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9 Jul 2021
The rise of super apps: Create ecosystems, not just platforms
by Candice Wan, Analyst, Caelus Hong Kong Office

Imagine an average day in your life –
7 am, read online news;
8 am, hail a ride to work;
9 am, use instant messaging to communicate with colleagues;
1 pm, order lunch via a food delivery app;
3 pm, make online calls with overseas clients;
6 pm, search online for restaurant recommendations for dinner with a friend;
9 pm, pay your friend back for your share of the dinner via your digital wallet.

Instead of having a separate app for each of these everyday tasks, how about a super app that groups all of your activities into one place? Would you still prefer downloading and organizing these apps on your phone, or completing your tasks using one single app? Everyday apps such as WeChat and Kakao (instant messaging), Grab (ride-hailing), are now leveraging their broad user bases to drive new revenue by expanding their core businesses. As these apps become rooted in users’ daily lives, most of them venture into fintech, further making them comprehensive super apps.

“Super apps are ecosystems— they consolidate a plethora of services into a single app that allow users to easily accomplish a wide variety of tasks, as long as the tasks occur within the app.”

Super apps rely on mini-apps (e.g. WeChat mini-programs), which are lightweight apps that run inside another app. They do not need to be downloaded or upgraded through app stores, making it possible for one app to perform the service of many apps.

Super apps are increasingly popular for their functionality and decreasing phone storage consumption. Most notable super apps exist in Asia, where many consumers own underpowered smartphones that were not conducive to managing over 40 individual apps. In China, there are WeChat and Ant Group (formerly Ant Financial and Alipay); in Korea, there is Kakao; in Japan, LINE; in Southeast Asia, Grab and Go-Jek; and it is said that PayPal is considering developing into a super app as well.

Why do we think building ecosystems through super apps is a hot trend?
The success of everyday apps evolving into super apps demonstrates that ecosystem strategies are sound and could generate real value. This motivates new startups and incumbents to follow this hot trend. To encourage faster revenue growth, these everyday apps eventually integrate financial services such as digital payment and loan services, and offer Software-as-a-Service (SaaS) to third-party operators to develop their own mini-apps within the platforms, turning these platforms into ecosystems.
Compared to platforms, ecosystems tend to run themselves automatically after the initial setup by a core firm. This is especially true when third-party operators develop their own mini-apps by riding on the core firm’s SaaS tools and existing customer base. As more third-party operators join the ecosystem, more users will be attracted to the ecosystem, which becomes a virtuous cycle and achieves a network effect. Members within an ecosystem create synergies and value with each other by sharing real-time data. This sharing economy typically drives operational efficiency, lower costs, brings convenience and create collaborative opportunities among numerous players.

From the end-users’ point of view, as they have developed a habit to use a user-friendly and sticky super app, their demand for the app becomes inelastic. It would be a second nature to them to constantly use the app and even venture into using the mini-apps within the app. Moreover, mini-apps have small memory footprint/RAM usage that consume less power and phone storage. In return, the super apps keep improving, releasing updates, and adding more services through mini-apps, therefore creating customer as well as monetary value to the service providers of the super apps.

As technologies like artificial intelligence and machine learning become more prevalent, ecosystems are expected to become increasingly ubiquitous. Consequently, most ecosystems will act as data aggregators in their own right. If a company is able to convert these data derived from an ecosystem into meaningful information with the help of these technologies, not only the parties within the ecosystem can benefit from it, but many parties along the value chain could unlock new value and solve complex problems.

The super app trend is going to grow rapidly as a result of the COVID-19 crisis. Digital interactions are now essential for both businesses and customers— consumers are demanding valuable experiences across products and services, and companies reinventing their value propositions to swiftly adapt to global crises. However, implementing the ecosystem strategy requires a keen focus, and one must carefully choose the approach that is best suited for each application, to maximize the potential of an ecosystem.

The author is a Securities and Futures Commission licensee, and no part of the author’s compensation was, is, or will be, directly or indirectly, related to the specific material contained herein. The author does not personally hold the mentioned relevant shares.

The commentary, news, research, analysis, prices and other information published in this column can only be viewed as general market information, which is for reference only and does not constitute investment advice. Caelus Asset Management Limited is not responsible for errors, inaccuracies or omissions in the information, and does not guarantee the accuracy or completeness of the information, text, diagrams, connections or other items contained therein. The company shall not be liable for any special, indirect, joint or consequential damages caused by the materials, including but not limited to loss, loss of income or loss of profit.