The growth of Southeast Asia’s Internet economy is exceeding earlier projections – here’s what’s fuelling it

Southeast Asia is proving itself to be on a growth spurt when it comes to Internet proliferation and its corresponding economic growth, and it’s well on track to having some 480 million Internet users by 2020 – if not exceeding it.

In fact, the region will have 330 million monthly active Internet users by the end of this year, adding over 70 million users since 2015 at a 13% compound annual growth rate (CAGR).

That’s not all. Southeast Asia’s Internet economy is expected to reach $50 billion this year, growing at a 27% CAGR, and is on a solid path to exceeding an earlier projection of $200 billion by 2025.

These are findings of the Google-Temasek e-Conomy Southeast Asia Spotlight 2017 report released on Tuesday (Dec 12) which highlighted solid growth in all sectors of the Internet economy particularly in e-commerce and ride hailing which record the fastest growth at 40% CAGR.

One big reason for this is the region’s Internet user base which is expected to hit 330 million monthly active users by the end of this year, adding over 70 million new users since 2015 at 13% CAGR.

Mobile is king in Southeast Asia as more than 90% of the region’s Internet users are on smartphones, each spending an average of 3.6 hours per day connecting with their devices – more than any other region in the world.

The report said that e-commerce sales  – based on the gross value of brand new merchandise shipped – are accelerating in the region, reaching $10.9 billion this year, up from $5.5 billion in 2015, and growing at 41% CAGR.

e-Conomy Southeast Asia Spotlight 2017

“The acceleration of Southeast Asian e-commerce has been driven by the surge of marketplaces where small and medium businesses (SMB) sell to consumers on mobile-first platforms,” said the report.

Top players such as Lazada, Shopee and Tokopedia have provide scalable and readily accessible platforms for these businesses to transact online and reach new consumers.

One testament to the e-commerce scene here, the report found, is is how Southeast Asian mobile Internet users are among the most engaged globally.

They spend an average of 140 minutes a month on such platforms compared to 80 minutes per month for the leading US marketplace.

Similarly, ride hailing services in the region have experienced dramatic growth in the past two years, estimated to reach $5.1 billion in gross merchandise value, more than double from $2.5 billion in 2015.

e-Conomy Southeast Asia Spotlight 2017

The sector is hotly contested between Grab, Uber, and Go-Jek, which have announced plans to make services available in over 100 cities in the region by the end of this year, and further expand to 200 cities by 2018.