SOUTH-EAST Asia’s digital economy – comprising digital financial services, e-commerce, travel, online media, food and transport – will be worth US$122 billion in 2024, indicated the e-Conomy SEA 2024 report by Bain, Google and Temasek.
Digital economy revenue for 2023 came in at US$78 billion. E-commerce now makes up the bulk of the digital economy revenue, accounting for US$35 billion in 2024, up from US$31 billion in 2023.
E-commerce revenue grew by double digits to 13 per cent, from US$31 billion in 2023 to US$35 billion in 2024. This growth has tempered from the 39 per cent jump between US$23 billion in 2022 and US$31 billion in 2023.
Video commerce has helped to drive growth in the e-commerce segment, accounting for 20 per cent of total gross merchandise value (GMV) of US$159 billion in 2024. This is up from the less than 5 per cent of GMV in 2022 of US$130 billion.
Profitability has come into increased focus in this year’s report, with forecasts for profitability in the digital economy sector to hit US$11 billion in 2024, up from US$9 billion in 2023 and US$4 billion in 2022.
Profitability in the digital economy will be largely driven by online media and travel, with the segments booking 45 per cent and 15 per cent earnings before interest, tax, depreciation and amortisation (Ebitda) margins, respectively, in 2024. Online media includes tech giants such as Google and Meta.
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Ebitda margins in e-commerce and transport and food are also heading in a positive direction, with commission rates climbing and adjacent revenue streams, such as advertising, coming online.
However, these sectors will continue to be weighed down by the high costs of sales and marketing, with profitability hinging on the ability to offset costs with monetisation.
On the digital financial services front, lending continues to be the bulk of revenue for the region, accounting for US$22 billion out of the US$33 billion revenue in 2024. Digital wealth management is forecast to be the biggest segment in digital financial services aside from digital payments.
Assets under management in the digital wealth segment are forecast to hit US$410 billion by 2030. They hit US$69 billion in 2024, up 24 per cent from US$56 billion in 2023. While Singapore is making an outsized impact due to its status as a digital wealth hub, Florian Hoppe, partner at Bain, believes that other countries in the region will feature more prominently in the future.
“You do see a lot of activity from Indonesia through retail stock trading and even Thailand – this is not a pure Singapore story,” he said.
Digital banks are expected to move more into the digital wealth space and drive growth outside Singapore.
A return with a caveat
Private funding has returned to pre-pandemic levels, but with a caveat – that is, if funding for South-east Asia tech giants is excluded. The giants refer to Gojek, Grab, Lazada, Shopee and Tokopedia.
Early-stage funding – seed and Series A – continued to be resilient, with the first half of 2024 seeing about US$900 million in funding, a 2 per cent increase from the second half of 2023. Growth-stage funding – Series B and C – stood at about US$400 million in the first half of 2024, up 19 per cent from the second half of 2023.
However, both growth- and early-stage funding, at US$1.1 billion and US$1.2 billion, respectively, continue to lag the amount raised in the first half of 2023.
Late-stage funding – Series D and beyond – plunged in the first half of 2024, down 93 per cent at US$100 million from US$800 million in the second half of 2023. This amount is also lower than the US$400 million in the first half of 2023.
The majority – or 40 per cent – of early-stage investors polled in the report said that between 25 and 50 per cent of their portfolio is expected to be profitable within the next 12 months. However, 30 per cent of investors also said that less than 25 per cent of their portfolio is expected to be profitable within a year.
Scale and reduction of overhead costs are seen as key factors for achieving profitability, according to investors.
The third-biggest factor is sacrificing growth for improved unit economics. Founders and investors are having conversations around unit economics and profitability as early as Series A, said Fock Wai Hoong, head of South-east Asia at Temasek.
“What you’ll see is companies finding the right balance for their stage of growth,” he added.
