South East Asia’s Potential Problem For Marketplace Marketplaces

There’s another likely motivation behind Gojek’s moves beyond Indonesia: being a nuisance to Grab. “It’s like a game: you try to neutralise your enemy, so neither of you has the advantage,” the investor mentioned above said.

By taking on Grab in other countries, Gojek aims to dilute its rival’s increasing focus on Indonesia, Southeast Asia’s largest market, accounting for 40% of its economic output. The thorn-in-Grab’s-side approach is very deliberate.

Gojek tracks a range of data that it uses to decide whether to invest in subsidies and discounts in expansion markets, a former company executive told The Ken. One of the key metrics is whether investing in local businesses will win market share and require Grab to increase its spending to keep up.

What We do at Denfex to Help Go-Jek Expand Globally

What We do at Denfex to Help Go-Jek Expand Globally

In Singapore, Gojek’s third market for expansion following Vietnam and Thailand, the strategy showed early promise. Gojek entered the city-state in November 2018 with no surge pricing and a reported 20,000 drivers on waitlist.

Though limited to taxis, the service initially seemed well-received as Gojek offered lower prices at select times during the day, according to Valerie Law, a transport analyst associated with investment research platform

Smartkarma . Gojek also gained attention “due to Grab’s missteps on the public relations side after it lowered incentives in its rewards system, and a lack of ride-hailing options after the exit of Uber,” added Law.
However, Gojek’s costly push didn’t last. The company slashed driver incentives just three months after launching in Singapore. Changes were also made on the passenger side, with a report from consultancy firm Momentum Works estimating that prices rose by around 30% around the same time.

Therein lies the problem if you want to compete with Grab. The company is backed by more cash than any other tech startup in the history of Southeast Asia. Its most recent Series H round closed out at $6.5 billion last year. That cash pile means Grab is more than able to play the subsidies game, and the company has been very keen to make that clear.

What is the Background?

That Series H round started with a $1 billion investment from Toyota in June 2018, months after the Uber deal. Grab sent out further warning shots to Gojek as the deal developed. A series of splashy announcements added new investors, including big names like tech giant Microsoft. With significant tranches of cash, most notably a $1.5 billion injection from SoftBank’s Vision Fund in March 2019, Grab built a phenomenal war chest of capital. The intent was clear: scare Gojek and put off potential investors who would fuel its business with cash.

“We want to be underfunded,” Makarim, the former Gojek CEO, told The Financial Times in an interview in April 2019. “It forces discipline. We will survive through innovation and monetisation and talent. We want to under-promise and over-deliver.”

Makarim may have been prepared for Grab stockpiling cash, but its efforts still seem to have had an effect. Gojek’s response to Grab’s huge financing push was a $2-billion mega round of its own.