Southeast Asia’s digital economy has grown its profits by 2.5 times over the last two years, from US$4 billion in 2022 to US$11 billion ($14.5 billion) in 2024. This is driven by tighter commissions, targeted incentives, new revenue streams and the significant strides key players have made towards profitability milestones.
The region’s digital economy is also expected to reach US$263 billion in Gross Merchandise Value (GMV), a 15% increase over last year. Revenues have grown 14% and are projected to reach $89 billion this year. This suggests that the digital economy can achieve both profitability and growth in tandem, marking a significant step towards achieving sustainable economic value.
These are among the findings of the 9th edition of the e-Conomy SEA report by Google, Temasek and Bain & Company. The report provides insights on six digital sectors, examines the current state and future prospects of technology funding in the region and delves into the factors essential for ensuring inclusive growth.
“Southeast Asia’s digital economy continues to do well, with continued double-digit GMV and revenue growth and a surge in profitability across sectors led by key players. The overall market and every individual sector [we examined in the report] remains incredibly robust,” says Florian Hoppe, partner at Bain & Company.
Here are some key findings of the six digital sectors:
- E-commerce is poised to reach US$159 billion GMV by 2024 primarily due to existing customers who account for up to 70% of expansion. Incumbents are reinvesting into GMV growth and defending their market share as international players disrupt the market. Revenue is projected to surge 13% YoY to $35 billion in 2024.
Video commerce is also propelling e-commerce’s growth, accounting for 20% of e-commerce GMV. From product discovery and research to final purchase, over 40% of online shoppers rely on videos to help them decide. In response, brands and marketplaces are embracing all types of video commerce, including live shopping and creator-led video content with affiliate links.
- Digital Financial Services (DFS)’s revenue is expected to increase 22%, from US$22 billion in 2022 to US$33 billion in 2024. Digital payments and lending (which accounts for over 90% of the total revenue from DFS sectors) are driving this expansion.
Digital payments have become ubiquitous, with e-wallets partnering with major payment card networks and QR code usage on the rise. A generational shift in investor behaviour is contributing to a more dynamic wealth landscape. This momentum should continue as merchant acceptance of digital payments expands, risk underwriting capabilities improve and consumers migrate online for their insurance and wealth needs.
- Food delivery is gaining momentum as dining-out patterns stabilise and new monetisation pathways such as in-app advertisements and subscriptions emerge. Revenue is set to grow by 54% YoY to reach US$1.7 billion, while GMV is expected to increase by 7% to US$19 billion this year.
- Transport sector’s revenue is projected to grow by 36% YoY to US$1.5 billion, driven by rebounding demand and pricing, while GMV is expected to increase by 18% to US$9 billion.
- Online travel has outperformed the overall digital economy in terms of Gross Travel Bookings (GTB) growth, which is driven by intra-regional travel within Asia Pacific. Increased airfares and the shift in travellers’ preference for luxury options will continue to drive GTB, which is projected to reach US$46 billion in 2024, representing a 21% YoY increase. Revenue is also expected to grow by 18% to US$20 billion. While direct channels remain dominant, online travel agencies continue to successfully monetise their core business and travel-adjacent offerings such as financing and insurance.
- Online media’s GMV is forecasted to reach US$30 billion, representing an 11% YoY increase, due to video-on-demand and gaming. Advertising remains a proven revenue stream, while hybrid models incorporating in-app purchases, subscriptions, and ads are increasingly being adopted to cater to various player segments. The popularity of gaming creators has paved the way for a thriving creator ecosystem as other verticals also tap into live streaming to facilitate two-way interaction between sellers and customers.
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The funding landscape
According to the report, investors are showing cautious optimism about Southeast Asia’s long-term potential by casting a wider net. They are expanding their focus to sectors such as food and beverage or fitness that have the potential for technological disruption, and nascent sectors including sustainability technology and Web3.
“Investors have started looking for the next wave of growth by investing in nascent sectors such as software and services as well as artificial intelligence (AI), demonstrating confidence in the long-term potential of SEA’s digital economy. Temasek remains committed to deploying catalytic capital to the region’s digital economy to achieve sustainable and inclusive growth so that every generation prospers,” says Fock Wai Hoong, head of Southeast Asia at Temasek.
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Last year’s report outlined four enablers to revitalise the funding landscape: realistic entry valuations, proven monetisation models, a clear path to profitability, and dependable exit pathways. Although the first three have been achieved, developing dependable exit pathways is a work in progress as capital market conditions continue to be challenging, notes Fock. The good news is that the region has undertaken efforts such as cross-border exchange collaborations and IPO regulatory improvements to improve the situation, he adds.
AI-powered
The report also reveals that Southeast Asia is poised to compete in the global AI landscape, particularly in data centres and innovative end-layer applications. The region is expected to increase the capacity of its data centres by about 1.5 times, and has attracted more than US$30 billion in AI infrastructure investment in the first half of 2024.
Moreover, consumer interest in AI is soaring, with searches for AI up 11-fold over the past four years. Southeast Asia’s young, digitally literate population and widespread smartphone use make it a fertile market for AI-driven solutions. From travel planners to generative AI for fraud detection, the technology is adding value across the region’s digital economy through sector-specific and broader business use cases. Pro-innovation policies that support AI development and governance will further unlock opportunities in the digital landscape.
“Southeast Asia is emerging as a global hub for AI innovation and adoption. With significant investments in AI infrastructure and a thriving ecosystem of startups and developers, the region is poised to unlock the transformative power of AI across various sectors,” says Sapna Chadha, vice president for Southeast Asia and South Asia Frontier at Google.
