Are the Samwer Brothers, a.k.a Rocket Internet really that bad for Southeast Asia?

Many months back, I tweeted about the entrance of Rocket Internet in Southeast Asia with the comment, “Winter is coming.” Not long after, they have gotten off the ground running with an aggressive hiring spree and clones in the e-commerce space.

Rocket Internet is a company that belongs to the Samwer Brothers. They are known for their amazing execution prowess and their ruthlessness in cloning successful US Internet companies. Of course, their tactics and methods have raised the ire of many, including pro-Silicon Valley reporters such as Sarah Lacy who mounted a campaign against them.

But is the company’s impact on the Southeast Asia digital market all bad? I’ll examine this issue in detail and argue that while it may have some impact on innovation, it isn’t bad for the industry as a whole.

Rocket Internet’s footprint in Southeast Asia: Attack of the Clones

In the past few months, Rocket Internet has launched five companies: Wimdu, Pinspire, Zalora, FoodPanda and Lazada, which are clones of various well-known Internet companies from Silicon Valley: AirBnB, Pinterest, Zappos, and Amazon. Using Singapore as their headquarters, they have spawned their units very quickly around Southeast Asia, with a major focus on Philippines, Indonesia and Malaysia.

If you look carefully at their portfolio, you’ll notice they have two key areas of interest: e-commerce and currently sexy start-ups in Silicon Valley. While I applaud them for their aggressive hiring spree in Singapore which will help to service our economy with more jobs, I am aware of their ability to quell innovation within the region.

Everyone might be wondering: Why Southeast Asia of all places, after Europe (where their headquarters is in Germany)? First of all, Southeast Asia is as fragmented as Europe, with many diverse cultures, languages and nationality.

Unlike large single markets such as the BRIC nations (Brazil, Russia, India & China) and United States, the user behaviour of mobile and web users are radically different but clustered into two blocs.

The more developed economies like Singapore and Malaysia favor mobile and web penetration almost equally while emerging economies such as Thailand, Philippines and Indonesia favor mobile over web by a ratio that ranges from 3 to 5.

ASEAN’s inability to form a single common market is also reminiscent of the European Union’s failure,  unfolding before our very own eyes. Given the way the Samwer Brothers operate, it’s therefore not surprising that they’re setting sights on Southeast Asia because of its economic similarities with Europe.

Another reason they’re in Southeast Asia is the untapped potential of this market. This region has been friendly to US technology companies and there are very few success stories that have any remote chance of pitting themselves against the gang of five: Google, Amazon, Facebook, Apple and Microsoft.

Southeast Asia often remains an after-thought to those who are seduced like butterflies to single markets like India and China and to some extent, Indonesia. With a lack of innovation and the US tech companies trying to put a square peg into a round hole with their templates, most local companies within each Southeast Asia country merely perform technology arbitrage and hence the whole mobile web industry suffers as a whole.

So, if the Samwer Brothers can somehow build a business structure that can address the fragmentation of Southeast Asia with a unifying mobile web theme such as e-commerce, you can see that the big companies might have no choice but to pay them “a ransom”, as Sarah puts it.