Here’s what Ruangguru’s financial numbers don’t tell you

Dear readers,

Last week, Aditya and I took out our magnifying glasses and examined the financial numbers behind Indonesia’s biggest education tech startup, Ruangguru.

As someone who’s only average at best in math, I’ve come to enjoy looking at financial statements – it’s like being an archeologist, if you will. It’s not just about making calculations, but it’s also about figuring out the mind-boggling jargon and digging up insights from the numbers.

Ruangguru’s 2019 numbers tell us a lot of things. For one, it has an enviable 94% gross margin, which seems more in line with a software company rather than a content-focused business.

The number echoes what we wrote in an earlier profile of the startup. According to Jixun Foo of GGV Capital, one of its investors, while the initial cost to produce content is high, its lifetime value is also high because it can be reused for a long time, with the occasional minor tweaks.

But it’s still early days for Ruangguru, which had only just begun deploying capital from its big funding round. Like any subscription business, Ruangguru’s users often pay for an entire year’s package upfront. Ultimately, what matters most is how engaged customers are with the content and how likely they are to renew.

Apart from the company’s metrics, a key data point to look out for might be the size of Southeast Asia’s pool of “competitive” parents, who are willing to splurge to give their children any advantage they can provide. Future financial statements, as well as any engagement metrics Ruangguru might be willing to share, will give us a better indicator of its real performance.

We recently reported that subscription-based content businesses are set to boom in Indonesia, and we believe this could apply to Ruangguru and its rival Zenius as well.

Sticking to the theme of content, Joseph looked at whether One Championship can free itself from a financial chokehold through pay-per-view or subscription plans. We think that it has a shot, but a major obstacle is the strong branding of US heavyweight UFC. Despite the millions that Singapore-based One has poured into marketing, UFC still dominates search queries even in Asia.

The emergence of subscription businesses in Asia will rise in tandem with the growing usage of e-wallets. Which brings us to a piece that Huong wrote on why Sea is quietly running a food delivery business in Vietnam.

At first glance, Foody seems like a departure from Sea’s focus on gaming, ecommerce, and fintech. But we think it is already playing a vital role by serving as an additional use case for Shopee’s fintech and e-wallet play, SeaMoney. It’s also worth noting that food delivery is just one of the businesses that Foody runs in Vietnam.

Main services under Foody: a restaurant-listing site, food delivery, table booking, and POS system