Southeast Asian digital economy hits $100B in revenue: Bain

The Southeast Asian digital economy is flourishing despite global macroeconomic headwinds.

The region’s gross merchandise value (GMV) continues an upward trajectory and is set to reach US$218 billion, growing 11% year-on-year (YoY), according to this year's e-Conomy SEA report - Reaching new heights: navigating the path to profitable growth by Google, Temasek and Bain & Company. 

In addition, revenues of the Southeast Asian digital economy is poised to hit $100 billion this year, growing 1.7x as fast as the region’s GMV, the report added. 

Key findings
Some of the key findings in the report include the following.

• SEA private funding has declined to its lowest level in six years after record highs, in line with global shifts towards high cost of capital and issues across the funding lifecycle. 
• These issues include a broader correction in valuations compared to the highs of 2021, uncertainty surrounding the profitability pathways of some companies and a challenging capital market environment which makes potential exits more difficult to achieve. 
• Despite the increased prudence by investors, dry powder has risen to $15.7 billion at the end of 2022 from $12.4 billion in 2021. This shows that there is fuel available to propel the Southeast Asian digital economy to the next stage of growth.
• Funding declines cut across all investment stages, with late-stage deal flow slowing down the most. Digital financial services continues to be the top investment sector due to its high monetisation potential. 
• A growing portion of deal activity is funnelled into nascent sectors, signalling that investors are diversifying portfolios.
• SEA consistently delivers on both GMV growth and revenue growth, which shows that monetisation and overall market growth are not at odds. 
• Digital businesses have successfully monetised Southeast Asian digital economy, moving from user acquisition to deepening engagement with existing customers.
• E-commerce continues a growth trajectory with a 22% increase in revenue YoY, reaching $28 billion. 
• The sector’s GMV grew to $139 billion in 2023 and is expected to reach $186 billion in 2025, growing 16%. 
• While adjacent revenue streams such as advertising and delivery services serve as a long-term growth engine for e-commerce, growing the number of users and transaction sizes is key to growth and boosting profitability.
• Online Travel is on track to recover by 2024 as flight passenger volume nears pre-pandemic levels. 
• The sector's revenue — accelerated by inflation — will reach $14 billion, increasing 57% YoY.
• Its GMV grew 63% YoY, reaching $30 billion in 2023, and is tracking towards $43 billion in 2025. Online travel is seeing significant momentum in Thailand where it’s the main growth driver in 2023, growing 85% YoY.
• Transport is seeing a strong recovery boosted by successful monetisation efforts as its revenue reaches $1.1 billion, growing 47% YoY. Full recovery, fueled by international travel recovery, is expected by early 2024. 
• Food delivery revenue hits $0.8 billion in 2023, growing 60% YoY despite the return to in-person dining and a pullback in promotions. In the short term, the sector’s revenue growth is driven by increased take rate while user and order growth will drive it in the long run.
• Online Media’s GMV grows to $26 billion, increasing 10% YoY. 
• Advertising and video streaming are expected to remain its long-term revenue drivers as the sector heads toward $34 billion GMV in 2025. 
• The Philippines is expected to have the fastest growing Online Media sector in SEA until 2025, while Thailand is expected to be the largest Online Media market overall between 2023-2030.
• High-value users continue to drive sustainable unit economics but significant growth headroom lies in increasing digital participation
• Over 70% of digital economy transaction values are made by the top 30% of SEA spenders. 
• These high-value users (HVUs) spend more than 6x the amount non-HVUs spend online, particularly higher in discretionary spending verticals such as gaming, transport and travel.
• While HVUs are more likely to increase spending over time, non-HVUs present a 1.9x growth opportunity of that of HVUs. 
• As the consumer demand keeps growing, a majority of non-HVUs have an appetite to increase their online spending if barriers such as the need to touch and feel products can be addressed.
• New technologies such as AI can benefit both companies and consumers in several ways. 
• These include improving operational efficiency in areas such as inventory management and route optimisation, and increasing deeper engagement and digital participation through personalised content recommendations in online media. 
• AI can also play an important role in detecting and preventing fraud, increasing security for both consumers and merchants.