GRAB

[karlmarx]

IG had zero revenue when it was bought for 1b. The key is, if you have a large and sticky user base, there will be a way to monetise them.

Grab is still in the process of becoming both large and sticky. Right now, there’s not very much difference between itself and its competitors, so ability to sustain cash burn will be a key factor of success.

The merchant commissions are already very high. So if grab were to stop burning cash, it will have to lower the amount it is paying its riders, and increase the cost to consumers. Both only possible when there is no meaningful competition.

As Grab competes in different verticals, it is more difficult to predict how it’s competitors will perform, and hence the impact on Grab.

[Wildreamz]

IG had zero revenue when it was bought for 1b. The key is, if you have a large and sticky user base, there will be a way to monetise them.

Grab is still in the process of becoming both large and sticky.

..

Hi Karlmarx,

I question the premise that Grab (or any ride-hailing platform in general) has a "sticky" user base. IG has global network effect, you are more likely to join IG if it already has a large global user base; the more users on the platform, the better the experience (flywheel effect). Once uploaded some pictures, you are less likely to want to delete everything and go to a new platform to start anew; hence sticky. 

Contrast Grab, there is almost no barrier to download a new app to take advantage of discounts by a competitor. Network effect is local (a new user/driver in Malaysia has almost 0 value to you as a user in Singapore). 

The reason, they have so much competition, is precisely because their service isn't sticky; hence, no moat.

Peace.

[karlmarx]

IG had zero revenue when it was bought for 1b. The key is, if you have a large and sticky user base, there will be a way to monetise them.

Grab is still in the process of becoming both large and sticky.

..

Hi Karlmarx,

I question the premise that Grab (or any ride-hailing platform in general) has a "sticky" user base. IG has global network effect, you are more likely to join IG if it already has a large global user base; the more users on the platform, the better the experience (flywheel effect). Once uploaded some pictures, you are less likely to want to delete everything and go to a new platform to start anew; hence sticky. 

Contrast Grab, there is almost no barrier to download a new app to take advantage of discounts by a competitor. Network effect is local (a new user/driver in Malaysia has almost 0 value to you as a user in Singapore). 

The reason, they have so much competition, is precisely because their service isn't sticky; hence, no moat.

Peace.

I think you may have misread my point.

Anyway, these tech companies still have plenty of cash to burn, so I'm thinking that it might be at least two years or more before a clearer winner emerges. As with most or all markets, you get sticky naturally by being the biggest (network effect, flywheel, and so on), so I'm sure that's what all the players are going for.

Since it is mostly a game of cash burn, the loser will clearly be the one with the least of it.

The end game may perhaps be some kind of M&A similar to Uber in SEA.

[Wildreamz]

I think you may have misread my point.

Anyway, these tech companies still have plenty of cash to burn, so I'm thinking that it might be at least two years or more before a clearer winner emerges. As with most or all markets, you get sticky naturally by being the biggest (network effect, flywheel, and so on), so I'm sure that's what all the players are going for.

Since it is mostly a game of cash burn, the loser will clearly be the one with the least of it.

The end game may perhaps be some kind of M&A similar to Uber in SEA.

Not true at all. That's the point. There is a difference between Global and Local network effect. The intrinsic network effect of Ride-hailing is weak. Hence, they struggle to fend off new entrants. And the value-add is low, hence they struggle to make a profit.

Peace.

[dreamybear]

Granted the news might be a bit old, my point is new entrants seem to be popping up every now and then.

https://www.reddit.com/r/Thailand/commen...r_indrive/
https://www.reuters.com/article/ride-hai...NKCN24U1IR

Even if the company burns a lot of money to take out competitors and become the eventual clear winner, regulations would probably come in to prevent a monopoly status. I think buddy Big Toe put it aptly - it's a story based business from the beginning.

I wonder how institutional investors view this investment.
https://www.nasdaq.com/market-activity/s...l-holdings

[weijian]

@wildreamz,
I think what karlmarx is trying to say is that the endgame is to become big and that will provide the stickyness. We do all agree it isn't sticky now. And Grab has long passed been a "ride hailing" app. While the Wechat has shown the way, it does remain to be seen how "sticky" the kind of super app that Grab can be, if it can ever become one (considering the deep pockets that its competitors have in each category)

[Wildreamz]

Hi Weijin, 

The point I'm trying to make is, size alone doesn't create stickiness. Qualitative aspects, such as true global network effect, value-add, fly-wheel effect etc. creates stickiness; not the other way round.

[karlmarx]

Granted the news might be a bit old, my point is new entrants seem to be popping up every now and then.

https://www.reddit.com/r/Thailand/commen...r_indrive/
https://www.reuters.com/article/ride-hai...NKCN24U1IR

Even if the company burns a lot of money to take out competitors and become the eventual clear winner, regulations would probably come in to prevent a monopoly status. I think buddy Big Toe put it aptly - it's a story based business from the beginning.

I wonder how institutional investors view this investment.
https://www.nasdaq.com/market-activity/s...l-holdings

New entrants are always coming in to any market - new or old. In fact, if there are no new entrants in a market, it probably means that prospects are not bright (at least for the foreseeable future). Competition should be something to look out for, but the presence of competition should not immediately deter further research.

A business certainly doesn't look legitimate if it doesn't turn a profit. Some may have less than honest intentions but I wouldn't think Grab is one of them. Certainly not like those bike-sharing apps. Ride hailing and food/grocery delivery will not be going away. Maybe demand will be lower when there are fewer subsidies, but I'm convinced some behaviours have changed.

[Wildreamz]

New entrants are always coming in to any market - new or old. In fact, if there are no new entrants in a market, it probably means that prospects are not bright (at least for the foreseeable future).

..

Or maybe the incumbent has been serving the market so well, and so entrenched that new entrants are unnecessary? Think Google and Airbnb. Not that they do not have any competition at all, but "competition" for either of these companies are merely trying to serve niche market and needs.

Ride-hailing may be here to stay, but in what form? At what valuation? Perhaps the business model needs a complete rethink?

[CY09]

This is why it has been aggressive in catching the food delivery and express mart delivery segments. And to be truthful, there has been some degree of success. Based on my observation of Singapore's market; despite its delivery fees being priced an average of $0.50 more than Foodpanda and the same food price are almost the same across both platforms, Grab still has leading market edge. This shows Singaporeans are unaware they are choosing the more expensive platform for their meal deliveries.

So there is some form of entrenchment. I'm still waiting for the day when Singaporeans start to notice that they have been paying more using the Grab platform as compared to others, however, it seems to show branding does work