The digital arena in Southeast Asia is feeling the heat, and not just from its tropical climate. While the internet economy is still growing, the pace has slackened considerably. Recent research from Google, Temasek Holdings, and Bain & Co suggests the internet economy will grow only 11% this year to hit $218 billion, the slowest rate since 2017. That’s – a little concerning.

Over 70% of online spending is thanks to the top 30% high-value users

But that’s not the entire story. What’s truly interesting is the unequal distribution of this digital spending. Over 70% of all online spending comes from the top 30% high-value users, who are primarily concentrated in big cities. In simpler terms, if you’re an internet company targeting the Southeast Asian market, you’re likely fishing in a small, albeit wealthy, pond.

Commerce

In a region that’s home to more than 650 million people, why is the digital economy so skewed towards the urban elite? One reason could be rising inflation and interest rates, making consumers more cautious with their wallets. But that doesn’t entirely explain the digital divide. The investment climate also mirrors this caution. Private funding for companies in Southeast Asia has nosedived to a six-year low. Investors who hopped on the Southeast Asia bandwagon five to seven years ago are now seeing only a 4% return on average, a far cry from the 50% in China and 40% in the U.S.

So, where does that leave internet giants like Grab, Sea, and GoTo? Facing intense competition in urban markets while still struggling to tap into the vast yet untapped rural consumer base. With e-commerce estimated to reach just $186 billion by 2025, these companies may have to rewrite their growth strategies.

The digital landscape in Southeast Asia is more than just numbers and percentages; it’s a tale of a growing divide, a challenge to innovators, and a test for investors. And for now, it’s the big cities taking home the lion’s share of the digital pie.

RELATED:

(Via)

RELATED ARTICLESMORE FROM AUTHOR