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Beyond ride-hailing: Go-Jek, Grab and all their friends

Indonesia · Nov 26, 2018 · By Putu Agung Wija Putera

Now that Grab and Go-Jek are in a faceoff on a regional scale, here's a look at how Southeast Asia's two biggest unicorns – and their investors – could be shaping the local digital economies and startup ecosystems

When Uber decided to sell its Southeast Asia business to local rival Grab March this year, it left the region virtually facing a ride-hailing monopoly. Except in one market: Indonesia, where the home-grown Go-Jek has its grip firmly on the region’s largest and most populous country.  

Indonesia’s first and most valuable unicorn, Go-Jek has since also begun expanding into other Southeast Asian markets. It's said to be valued up to US$10 billion in a coming round of funding, just below Grab’s US$11 billion tag. Both startups are backed by some of the world’s most powerful investors: Tencent, Temasek, Google, Warburg Pincus and KKR in the case of Go-Jek; while SoftBank, Toyota, Microsoft, Didi and Ping An are behind Grab.

And the stakes are no longer in ride-hailing alone. Taking a leaf out of China, Grab and Go-Jek are each building their own super app and online-to-offline (O2O) ecosystem on the back of their transportation network. It's a race to conquer the virgin territory of Southeast Asia, home to more than 600 million people and a fast-rising middle class.

Way back in 2015, the founders of Go-Jek already saw it crystal clear: “Logistics is the key to everything. It’s the key to e-commerce, it’s the key to food… Essentially with a logistics network like the one we’ve built, all these different business units and services are simply being stacked on; we’re just looking for the highest value economic activities to put on the network.”

O2O ecosystems

Today, Go-Jek’s payment service, Go-Pay, is what connects the company’s separate services, from ride-hailing and food delivery to ticketing, on-demand lifestyle services, even last-mile logistics – all within a single app. A customer could spend an entire day consuming Go-Jek’s services – commuting in its motorbike taxis, ordering takeout, buying tickets for a movie – and pay for them all with Go-Pay. Go-Jek continues to pursue this strategy aggressively in Indonesia, and is likely want to replicate it in other Southeast Asian markets.

In this, Grab has some catching up to do. It added GrabFood after merging with Uber, and continues to push for the adoption of GrabPay in physical stores. But it has yet to reach the sheer variety of services that Go-Jek offers in Indonesia.

The game is far from over though. Grab has been aggressively inking partnerships with traditional corporate giants – Singapore Airlines, Thailand’s Kasikornbank, Indonesian real estate conglomerate Lippo Group, just to name a few  – as well as with internet players such as Chinese AI healthcare startup Ping An Good Doctor, Vietnamese digital payments startup Moca and regional group-buying platform Fave.

More telling about Grab’s ambitions are its partnerships with Microsoft and Toyota, both also its investors. Grab waxes about building a “smart city” of “seamless mobility” – powered by artificial intelligence, internet-connected vehicles and data analytics. It’s an ecosystem enabled by Microsoft’s facial recognition technologies for Grab drivers and passengers and Toyota’s driving-data recorders, which provide information that can be used to lower rental and insurance costs for Grab's drivers, for a start.

As Go-Jek and Grab continue to dominate Southeast Asia’s O2O economy in their respective ecosystem-building quest, what might that bode for local startups, current and future? For one, potential investors might start asking: “Will your startup fit in the Go-Jek or Grab ecosystem? And how?”

Local services like on-demand cleaning or laundry, for example, will have to compete with Go-Life, a Go-Jek service. Without the kind of funding, talent and network that Go-Jek has accumulated over the years, most new startups in on-demand would stand little chance of breaking into the market; meanwhile existing players find themselves struggling to scale, or even survive.

No surprise then that getting acquired seems the way to go. Already, the online payments sector has got the ball rolling. In Indonesia alone, Grab bought payments app startup Kudo, while Go-Jek swallowed up three fintech startups: payments processing startups Midtrans and Kartuku, as well as the O2O social e-commerce company, Mapan.

Soft power

What’s more, the extent and impact of the Grab-Go Jek faceoff goes beyond Southeast Asia. In its early days, the battle for hegemony seemed to be a proxy war waged between Tencent and Alibaba as the Chinese rivals expand their internet empires overseas. Tencent is a key investor in Go-Jek, while Alibaba has been rumored to be in funding talks with Grab. A Grab-Alibaba deal has yet to materialize – Grab seems reluctant to take money from internet heavyweights – but Grab has instead received funding from Japan's SoftBank, a longtime investor and ally of Alibaba.

Perhaps SoftBank stands to emerge the biggest winner from this tussle. The investor, which has major stakes in leading ride-hailing startups Uber, Ola, Didi and Grab, is said to have maneuvered Uber’s Southeast Asia exit and merger with Grab, effectively consolidating its investments and position in the sector. SoftBank also recently announced a joint venture with Toyota, another Grab investor, to develop new technologies for autonomous vehicles in smart cities – not dissimilar to the smart city vision Grab is selling.

Through its US$100 billion Vision Fund pumping cash into technology startups, SoftBank has managed to disrupt industries around the world, from real estate (via WeWork and Compass) and construction (Katerra) to healthcare (Ping An Healthcare and Ping An Good Doctor) and insurance (ZhongAn and PolicyBazaar), and even the venture capital market itself. In this, Grab, with its O2O ecosystem in Southeast Asia, fits as another piece of the SoftBank empire.

So while it’s unclear if the rivalry between the founders of Go-Jek and Grab, Nadiem Makarim and Anthony Tan, had started way back then during their days as classmates at Harvard Business School (batch of MBA 2011), there's no doubt they are now at the helm of opposing armies, fighting the biggest business battle ever witnessed in Southeast Asia – something they would not have dreamed of when they started out.

Edited by Bernice Tang