Thursday 28 Mar 2024
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This article first appeared in The Edge Malaysia Weekly on May 30, 2022 - June 5, 2022

IF you have been following the ongoing saga of the world’s richest man Elon Musk’s US$44 billion purchase of Twitter, you are probably struggling to keep up with what exactly he would do with the microblogging platform once he owns it. As it turns out, Musk, who originally said he was not looking to make money from the purchase and was interested mainly in defending free speech, now feels that the best way to derive value from Twitter might be to turn it into a super app with payments at its core.

While Asians have heard a lot about ­WeChat, the all-purpose super app owned by Chinese internet giant Tencent Holdings Ltd, American and Europeans do not have anything close to a super app. A super app is a single mobile app that offers basic services including chat and payments, alongside a suite of “mini apps” from third parties, ranging from stores and restaurants to government agencies. WeChat is the “everything app” — wallet, social media, messaging, food ordering, music and video streaming, bill paying, game playing and a lot more. “If you’re in China, you kind of live on ­WeChat,” Musk said on a podcast on May 16. “It does everything — sort of like Twitter, plus PayPal, plus a whole bunch of things, and all rolled into one, with a great interface.”

Developed markets like North America, Europe or Japan may not have a super app but emerging markets in Asia and Latin America have plenty of imitators or ­WeChat wannabes. They include Singapore’s ride hailing firm Grab Holdings Inc and Indonesia’s e-commerce player PT GoTo Gojek Tokopedia Tbk, Shopee’s owner Sea Ltd, Indian fintech player Paytm and PhonePe, the fintech arm of Walmart’s Indian e-commerce subsidiary Flipkart, or Latin America’s e-commerce and payment giant Mercado Libre Inc or Brazilian payment player PagSeguro. Former WeChat executive Kevin Shimota’s new book The First Superapp: Inside China’s WeChat and the Digital Revolution explains how the super app framework can be reproduced beyond China.

What makes a multi-purpose app a super app? “An app reaches super status when it knits together a critical mass of services, makes them so easy to toggle across that, even if they aren’t as good as sole-purpose apps, the app becomes the operating system for your digital life,” notes prominent tech commentator Scott Galloway, a professor at New York University’s Stern Business School.

What makes WeChat sticky is its chat or messaging platform. And what adds to that stickiness is its payments platform. The combination of the two helped catapult WeChat to be the top app in China. Tencent then overlayed it with an array of apps like music streaming through Tencent Music Entertainment and video streaming through iQiyi. WeChat is now by far the most used piece of software on the planet, way ahead of productivity software like Microsoft ­Office. Tencent’s rival Alibaba Group Holding Ltd, despite its huge lead in e-commerce, could not recreate a super app as big or as sticky as WeChat.

For his part, Musk says he would like to turn Twitter into a super app that would merge its public forum with features like chat, picture and video messaging, Facebook-style newsfeeds and a variety of other social media functions — including payments as a primary function. Like Twitter, WeChat started off as a social platform but became a viral sensation when it added a mobile wallet and payment features. Musk says the super app he envisages would be “a spam-free thing where you can make comments, post videos … an all-encompassing app that’s everything from a digital town where important ideas are debated” to a payments enabler and everything in between. Just listening to his recent podcast, my sense is that the new “super app Twitter” will be more of a media company than, say, Facebook or Google, which are part media companies and part social media.

The key to building a great super app is trust. “Where you sort of have a high trust situation, then payments, whether it’s crypto or fiat, can make a lot of sense,” Musk said on the podcast last week. Twitter, the new super app, says Musk, a co-founder of fintech giant PayPal Holdings Inc, would be “maximally trusted and inclusive”.

Are super apps what they are being made out to be? Super apps start with solving one core problem really well and then build an ecosystem around the core offering, notes NYU’s Galloway. A good super app offers a suite of internet services on one platform. Take Block, the fintech platform formerly known as Square. Its Cash App enables peer-to-peer payments, crypto and commission-free stock trading. Last year, it acquired Afterpay Ltd, which offers “buy now, pay later” lending. It also owns Tidal, a music streaming competitor to Spotify and Apple Music. It sold Caviar, its food delivery service, to market leader DoorDash Inc a couple of years ago. And, oh, there is also Square, its core merchant-payment platform. Rival PayPal tried to buy social media firm Pinterest Inc last year but reportedly broke off talks due to disagreement on price.

Super apps have been aptly compared to the versatile multi-tool Swiss army knife. Truth be told, I have owned various versions of the Victorinox Swiss army knife that also had a corkscrew, bottle opener, can opener, screwdriver, key ring, oh, even a nail file and a small ruler and half a dozen other tools that I can’t remember. It’s a nice handy helper when you can’t find the right tool around the home. There are clearly some things the multipurpose tool does well in emergencies but try opening a large tin can with it or using the screwdriver and you will get what I am trying to say. You can’t do everything well with a super app just as you can’t do everything well with a Swiss army knife.

Yet when someone as well-known as Musk, in the midst of a high-profile corporate takeover, says he is buying the microblogging platform because he wants to imitate a Chinese app, everyone wonders — if the super app is such a great innovation, why hasn’t the world’s most developed market with its trillion dollar tech giants offered anything like it to customers in their own backyard?

Smartphone duopoly

One reason why super apps have had little traction in the developed world is the smartphone duopoly of Apple Inc’s iPhone iOS and Google’s Android operating system. Super apps sit on a smartphone’s screen. Apple and Google are the gatekeepers of the mobile internet; the last thing they want is to allow a super app to come in and disrupt their gatekeeper status. Apple and Google have their payment systems. You can use your Apple or Google ID to sign in to a range of services. They offer credit and debit payments. Apple recently introduced its own merchant-payment platform to rival PayPal’s core offerings and has plans to launch its “buy now, pay later” lending offering later this year. In short, Apple is as much of a fintech player as it is a super app itself.

In the US, about half of smartphone ­users have an iPhone. Rival Android has the other half. Globally, Android has 81% of the total smartphone installed base while the iPhone has a mere 19% share. The iPhone’s closed, well-integrated ecosystem is a built-in repellent to the widespread adoption of super apps in the US.

Super apps have had some traction in Southeast Asia, India and Latin America in part because they are dominated by cheaper Android phones, which do not have the closely knit ecosystem advantages of the iPhone. While the iPhone is very gradually gaining share, Android has an almost insurmountable lead because affordable phones made by Samsung Electronics Co, Xiaomi Corp, Oppo and Vivo are preferred by Indians, Chinese and Southeast Asians at the expense of the more expensive iPhone.

Other global tech behemoths see themselves as super apps. Social media giant Facebook’s owner Meta Platforms Inc was once thought as the company best placed to be the developed world’s version of WeChat. Founder and CEO Mark Zuckerberg, who has grown his social media platforms by aggressively copying rivals like Snap and TikTok, or paying over-the-top amounts to buy companies it perceived to be a long-term threat like WhatsApp and Instagram, began copying WeChat in earnest to develop America’s first super app.

He initially attempted to build it as an ecosystem around Facebook Messenger. Facebook had grand plans for its super app. It poured billions into building a global payment system. At the apex of that push was the launch of its digital currency, Libra. Last year, it abandoned Libra to focus on a stablecoin called Diem. Now it is experimenting with non-blockchain-based digital currencies as a way to expand into e-commerce in the “least regulated way”. Its focus is now on launching digital tokens, dubbed as “Zuck Bucks” by the media, within its apps and its proprietary metaverse.

Meta needs a strong payment system to support its forays into e-commerce. In India, it is trying to monetise WhatsApp through its partnership with Jio Platforms Ltd, the digital services arm of India’s largest conglomerate, Reliance Industries Ltd. Jio, which has nearly 440 million customers in a nation of 1.4 billion people, has launched an e-commerce platform for small corner stores using WhatsApp.

Regulatory hurdles

Still, the deck is stacked against the rise and rise of global super apps. It is unlikely that regulators and policymakers in North America or Europe, or indeed even South Korea, Japan or Australia, will at any point soon allow a dominant super app to thrive in their jurisdictions because of all sorts of antitrust problems. For their part, consumers in the developed world do not want super apps because they will reopen a can of worms surrounding a myriad of data privacy issues. If for some reason an American tech giant could morph into a super app, European regulators like Denmark’s Margrethe Vestager will be ready to pounce on them on data privacy.

That brings me back to the bigger question of whether super apps will survive in China and Southeast Asia or, to put it another way, whether they will be allowed to thrive in their own geographies. In the end, it will all come down to what regulators in the region will do. How much data will they allow super apps to collect? How will the data collection be policed? Essentially, super apps are private data collection utilities. Across Asia, and indeed even in China, there are private utilities like electric power producers but they are heavily regulated. My own sense is that five or 10 years from now, WeChat will be a more regulated and much less profitable player than it is today. In their early incarnation, independent power producers were huge money spinners until regulations caught on.

Super apps have a role to play in the region’s digital economy and it is unlikely they will go away soon, but anyone betting on them to be the next moneymaking machines should look no further than the iconic Swiss army knife. It’s nice to have and handy in emergencies but even Victorinox, the world’s biggest Swiss army knife maker, which also makes watches and fragrances, is still a niche player, not a powerhouse.

 

Assif Shameen is a technology writer based in North America

 

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