GRAB

[Big Toe]

Here's something to chew on.

For IG, the consumers consume a digital product, a pure digital product, in this case a photo/video(content), is very profitable since the creation of content is essentially free. And the reach is global. Monetizing this is far easier as compared to say, bike share. Bike share even with a monopoly is unlikely to be profitable.

Then we have GRAB, let's take ride hailing and food delivery segment. The initial idea is a great one. And the social impact is also excellent. 10/10 for its social impact. The gig economy have provided jobs for many people who otherwise could not work elsewhere. It also helped many food outlets during the severe covid period where dine in were not allowed. Moving around also became much easier, But that's where it ends, as a business currently it is 0/10.

1. Users are consuming a local physical product/service. Food and a ride provided third parties. They are not consuming a digital product, hence how GRAB can effectively monetize is questionable.

2. Grab will only face more legislation for its delivery riders and ride hailing drivers. Insurance, mandatory contribution to retirement etc etc hence cost will only increase and no amount of local network effect can offset this increase.

3. For Food delivery, there is limited room to maneuver, getting 30% from eateries is not easy, do consider the high cost of running a food business in SG. From a eatery's point of view, they would rather have a direct consumer do take out/eat in than GRAB take 30%. Also GRAB's menu prices are already marked up from eat in/take away prices to cater for this.

This model will NEVER work on gorceries and as margins are nowhere as high to begin with. So day to day gorcery delivery using this model will be completely flawed. (think redmart)

4. For the food riders, takings are already starting to take a hit as they get less money for each delivery made. Also factor in the waiting time needed for the food to be cooked, especially the popular ones.

5. Also consider the quality costs. For IG, very little, so long as the servers are up and running.
Then we look at GRAB. There is a lot of human interaction in the process and when that happens, there will be plenty of incidents, mistakes and complaints. And another human will be needed to resolve(another cost).
Ie For food delivery, what if delivery takes too long and food become cold? What if the order is wrong? What if the order is not picked up or not delivered?


To sum up, there is no way to value Grab. This is not to say it is worth nothing, but impossible to value right now. Anything that is not possible to value, will be, by deafult, not investable. Of course, there are smarter people out there who has far greater insights and they maybe able to value GRAB.

[CY09]

Sorry just curious what is this "IG" being discussed here.

If it is referring to Instagram, will like to say it is a concept on the decline. User engagement to IG is declining and losing to Tiktok. So don't think there is much stickiness in it as well.

The concept of "New is always better" is applicable here and ppl are always gravitating towards the latest social media trend.

[Big Toe]

Yes Instagram since someone brought up IG a few posts back.
Completely unsure about the battle between IG and Tiktok, maybe pie is big enough for both of them?
Purpose of previous post is to point out that GRAB and IG/Tiktok are inherently very very different businesses.

[Wildreamz]

Businesses, especially in tech, are highly dynamic. Hence, as Elon said, Moats are lame, pace of innovation is the true differentiator (paraphrasing). All moats will be eroded eventually, if pace of innovation cannot keep up with competitors.

See how Google destroyed the "moat" of Yahoo and other search engines before it; does it mean search engines in general doesn't have any moat and network effect?.

Zuckerberg's leadership and pace of innovation is questionable. Doesn't mean IG's business model doesn't have a moat to begin with.

Instagram started losing young users to TikTok in 2019. Kevin Systrom left Instagram in 2018.

Coincidence? I think not.

[karlmarx]

1. My point in highlighting IG is that businesses that lose money now, may not necessarily lose money in the future. Obviously, Grab does not have global network effects, and is inferior to IG in those terms, but that's not the point. And certainly, IG and Grab are different businesses. But many observers were also bewildered when it was sold for 1b when it had no revenue. And it wasn't only FB that had the foresight of its potential. Twitter also had strong interest in acquiring IG.

2. Innovation is indeed the best defense against competition. Kevin Systrom was no doubt incredibly talented. But he did not seem to be interested in innovating IG to be more than what it was in its early days, which was 'an app for sharing aesthetically beautiful photos.' It only started Stories, and then later Reels, after Snap and TT's popularity became obvious. So, more reactive than proactive.

3. I think TT will definitely overtake IG in terms of screen time. The product is amazing and you should try it if you haven't. There's definitely much more room for them to monetise as their video-to-ad ratio is still much lower than TT, and users will continue to grow. IG will still have relevance for its photo format, but definitely its market will be smaller than before.

4. If another company is able to produce a technology which enables a more efficient way to transport people and food -- basically a dispatcher system -- then Grab should worry. But that is not yet the case. Yahoo lost the search engine market because they had a technically inferior ability to connect users with content. The early moat of Yahoo built around their landing/index page was fallible because it depended on their human curators; different users want different content, and human tastes are subjective, they did not have the means to cater to them all (unlike say, FB or TT). So maybe the question for Grab observers is whether they have a technically inferior dispatcher system as well.

5. The economics of ride hailing and food delivery are obviously not attractive. The margins are small and scaling the volume is tedious. So the question is, why are they still offering heavy discounts to attract users? The answer is that they want to be the everyday/go-to app for consumers, and they are willing to spend to create that kind of behaviour in consumers.

Size is very important. Once you are big in one vertical, you can easily expand into another. Eventually, Grab wants to be able to sell you almost everything. To be perhaps the Meituan and Ant of SE Asia. And to get the kind of transaction volume to attract more merchants, it must spend to attract consumers. Whether it will be able to achieve success is something for investors to ponder over. It will be shortsighted of Grab if they only intend to be a logistic provider (ride hailing and food delivery).

[CY09]

That's the story, Grab is driving at - to be Meituan/Ant of South East Asia.

However, we have two other "storytellers" telling us the same- GoTo and Sea

To-go has gained a foothold in Indonesia, the largest economy here basically because its Indonesian
Grab has gained Vietnam
While Sea Group has not won in any area yet but has the biggest warchest

The end goal is to become a super app but its difficult for all 3 to be super apps while equally dividing the South East Asia pie due to the small market size each would have. So the question now as investors whose story do you believe more? Based on Singapore experience, I would be bias and say Grab because it employs close to 70,000 freelancers + a few hundred corporate staff who are Singaporeans/PRs. If it fails, a lot of them would lose the lucrative incentives they have as earnings and is a potential problem for the government. So grab has this sword over Singapore government- being a too big to fail

[Choon]

From the above discussion, by extension, would Meituan and Ele also turn out to be story-based businesses?

Are food delivery platforms inherently economically efficient?

Or local environment unique characteristics (e.g. population density) can make food delivery platform a viable business in some cities but not others?

[CY09]

Meituan is profitable in the food delivery. Meituan reported a 4.3% net margin and the latest first half (pre common prosperity law days), Meituan has grown it to 10% margin, see page 17

DeliveryHero has also reported positive EBITDA for its Middle East North Africa and Europe segments

http://media-meituan.todayir.com/2021092...536_en.pdf

I do not know the similarity among China, Europe, Middle East and North Africa; but my suspicion is that these companies have been carefully managing their cost by not over paying freelancers too much, decent commission and not much incentives.

The situation is very unique in South East Asia where all the companies are dangling huge incentives and overpaying delivery riders in their bid to be number 1

[Big Toe]

A few things we can all agree on. While the combined market of SEA region is attractive, the incentives and the win at all cost mentality is making losers out of all the story-tellers. Actually this mindset is not unique to these disrupters, it happens in many industries and amongst countries as well. Of course this imbalance wont go on perpetually, at some point they will either merge or exit.

And the super-app story where one can get everything in one app is probably the best story of them all. Again, while the envisioned end game might sound extremely attractive, the reality of it happening is exceedingly low. (This is somewhat akin to someone hoping to win a $12M toto and talking about what happens after winning.) Some business are inherently very unattractive to begin with. Having it all is really quite pointless. Forcing it to happen will bring no happiness, especially for investors.

Again, I do not have deep insights into these companies as they do not fall in the what I am able to confidently value. Thus I know only enough to avoid. I speak from a normal business perspective.

[dydx]

Let's talk business strategy. If someone chooses to pay a large premium to buy up a big chunk of properties along Shenton Way with the view to become the dominant player/owner there in a few years, do you think that he will make a lot of money at the end? If, instead of using his own money, he chooses to use mostly others' money (including debt) to do so, do you think it is financially safe? Would you be willing to support him with your own money? In the first place, does it really make sense to pay a large premium to buy up a big chunk of properties along Shenton Way?