Google: Southeast Asia’s online economy is growing faster than we predicted

Google headquarters in Mountain View, United States. Photo credit: bennymarty / 123RF

Google and Singapore sovereign fund Temasek released their latest report on the state of Southeast Asia’s online economy today, following their inaugural study published in May last year.

The earlier edition predicted that the region’s number of internet users would grow from 260 million to 480 million by 2020. Google and Temasek estimated that Southeast Asia’s internet economy would be worth US$200 billion by 2025, built on the back of around US$50 billion in investment.

In today’s report, the two firms have adjusted those predictions upward:

• The online economy’s predicted 10-year compound annual growth rate (CAGR) has skyrocketed from 20 percent to 27 percent since last year’s study
• As a result, Southeast Asia’s internet economy is now on course to be worth more than US$200 billion by 2025, as Google and Temasek had forecast last year

Internet-based business accounted for 2 percent of the region’s GDP this year, and Google and Temasek now expect that share to reach 6 percent by 2025.

Digging down into specific sectors, the biggest growth since the previous study period was seen in ecommerce and ride-hailing, which experienced CAGRs of 41 percent and 43 percent respectively. They are also expected to see the most significant growth between now and 2025.

Southeast Asia’s online economy size (billions US$). Source: e-Conomy SEA Spotlight 2017, Google/Temasek

The report notes that it does not cover sectors such as mobile payments, online education, or digital healthcare, as these “are still in [an] early stage of development and monetization in Southeast Asia.”

$11b ecommerce market

Google and Temasek focus on business-to-consumer (B2C) ecommerce models, including marketplaces that enable small and medium-sized enterprises (SMEs) to sell to consumers. Second-hand goods marketplaces, consumer-to-consumer platforms, online classifieds, and sales via social media were left out of the equation.

Despite the narrower focus, the report found B2C ecommerce touched US$10.9 billion in gross merchandise volume this year.

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