016.
- BKash: In Bangladesh, BKash is a mobile financial service that has brought banking and e-commerce capabilities to a wide segment of the population previously underserved by traditional banks. As a super app, BKash offers payment services, money transfers, and various other financial services, reaching a broad user base.
These super apps have succeeded in their respective markets by filling gaps in infrastructure, such as limited physical banking facilities or unreliable public transport, thus providing an integrated solution that caters to multiple needs through a single platform. They capitalize on the mobile-first approach prevalent in these regions, where many users access the internet primarily through smartphones. By offering an array of services, these apps retain user engagement and become deeply integrated into daily life, setting a pattern for digital consumption that differs significantly from the more segmented app usage common in Western markets.
2. The Regulatory Environment
The regulatory environment plays a significant role in the adoption and success of super apps, particularly in how different regions approach data privacy, anti-competitive practices, and overall market regulation.
1. Asian Markets:
- Less Stringent Regulations: In many Asian countries, regulations around data privacy and market competition are relatively less stringent or are in the earlier stages of development. This regulatory landscape allows super apps to collect and use a wide range of user data to cross-promote services and personalize offers. For example, a super app could leverage its insights from a user’s transportation habits to recommend related services like food delivery or financial products without facing the rigorous compliance requirements seen in Western markets.
- Support for Innovation: Governments in several Asian countries actively support and promote technological innovation as a means to drive economic growth and improve public services. This can include relaxed regulations for new digital business models, which aids the growth of super apps. For instance, China’s initial approach to internet-based businesses allowed giants like Tencent (WeChat) and Alibaba (Alipay) to expand rapidly into multiple sectors.
2. Western Markets:
- Strict Data Protection Laws: In contrast, Western countries, particularly in Europe with the General Data Protection Regulation (GDPR), have stringent data protection laws that heavily regulate how companies can collect, store, and use personal data. These regulations make it more challenging for a single app to integrate diverse services that require extensive data sharing and processing.
- Anti-Competitive Regulations: The U.S. and European regulators are vigilant about maintaining fair competition. They scrutinize and sometimes obstruct the kind of rapid expansion and cross-sector dominance that super apps pursue. For example, efforts by major tech companies like Google or Amazon to extend their reach into new areas frequently attract regulatory review.
- Consumer Protection Focus: Western regulations also strongly emphasize consumer protection, which includes transparency about data use, the right to data portability, and the right to be forgotten. These provisions necessitate additional operational adjustments and costs for apps wishing to offer multiple integrated services.
The distinct regulatory environments thus influence the operational and strategic decisions of digital platforms. In Asia, the more permissive regulatory environment can accelerate the growth and diversification of super apps. In contrast, in the West, rigorous regulations not only limit the data practices that are central to the super app model but also increase the complexity and cost of compliance when adding new services, thereby inhibiting the super app model’s feasibility and attractiveness.
3. Economic Factors
The economic factors that contribute to the success of super apps in Asia largely revolve around the cost-effectiveness of these platforms, which is especially appealing in regions with high price sensitivity among consumers. Here’s a deeper look at how these economic factors play out:
Price Sensitivity:
- Emerging Market Dynamics: In many parts of Asia, a significant portion of the population has a lower disposable income compared to Western countries. This economic reality makes cost an important factor in everyday decisions. Super apps capitalize on this by offering a range of services at competitive prices, often subsidized by the platform to gain market share and user loyalty.
- Bundled Services: Super apps frequently bundle services together, offering promotions that span multiple needs—such as ride-hailing, food delivery, and online shopping—all within one platform. This bundling can reduce costs for users through economies of scale, discounts, or loyalty rewards, making these apps more attractive compared to using multiple specialized apps.
Discounts and Promotions:
- Cross-Promotion: Super apps often use cross-promotion tactics to encourage users to try different services. For example, a user who primarily uses the app for messaging might receive a discount code for their first meal delivery. This not only introduces users to more services but also increases their reliance on the app for daily needs.
- Volume-Based Discounts: By driving a high volume of transactions, super apps can negotiate better rates with service providers, which they can then pass on to consumers. These discounts further enhance the value proposition of using a single app for multiple services.
Market Penetration Strategies:
- Subsidized Pricing: In the early stages of market entry, super apps often subsidize prices to attract users, absorbing the short-term losses in exchange for long-term market share. This strategy is particularly effective in cost-sensitive markets where initial price barriers might deter potential users.
- Financial Services Integration: Super apps also integrate financial services, providing micro-loans, insurance, and investment products tailored to the local economic context. These services are not only convenient but often more accessible and cheaper than traditional banking products, appealing strongly to the unbanked or underbanked populations common in Asia.
Economic Empowerment:
- Creating Economic Opportunities: Super apps frequently create new economic opportunities for local businesses and individual service providers by integrating them into the digital economy. For instance, local restaurants can reach more customers through food delivery services, and individuals can earn income as ride-share drivers. This not only helps to grow the app’s ecosystem but also supports local economies, making the super app model even more integral to users’ lives. The cost-effectiveness of super apps, coupled with strategic financial incentives, makes them highly appealing in Asia, where economic factors significantly influence consumer behavior. This approach has helped super apps become not just a service provider but a crucial part of everyday life for many users in these regions.
4. Fragmentation of Services and Cultural Factors
The fragmentation of services in Western markets significantly impacts the feasibility and potential success of super apps. Unlike in many Asian markets, where a single app can provide numerous integrated services effectively capturing broad user engagement, Western markets demonstrate a strong preference for specialized platforms that focus on specific service categories. Here are some key points that highlight this phenomenon:
Specialization and Market Leadership:
- In sectors such as transportation, lodging, and professional networking, Western markets have distinct leaders: Uber for transportation, Airbnb for lodging, and LinkedIn for professional networking. These platforms have optimized their services to cater specifically to the needs and expectations of their user bases.
- These specialized platforms have developed deep expertise, robust infrastructure, and brand loyalty that a new entrant, especially a super app trying to cover multiple service areas, would find difficult to match.
Consumer Preferences for Specialization:
Western consumers typically prefer to use different platforms for different needs, appreciating the tailored approach that specialized services offer. For instance, they might choose Uber for its efficient ride-hailing service, Airbnb for its unique accommodation listings, and LinkedIn for its professional environment and networking opportunities. This preference is linked to the perception of expertise and trust in handling specific types of transactions and data securely and competently.
High Competitive Barriers:
- The competition in Western markets is intense, with each category having well-established players. New entrants must offer significant innovations or superior service experiences to dislodge or compete with these incumbents.
- Additionally, marketing and customer acquisition costs in these fragmented markets are high, and user acquisition often involves convincing users to switch from services they already trust and are familiar with.
Turning to the specific case of BranchOut:
BranchOut’s Concept and Execution:
BranchOut attempted to build a professional network within Facebook, aiming to tap into the social connections of users for professional purposes. Initially, it seemed to be a promising idea because of the vast user base of Facebook and the ease of leveraging existing social connections.
Consumer Resistance:
However, BranchOut’s growth stumbled as it became clear that users in Western markets were uncomfortable mixing their social and professional lives. Users expressed a preference for keeping their professional interactions separate from their social ones, leading to resistance against fully engaging with BranchOut’s platform.
This case highlights a broader reluctance in Western markets to merge different aspects of life into a single platform, which contrasts with the more flexible approach seen in many Asian markets where super apps thrive.
This preference for specialized services in the West, exemplified by the story of BranchOut, underlines the difficulty super apps face in these markets. The failure of BranchOut serves as a cautionary tale of the challenges inherent in overcoming established consumer behaviors and market fragmentation.
5. The Technology Leapfrogging in Asia and the Mobile-first Consumer
The phenomenon of technology leapfrogging in some Asian countries plays a crucial role in the success of super apps. This concept refers to skipping over traditional or older technology generations, such as landlines or desktop computers, and jumping directly to newer technologies, primarily mobile internet. This has several implications for technology adoption and the design of digital services:
Mobile-First Consumer Base:
In countries like India, Indonesia, and the Philippines, many consumers accessed the internet for the first time through smartphones, bypassing the era of desktop computing that dominated early internet experiences in Western countries. This shift has cultivated a large, mobile-first user base that is highly proficient and comfortable with conducting a variety of activities on their smartphones. As a result, these consumers are more receptive to using mobile applications for a wide range of services—from shopping and financial transactions to entertainment and communications—because the mobile interface is their primary or sole point of digital interaction.
Design and Functionality of Super Apps
Super apps are designed to cater to a mobile-first audience, providing a cohesive and integrated experience that aligns with the on-the-go lifestyle of their users. They combine multiple functionalities—such as payments, messaging, shopping, and more—into a single, seamless mobile application, reducing the need for multiple apps and simplifying the user experience. This integration is particularly appealing in regions where mobile data and storage space might be limited, making the efficiency of a single app that accomplishes many tasks a practical and attractive solution.
Infrastructure and Market Readiness
In many Asian markets, the rapid deployment of mobile broadband has outpaced the development of other forms of digital infrastructure like widespread broadband internet or reliable electricity, which further emphasizes the importance of mobile solutions.
Governments and businesses in these regions have also supported this shift with initiatives aimed at boosting mobile penetration and usage, such as through digital literacy programs and incentives for mobile payments, fostering a conducive environment for the adoption of super apps.
Economic and Social Implications
The mobile-first approach has significant economic implications. It lowers the barrier to entry for new users and small businesses alike, facilitating greater economic participation. For instance, small vendors can easily join e-commerce platforms, access financial services, or start offering ride-sharing services through their smartphones.
Socially, the widespread adoption of mobile internet through super apps has helped bridge the digital divide, bringing more citizens into the fold of digital services and connectivity, which in turn helps to accelerate socio-economic development.
In summary, the leapfrogging of technology in Asia has not only shaped a mobile-first consumer base but also driven the design and adoption of super apps. These apps perfectly cater to the needs and conditions of a demographic that has embraced mobile technology as their primary gateway to the digital world, making super apps a natural fit for these markets.
About the Author:
Desy Paunova
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