Will Indonesia become the new tiger in Southeast Asia? The last few years have seen a rapid increase in Indonesia’s internet economy. Apart from e-commerce, online games, advertising, music and video subscriptions, as well as online travel and ride/food services are all enjoying adoption from young Indonesian consumers.
In the second half of the last century, Hong Kong, Singapore, South Korea and Taiwan were known as the ‘tiger’ economies of Asia because their rapid industrialization, trade, and financial development led to high sustained growth rates. Today the first two countries are the world’s leading financial centers and the second two countries are known for their state-of-the-art manufacturing industries.
A similar transformation is taking place in Southeast Asia, only now at the forefront of change being driven by the mobile economy. Nothing is clearer than in Indonesia, the world’s fourth largest country by population. That’s right—Indonesia is home to more than 265 million people.
Indonesia is a young country. The median age was 29, and 60 percent of the population was 40 or less. Indonesia is one of the most mobile-first countries in the world: of the 150 million internet users in Indonesia, 95 percent or 142 million are mobile. 60 percent of all Indonesian adults now own a smartphone.
When you combine these three factors, Indonesia represents a large population of mobile-savvy young digital natives. On average, we spend 206 minutes a day on social media. Top platforms like YouTube, Whatsapp and Facebook are all used by more than 80 percent of Indonesians online. And 76 percent of all internet users in Indonesia make purchases from their mobile phones, the highest rate of mobile e-commerce of any country in the world.
The last few years have seen a rapid increase in Indonesia’s internet economy. Apart from e-commerce, online games, advertising, music and video subscriptions, as well as online travel and ride/food services are all enjoying adoption from young Indonesian consumers.
A Google and Temasek report released last year stated: Indonesia’s “digital archipelago” is firing on all cylinders. Backed by the largest internet user base in the region (150 million users in 2022), Indonesia has the largest internet economy ($27 billion in 2022) and the fastest growing (49 percent CAGR 2022-2022) in the region. With ample space in all sectors, it is poised to grow to $100 billion by 2025, accounting for $4 of every $10 spent in the region.
The boom in Indonesia’s mobile economy has been fueled by a massive surge in venture investment, with $6 billion rising over the past four years. As one venture capitalist wrote in Venture Beat, the opportunities in Indonesia today are like investing in China in 2008.
The billion-dollar unicorn has appeared in several key sectors, such as Tokopedia (e-commerce), Traveloka (online travel reservation), and Go-Jek (ride vehicle). What makes VCs so excited is the ability to support proven business models from China and the US while adapting them to this huge, untapped market.
However, significant challenges and barriers to growth remain. Similar to India, Indonesia suffers from poor infrastructure. While mobile data is relatively cheap, bandwidth is poor: the average mobile download speed is around 10 mbps, less than half the global average. And while smartphone usage continues to increase, relatively inexpensive phones don’t have a lot of data storage, which makes users picky about which apps they use on a regular basis.
Perhaps the single biggest challenge (and opportunity) for Indonesia’s mobile economy is payments and e-money. Google and Temasek estimate that e-commerce in Indonesia will reach $53 billion by 2025. This growth is even more impressive considering the fact that less than half of Indonesians have a bank account, and only 2.4 percent of Indonesians have a credit card. Therein lies the great paradox of Indonesia.
Fifty-six percent of all Indonesians live in big cities and increasingly live their lives on mobile devices. The other half live in rural areas and are spread across 17,000 islands where cash remains the main medium of exchange. Because traditional banks rely on physical locations to acquire customers, this deployment limits their reach.
With more than 180 million unbanked Indonesians currently using smartphones, the race is on to provide them with mobile money and financial services. A new wave of fintech startups is invading the space, but some of the biggest strides have been made by players like Go-Jek, which already has massive distribution and a strong organic pull to drive adoption. Go-Jek’s mobile wallet, Go-Pay, makes it easy for motorbike drivers to get paid.
At the same time, Go-Jek has partnered with traditional banks to offer conventional products such as mortgages. It is truly transformational. A recent article in the Nikkei Asian Review cites the example of a street food vendor becoming a Go-Jek driver. He was never considered creditworthy, but after driving for Go-Jek for four years he was able to get a mortgage from a state-owned lender that partnered with Go-Jek and would be able to buy his first home. Extraordinary!
It’s easy to see why Indonesia’s mobile economy is such a happy place. For app developers and marketers, what are the opportunities? Here are some ideas. First, video is the dominant media format. Using videos for app marketing or developing YouTube influencers to sell your brand or app is a great idea. Also, consider focusing on women and their needs and wants.
Another Google report shows that women account for the majority of high-frequency household purchases and are therefore good targets for e-money services. Moreover, these young ladies are very aware of trends and hence an influence/curation/review platform will be invaluable for e-commerce.
In general, one way to look at the current mobile app opportunities in Indonesia is that a “first tier” platform – the equivalent of Amazon or Uber – has been built and that value will be created on a “second tier” platform. So instead of a travel booking site like Expedia, focus on a travel review site like Tripadvisor.
As millions of young, developing Indonesians spend more time and money on mobile, curating/validating the things they need and love will become even more valuable. Just a few thoughts to inspire you to dig deep and create your own best app for one of the hottest mobile markets in the world!
