Ovo’s denial; Southeast Asia’s direct-to-consumer revolution

Dear readers,

Last week, Indonesian media reported that homegrown payments unicorn Ovo has been burning a ton of money each month. That’s on top of other comments from Mochtar Riady, founder of Ovo parent entity Lippo Group, that seemed unusually blunt.

Ovo has said that the loss figure is false. The company also released a statement saying that it’s ahead of its internal targets for the path to profitability, and is confident about building a sustainable business.

Just make two quick points here:

1. Ovo’s denial is vague. It may still be losing a lot of money – just that we don’t know the exact amount. Did it lose US$35 million? US$40 million? Or US$45 million? Has it been losing US$50 million for months now but suddenly turned a profit in the latest month due to a one-off event? We’ll need more details to know for sure.

2. It’s highly believable that Ovo can be a sustainable business. But it’s also true that because it’s competing against GoPay, it will need to burn loads of cash to get there.

Riady’s comments about how Ovo has kept on burning money is interesting, though. The payments startup can win the market if its backers can pony up the capital. But it seems that sentiment towards money-burning businesses has begun to shift. How will this play out?

Speaking of profitability, we also published a couple of pieces on direct-to-consumer ecommerce startups. These are essentially brands that make their own products and ship them directly to consumers without going through a middleman.

When these businesses are run well, they can become quickly profitable while commanding user loyalty by making high-quality products. I wrote an in-depth piece that discusses why the time may have come for direct-to-consumer startups in Southeast Asia.

My colleague, Putra Muskita, meanwhile, dived deeper into the Indonesian market and looked at furniture ecommerce in particular.

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Cheers,

Terence
Chief editor