MANILA, Philippines - Despite being only second to Indonesia in terms of number of internet users in Southeast Asia (SEA), the Philippines' internet economy is the smallest among the 6 SEA nations in Google's latest SEA internet economy study.
The Philippine internet economy, measured as gross market value (GMV), is currently at $5 billion, with Malaysia being the closest at $8 billion, and Indonesia leading the region at $27 billion. In the next 7 years, the Philippines' internet economy will more than quadruple in size, reaching $21 billion by 2025. It follows the general trend for SEA, whose internet economy will collectively triple from $72 billion to $240 billion by 2025 – a projection that's $40 billion higher than initial estimates.
Indonesia, the largest digital economy in the region, will continue its growth, also quadrupling from $27 billion in 2018 to a massive $100 billion in 2025 – more than double the next largest in the list, Thailand and its expected $43 billion internet economy in 2025.
Indonesia has 150 million internet users in 2018, the most in the region. The Philippines has 75 million.
The study measured 4 verticals: e-commerce, ride-hailing, online travel, and online media. The study "does not include other sectors of the internet economy that are still in the early stages of development or lack reliable data sources, such as Education, Financial Services, Healthcare, and Social Commerce," it said.
Increased regional tech investments, mobile data affordability
The annual study, done in partnership with Singaporean holding company Temasek, is hopeful for the Philippines, however. It says that growth in the Philippines will be ushered in by increased focus and investments by startups and young regional e-companies that are already successful such as Singapore's Grab and Shopee, and Lazada, owned by China's Alibaba Group.
"With increased focus and investments from regional unicorns and local startups, we estimate that the Philippines could ignite growth beyond 30% compound annual growth rate (CAGR) and fully achieve its long-term potential," the study said.
“While the internet economy is growing in all six Southeast Asian countries covered in our research, the stage of development relative to the size of each country’s economy differs,” as pointed out in the study. “It has most room to grow in the Philippines.”
The country’s gross merchandise value (GMV) generated by internet-based products only accounts for 1.6% of its gross domestic product (GDP) – the lowest in the region, hence the most room for growth.
The study describes the Philippines' internet economy as "a relatively untapped opportunity," having "not yet generated unicorns nor shown the dynamism of the Indonesian and Vietnamese markets."
The Philippines also has the lowest adoption of digital payment services in the region at 21%, with only only one in five internet users in the Philippines using these services.
Crucial too for the development of internet economy is the availability and affordability of mobile internet access. "In a region where more than 90% of the users connect to the internet via smartphones, the speed and affordability of mobile networks is critical for the development of a robust internet economy," the study said.
Thankfully, it notes that "the cost of one gigabyte of mobile internet has more than halved relative to the income of Southeast Asians over the last four years." Among the 6 countries though, the Philippines ranked 5th most expensive in terms of the cost of 1GB of mobile data relative to a person's average income, according to the report.