Google, Temasek, and Bain & Company have projected that the digital economy in Southeast Asia (SEA) will reach $263 billion in gross merchandise value (GMV) in 2024, a 15 percent increase over last year.
The firms said in its e-Conomy SEA report on Tuesday that digital economy revenues in the region have grown 14 percent and are projected to reach $89 billion in 2024.
This suggests that the digital economy can achieve both profitability and growth in tandem, marking a significant step towards achieving sustainable economic value.
According to the report, after years of investment and development, key players in the region’s digital economy have progressed towards profitability while maintaining double-digit growth for GMV and revenue.
Deeper digital participation among users, effective monetization strategies, and the recovery of pandemic-impacted sectors are expected to drive continued growth.
E-commerce has also reaccelerated, fueled by video commerce.
E-commerce, poised to reach $159 billion GMV by 2024, is now driven primarily by existing customers who account for up to 70 percent of expansion, a departure from past years when first-time shoppers were driving growth.
Incumbents are reinvesting into GMV growth and defending their market share as international players disrupt the market.
Revenue is projected to surge 13 percent year on year to $35 billion in 2024.
Video commerce has surged to 20 percent of e-commerce GMV, up from less than 5 percent in 2022.
Video commerce is reshaping the e-commerce landscape in SEA, driving impressive growth and transforming the consumer shopping journey.
From live shopping to creator-led content, video is now an integral part of how people shop online, said the report.
Meanwhile, food delivery is gaining momentum as dining-out patterns stabilize and new monetization pathways such as in-app advertisements and subscriptions emerge.
In 2024, its revenue is set to grow by 54% percent year on year to reach $1.7 billion, while GMV is expected to increase by 7 percent to $19 billion.
Platforms are testing new recipes for future profitability such as improving visibility on restaurant selection pages while tapping on AI to optimize their operations.
Transport sector has also surpassed pre-COVID levels with revenue projected to grow by 36 percent year on year to $1.5 billion, driven by rebounding demand and pricing, while GMV is expected to increase by 18 percent to $9 billion.
Consumer demand remains robust in spite of inflationary pressures, owing to the strategic expansions of incumbents into second-tier cities and rural areas, combined with aggressive promotions by new entrants in pursuit of user growth.
There is still headroom to further enhance profitability through strategic pricing mechanisms.
Online travel has also outperformed the overall digital economy in terms of gross travel bookings (GTB) growth, which is driven by intra-regional travel within Asia Pacific.
Increased airfares and shift in travelers’ preference for luxury options will continue to drive GTB, which is projected to reach $46 billion in 2024, representing a 21 percent year on year increase.
Its revenue is also expected to grow by 18 percent to $20 billion.
While direct channels remain dominant, online travel agencies continue to successfully monetize their core business and travel-adjacent offerings such as financing and insurance.
Online media is on track for significant growth due to video-on-demand and gaming, with GMV expected to surge to $30 billion, representing an 11 percent year on year increase.
Developers in SEA are carving out a niche in casual gaming and hyperlocal gaming content.
Advertising remains a proven revenue stream, while hybrid models incorporating in-app purchases, subscriptions, and ads are increasingly being adopted to cater to various player segments.
The popularity of gaming creators have paved the way for a thriving creator ecosystem as other verticals also tap into livestreaming to facilitate two-way interaction between sellers and customers.
Digital Financial Services (DFS) are experiencing rapid growth, with revenue expected to increase 22 percent, from $22 billion in 2022 to $33 billion in 2024.
Digital payments and lending, accounting for over 90% of the total revenue from DFS sectors, are driving this expansion.
Digital payments have become ubiquitous, with e-wallets partnering with major payment card networks and QR code usage on the rise.
A generational shift in investor behavior is contributing to a more dynamic wealth landscape.
This momentum should continue as merchant acceptance of digital payments expands, risk underwriting capabilities improve and consumers migrate online for their insurance and wealth needs.
While the funding landscape continues to be subdued, investors have shown cautious optimism by directing nearly 50 percent of investments towards nascent sectors.
Even as the exit environment remains challenged, early stage companies in SEA have made significant progress towards profitability.
There is also an increased focus to drive cross-border exchange collaborations and initial public offering (IPO) regulatory improvements aimed at improving capital markets conditions.
The report also highlighted that SEA is emerging as a global hub for artificial intelligence (AI) innovation and adoption.
With significant investments in AI infrastructure and a thriving ecosystem of startups and developers, the region is poised to unlock the transformative power of AI across various sectors.
The region is well positioned to compete and attracted more than $30 billion in AI infrastructure investment in the first half of 2024 alone.
The report also showed Singapore’s digital economy has demonstrated remarkable resilience and is projected to reach $29 billion in GMV in 2024, up 13 percent from 2023.
The country’s e-commerce has rebounded from $8 billion GMV in 2023 to $9 billion in 2024, while online media and travel have grown at double-digits, fueled by robust infrastructure and pro-business policies.
In the first half, investments to build AI-ready data centers in Singapore reached $9 billion, second to Malaysia, where $15 billion was invested.
E-Conomy SEA 2023 report: Southeast Asia’s digital economy is set to hit $100B in revenue