7 Major Challenges Holding Back Tech Ecosystems Across Asia

Despite the strength and diversity of Asia’s tech ecosystems, there are a lot of problems and peculiarities that hold back these countries’ web industries in some ways. A new report today from The Economist’s Intelligence Unit gives a great overview of these challenges and how some are being overcome.

We’ve embedded the 30-page report below, but it’s worth summarizing the seven key findings that show how the industries and consumer markets differ so greatly from Silicon Valley and the West – and even vary wildly across borders among the packed-in cultures and languages across Asia.

1. “Asian internet businesses typically focus on home markets”

That’s The Economist’s quote to summarise the grow-at-home ethic that’s very prevalent among tech startups and even major web company across Asia. Of course, there are exceptions, and it’s interesting to note that e-commerce – well, who doesn’t love shopping? – is the best vehicle for overseas ventures. Japan’s Rakuten and China’s Alibaba stand out – Rakuten with its global marketplaces for consumers, and Alibaba with its worldwide platform for business outsourcing from Chinese manufacturers.

Social media, notes the report, has created a few instances of “accidental globalisation” where something has taken off quite organically in new countries, such as NHN Japan’s Line app, a social messaging service that’s cuter and has more features than Whatsapp. As we’ve noted before, about 70 percent of Line’s users are outside Japan. But it’s not always so easy, with Tencent’s WeChat recruiting top footballer Lionel Messi this week to promote the messaging app beyond China; WeChat now has 70 million users outside of China and should grow more with help from its celebrity backer.

As we’ve pondered and poured over a lot on this blog, smaller nations in Asia – especially Southeast Asia, and particularly Singapore – have such small home markets that they’re forced to look more closely at neighboring populaces. But languages are often an expensive and tricky barrier, especially when trying to break into, say, Thailand, Vietnam, or China.

2. “Monetization is an uphill battle for many entrepreneurs”

Now that you have a bunch of users online, how to monetize them? “As a market leader it’s relatively easy to get people to work with us,” says Satoshi Yajima, a senior manager at NHN Japan, which runs Line. “We have a user base of 40 million (in Japan), which is difficult to build, so companies want to access that.” And that’s where Line’s platform of stickers, e-books, and social gaming tie-ins give it plenty of monetization options. But for most, it’s a struggle to make users pay.

Factors like piracy, e-payment issues or a lack of credit card adoption, and rivals copying your ideas – they all come into play across Asia.

3. “Online payment channels are fragmented and under-developed, hindering business”

Speaking of online payment issues… While Japan has 45 percent of the populace using e-payments online, and Singapore 42 percent, it drops as low as two or three percent in Indonesia, Vietnam, and India. That’s a massive barrier. While e-commerce sites can resort to cash-on-delivery for such customers, that’s not an ideal solution for the app economy or online subscription services, such as ones for streaming music.

Earlier today, India’s Flipkart launched its Paypal-like PayZippy platform, so it’s clear that new and localized solutions are popping up to deal with this huge issue.

Admittedly, we’ve seen some novel solutions, like 2C2P leveraging on convenience stores as a payments channel for online shoppers, and social gaming platform Mig33 taking payments via a network of merchants. Better e-payments will never be fully solved, so niche solutions will always be needed.

4. “There is global demand for Asian content and platforms, but few entrepreneurs are thinking globally”

This ties in to the first point made in the report. We don’t totally agree with this particular point – there are a lot of globally-minded startups out there right now, especially ones centered around fairly simple app-based services, like Pakistan’s Artsly that we wrote about this morning.

One option for easier global roll-out is to focus on your home country’s global diaspora, such as Tohfay delivering Pakistani delicacies to expats; MelonFriends combining Chinese and western social media into one convenient app; and Spuul taking Bollywood and Indian dramas to the world.

5. “Asia’s market for tech talent is being fought over globally”

Visas, education, brain drains. Those are all factors in the human capital pool of tech talent. The lure of an education in the US or the UK often deprives Asian nations of potential entrepreneurs, who might well end up in Silicon Valley. Some do return to their home nations, where big holes in online markets are too tempting to resist. Also, to offset that imbalance, some foreign entrepreneurs make a move into Asia. It’s a complex push-pull between desires, demand, and supply.

6. “A culture of collaboration is slowly replacing suspicion in Asia”

7. “Internet regulation is on the rise”