S. Koreans' happiness rising slowly but surely: presidential panel
No. of depression patients exceeds 1m in 2022
Seoul subway fare to rise 12% beginning Saturday
Races tighten in Seoul as parties battle for Assembly control
Korean Air to submit new merger plan to ease antitrust concerns
US House votes to remove Speaker Kevin McCarthy
US calls on China to encourage N. Korea's return to diplomacy
6-year-old Uzbek girl found dead in Daegu
Korea to begin experiment with central bank digital currency
22 Chinese apprehended after illegal entry attempt
Korean start-ups eye Southeast Asian tech boom
Infrastructure obstacles create opportunity for innovative solutionsBy Elaine Ramirez
Published : Jan. 20, 2016 - 19:36
Internet penetration from the Philippines to Indonesia has more than quadrupled in the past five years as rising incomes and rapidly developing infrastructure have allowed nearly 200 million users across the diverse region access to mobile services.
And the popularity of Korean pop culture, from music to cosmetics, give local start-ups an image boost over other foreign competitors, according to members of the local start-up industry.
“The Southeast Asian market is very attractive because of the population, GDP growth rate, open minds -- most of the countries are at the beginning stage of mobile business, which is exciting,” said Louis Ryu, CEO of Venture Port, an incubator for Asia-bound local start-ups. “Right now, a lot of people are bringing proven models there, like payments and e-commerce.”
Ryu was joined by representatives from investor SoftBank Ventures Korea and start-ups VCNC and Swizzle at a roundtable discussion hosted by The Korea Herald.
Korean start-ups often struggle to break out of the local market, but they have advantages over start-ups in other Asian powers like China and Japan, which can be even more insulated on their large home turf, they agreed. Korean start-ups have a great environment, such as the high-tech infrastructure and trend-setting e-commerce and mobile markets, to build a product to be globally competitive, said Edward Lee, who heads global strategy for VCNC, maker of couples messaging app Between.
“Starting from Korea, there are a lot of advantages, especially if you are doing mobile services,” Lee said. “Commerce is so fast, everything is so fast in Korea. Everything is going to catch up (to Korean trends) in the near future, five or 10 years. So if you get a model, if you have a global mindset, I think it’s a good test bed to start a global service.”
The region’s most alluring market is Indonesia, an archipelago with 250 million people who are rapidly embracing mobile services. Local tech giant Kakao has jumped on board by acquiring Path, a U.S.-made $66 million social networking app with 4 million users in Indonesia, in its buildup to global expansion.
This environment has led to mobile advertisements in the country being priced twice as high as in Korea, according to Alex Kim, a director at SoftBank Ventures Korea. Digital ad spending there is projected to grow some 70 percent this year.
But that doesn’t necessarily translate into customers spending big, Lee of VCNC claims.
He believes a lot of the activity in Indonesia comes from hype from Western tech companies like Facebook or Google that struggled to crack into China and sought a viable alternative. The high ad prices were driven by heated supply-side competition rather than customer demand, he said.
That is why Between cannot afford to tackle Indonesia, as it already competes in the difficult market of Japan, he added. “If we cover Indonesia, we are in another competitive market where we can’t find us making money in the near future.”
Payments and logistics, along with tricky taxation and tariff processes, make Indonesia a labyrinth for foreign companies, especially in e-commerce. It may take 11-12 days to deliver to the thousands of far-flung islands, Ryu of Venture Port added.
But these infrastructure hurdles leave room for small start-ups to introduce creative solutions, both in Indonesia’s still-nascent $1 billion online retail market and beyond. “From a small start-up’s perspective, there is much room to innovate in the e-commerce market in Indonesia and Southeast Asia,” said Kim of SoftBank Ventures Korea, which funded the fast-growing Indonesian online marketplace Tokopedia in 2013. “In most developed and emerging market economies, there are already big e-commerce players ... but small start-ups keep challenging that market.”
Meanwhile, Taiwan has long been relevant in the region with strong infrastructure and globally open users with spending power. But while Taiwan was once the biggest magnet for trends from Japan, the game has shifted as Korea’s pop culture has overtaken Hello Kitty and manga in popularity. Between has discovered an even fresher market in Thailand, with sturdy infrastructure compared to its neighbors, significant economic growth and a growing middle class.
“They are very trendy. They accept things very quickly just like Taiwan,” Lee said, noting that successful trends that spread from Japan to Taiwan then make their way to Thailand. Between has experienced the same phenomenon. “Right now, competitiveness is not as high as in Indonesia. It means it could be a better, more fruitful market for us to invest and just capture the market.”
Still, the growth potential in the region may have its limits. Nick Szabo, chief operating officer of Swizzle, says the video start-up can’t depend on the market for revenue.
“We are going to Southeast Asia more to build our user base, because a lot of other people are trying to get Southeast Asian viewers for video. But our target market is usually outside Southeast Asia for people who can pay,” he said. “There is just no money for entertainment stuff. There is not a lot of disposable income.”
Because of the lower labor costs, foreign companies often underestimate the amount of investment and preparation they need to enter the region. Kim of SoftBank’s Korea arm advises start-ups to brace themselves with solid staff and meaningful funding.
Instead of blanketing its service across the region, Between decided to zero in on key markets Singapore, Malaysia, Thailand and Taiwan, and localize its product and full-fledged marketing backed by local boots on the ground.
“If you want a bite, you shouldn’t nibble,” Lee said. “Now we only localize in the countries that we have a local translation office in, where they are capable of getting the feedback and adjusting it to the market we aim for. Do everything great, if you are going to commit, then really do it. That’s what we learned.”
By Elaine Ramirez (firstname.lastname@example.org)
Korea to begin experiment with central bank digital currency
Defense Ministry warns NK regime over nuclear buildup
PM orders measures to prevent public opinion manipulation on web portals