Southeast Asia's digital economy is now worth more than US$50 billion, but remains highly fragmented with multiple players battling for the increasingly lucrative region.
Fuelled largely by strong demand in the travel and e-commerce industries, the region had emerged as a hotly contested battleground for both large global players from the US and China as well local players with expanding footprint.
According to Bain & Company's Digital Acceleration in Southeast Asia report, travel and tourism was the leading driver of the region's digital economy, accounting for US$22 billion of the total digital spend in 2016. The e-commerce sector generated US$15 billion, while media and entertainment churned US$3 billion and digital advertising--on websites, in-app, and search--was worth US$ 2 billion.
The findings were based various research including a survey that polled 2,400 consumers across six Southeast Asian markets: Singapore, Malaysia, Thailand, Vietnam, Indonesia, and the Philippines.
Bain estimated that the region now was home to 230 million "online engaged consumers", most of whom used digital for social and entertainment. In fact, with the exception of Singapore, between 91 percent and 91 percent of consumers said they either made a purchase using social media or were influenced by the platform to make a purchase. This figure was 79 percent in Singapore.
"Social is fast becoming a robust channel in its own right as users rely on it to find products, interact with sellers, and ultimately make a purchase," the report stated, noting that 85 percent of respondents across the region used social and messaging apps multiple times a day.
There also were 120 million mobile gamers, with the region's games sector accounting for US$2 billion of overall digital spend.
Some 300 million owned a smartphone, driven by widespread availability of low-priced phones that had, in turn, boosted connectivity across Southeast Asia. Indonesia, for instance, had 48 times more users connected to mobile than fixed broadband.
Florian Hoppe, the report's lead author and co-lead of Bain's Asia-Pacific digital practice, said: "We have seen monumental digital growth in Southeast Asia over the past year, but what is even more interesting is how these businesses are competing with very different business models, inspired by both China and the US players. The challenge that lies ahead is whether these companies can navigate what is still a highly fragmented market to stay head of the competition."
According to Bain, there were more than 7,000 startups in Southeast Asia, with new businesses registered every day, and consumers had multiple platforms from which to choose to fulfil their daily needs. The e-commerce sector, for instance, comprised different key players in each of the six regional markets where Qoo10, Carousell, Amazon, and Lazada were among sites Singapore respondents most frequented in the past six months, while their Indonesian counterparts visited Tokopedia, Bukalapak, OLX, and Elevenia.
The fragmented market landscape, though, had enabled local players to successfully compete and gained an edge over their global competitors in some industries, Bain said. It pointed to the likes of e-commerce sites Sea and Lazada as well as ride-hailing player Grab that had emerged as strong players with "massive funding scale".
"While the impact of this acceleration in Southeast Asia is advantageous for startups and online brands, it is having a different and adverse effect on the real-world economy," Bain said. "From mall shopping to cinemas and taxis to travel agencies, it is clear that digital has taken a toll on certain industries."
It suggested businesses could stay ahead of the digital wave by focusing on tech-enabled transformation to improve customers' experience of their products, and reengineering internal capabilities to adapt to the digital market.