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From the Concept Library, concepts for this article are:

• Growth: Core vs. Adjacency
• Growth: Explore vs. Exploit

From the Company Library, companies for this article are:

• Grab

Photo by Grab Media Resources

———-Transcription Below

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Welcome, welcome everybody. My name is Jeff Towson and this is the Tech Strategy Podcast where we dissect the strategies of the best digital companies of the US, China and Asia. And the topic for today, what Grab should learn about growth from Amazon and not from Meta. So this is kind of be about Grab, which is a company I’ve been focusing a lot this last week. Those of you who are subscribers, I’ve sent you two pretty in-depth articles about. their sort of strategy situation. But it’s also a good opportunity to talk about growth. And that really bleeds into the idea of innovation, growth and innovation tend to go hand in hand in digital companies. So I thought that would be a good topic for today. And I’ve talked a bit about growth in the past, specifically about sustainable growth, which is generally considered, the framework I like is core versus adjacency growth. So we’ll talk about that as a concept as well. Little bit of companies, little bit of concepts for today, and that’ll be the topic. Now let’s see, those of you who are subscribers, I sent you the Grab articles. I think that’s all I’m gonna do for Grab right now. I think I’ve pretty much covered the strategy situation. Well, we’ll see where they are in a couple months. Stuff that’s on the way, I’m gonna send you an article on magazine Louisa, Magalu, and Zed Delivery. So those are both sort of. Digital companies coming out of Brazil, pretty interesting. I’ve sent you some articles before. This is gonna be sort of the completion of that. So that’s on the way. Other housekeeping stuff, the Asia Tech Tour. This is happening in March. It’s gonna be a week long, basically five days, Monday to Friday, sort of deep dive in probably Southeast Asia, although it’s not 100% finalized. where we’ll go to Jakarta, Singapore, and probably Bangkok, do some company visits, technology companies, obviously, and do some guest speakers, content, digital thinking. So it’s gonna be kind of a mix of company visits, digital content, and then just a lot of fun. So that’s in March, if you’re curious about that. send me an email, info at 1000group.com. If you go to my webpage, you can find the address info, I-N-F-O at 1000group.com and I’ll send you the details for that, but that is set up for March. We are probably gonna customize that a bit based on who’s going to make sure it sort of meets everyone’s interest, but that’s the baseline project right now. Anyways, if you’re interested, send me a note. Okay. That’s it. Other stuff, if you’re not subscribed or go over to my website, jifthousand.com, you can sign up there, free 30 day trial, see what you think. And standard disclaimer, nothing in this podcast or in my website or writing is investment advice. The numbers and information presented by me and any guests may be incorrect. The views and opinions may be expressed, expressed may no longer be relevant or accurate. Overall, investing is risky. This is not investment advice. Do your own research. All right, let’s get into the topic. Now, as always, we start with some concepts for today. And really, there’s just two I want to talk about. The first one is growth, often sustainable growth. We’ll just call it growth, which means longer term, sustainable, not a good quarter. But then that’s the kind of stuff we think about in strategy as opposed to the various growth tactics you can use to move the numbers for a month or six months. We’re talking about sustainable growth, things that play out over longer term. And within sustainable growth, the idea of core versus adjacency, which is something I’ve talked about in the past. You can find that in the concept library. And I specifically, I talked about Bain, the consulting group, there’s a guy there named Chris Zook who’s written several books, very good books on growth, specifically sustainable growth, that’s worth looking at. So we’ll talk about that. And then the other, okay, this is not really a standalone concept, but I just wanna talk about… an approach to growth which you hear a lot, which is often it’s called like explore and exploit or plant and harvest. And it’s basically the idea is you plant a lot of seeds and then you see how they grow and you feed the winners and you kill off the losers, whatever. It’s a lot about finding product market fit and things like that. That’s a pretty common strategy we see in a lot of digital companies. I think either done internally or by M&A. So let’s talk about explore and exploit as a growth approach, which is different than core versus adjacency. Those will be sort of the two ideas for today, both of them under growth. Now on Saturday, I finished up the last chapter of my last moats and marathons book. So all six books are officially done, which was a really a long, a long haul. It was 46 chapters overall. I’m close to 200,000 words. It took me about seven years worth of research. But as I was writing the last chapter, one of the things I was thinking about is, you know, I meet with clients and I’m doing quite a decent amount of advisory now about digital strategy. And you can talk about this stuff forever, but you know, your typical CEO generally is thinking about one of two things. So when I come in as sort of an advisor, generally it’s one of these two topics. I mean, you can talk about stuff all day long, but those are kind of the ones that lead to projects and things. And the first is competitive strength and defensibility of which is like, look, you are what you are. How do you defend what you have and extract more profits and build up barriers and, you know, entrench your position, which is what the Motes and Marathons book are about, which is, you know, how do you build and measure competitive advantage in digital businesses? Okay, that’s sort of topic number one. sort of writing a lot about that. The other topic which I am not sort of let’s say a leading thinker on, but I do study it a lot, is the idea of growth and innovation. You know, your typical CEO, if they see that their competitor is growing twice as fast as they are, that’s a big problem for them. If they see that their competitor is innovating faster than they are, new products, new features, lots of M&A moves, things like that. And that really ties into the idea of growth. Those things kind of go together. So growth and innovation is another area where CEOs really pay a lot of attention to it. And there are people who do a lot of sort of expert thinking in this area. I’m more of a follower in that subject, although I do, I knew actually study it a lot, but I try to lead in the other one and I follow there. So within this idea of growth and innovation, we get to the idea. we get to the topic of Grab. Now Grab, very cool company, I’ve talked about it a lot. I mean, this is, if you’re looking for Southeast Asia digital giants, you know, Grab is in the top three to five. I mean, you know, this is Anthony Tan founded it, raised a crazy amount of money, by and large as a copycat to Uber, early on. I mean, and it was, no, that’s where he started. And then you adapt and you localize, but that’s a really good strategy. I really like fast follower in a developing economy. And then you sort of copy something out of China, copy something out of the U.S. You take it to somewhere like Latin America, Southeast Asia, you localize it and adapt it and you innovate from there. It’s a really good approach. But you know, Grab was, starts with mobility services. Then you do food delivery. and then they move into payments, which has become more of a financial services play. Okay, that looked a lot like Uber plus Uber Eats. It looks a lot like DD, it looks a lot like food delivery, it looks like iFood. Now, whether it’s mobility plus food delivery, which is what you have in common then is the drivers, or whether maybe you just do the mobility, that would be, let’s say, DD, or if you do both, that would be Uber. So you can split it up a bit, but you’re basically in the O2O local services business. And we see versions of this play pretty frequently. Okay, so we look at Grab. I’m not gonna go through the whole history of Grab. I’ve talked about it a lot, but they recently had an investor day and they are now public. They did a SPAC, so now they’re doing investor days as of this year. Pretty interesting stuff. Their investor days are pretty good. For those of you who are subscribers, I sent you a decent number of slides from their presentations. Pretty good stuff actually. Pretty detailed. Pretty good. You know, the numbers are pretty good. But they have the same problem that Meituan had back in 2018, which is they have just gone public. Everyone can see their numbers and they are not operating profit positive. Right? They’ve got revenue. They’re showing growth. They’ve got lots of On the demand side, they’re seeing everything we would want to see. Lots of users. This is a big company across Southeast Asia. Lots of engagement. Lots of data being generated and growing revenue. And they’ve got a very well-known brand. I mean, they are a leading brand in Southeast Asia. So the demand side of the picture looks good. The numbers are big and they’re getting bigger. We see big scale, we see growth. All very good. The problem, just like with Meituan, and just like Uber, is this business model is not terribly profitable. It’s not like e-commerce, Amazon, Taobao, Shopee, where this business model just throws off a lot of operating cash very quickly. No, I mean, local food delivery, you got armies of dudes on scooters delivering, the margins are relatively low, the take rates of a… typical food order, 20%, something like that. So the revenue is a bit smaller, your take rates are smaller, you got all these delivery dudes, so you’re not getting the same profit. And there’s nothing you can do about it, it’s just the nature of the animal. Okay, so 2018, Maytwan goes public. They are good growth, lots of adoption, market leader, just like Grab, operating profit negative. How are they gonna get to profitability? It wasn’t clear, at least to me, that they could. And unlike Grab, they had a major competitor, which was Ulema, which is owned by Alibaba. Alibaba has more money than God. They’re taking on Meituan. It didn’t look good. I got it totally wrong. I thought they weren’t gonna get to operating profits. One year later, they surprised everyone. Not only did they reach operating profits, Meituan. They also expanded their market share versus Eleme. Eleme, it’s E-L-E dot M-E is how they say the name. In Chinese, it literally means Eleme, are you hungry? It’s a question. They’ve just written it E-L-E dot M-E. I don’t know why they did it, but that’s what it means. Okay, so I got it wrong. So I’m looking at Grab and I’m saying, okay, they’re operating profit negative. Could they surprise everyone in the year and announce positive operating profits? Okay, I took them apart. Subscribers, I sent you two, much too long emails about this. The first email was about their cost structure. And the way they’re going towards profitability is pretty similar to Metuan, which is we gotta grow our revenue, which I’ll talk about today, and we’ve got to become much more cost efficient. And this is from their, you know, COO talks about with this. And the big lever they’re pulling, they have several levers, but the big lever they’re pulling in cost efficiency is a geographic economies of scale in basically geographic and distribution density, which is if you go to my concept library and look at competitive advantages, you’ll see that’s one of the major ones. It’s a big deal for food delivery and other types of logistics. And the idea is the more density of users and orders you get in a specific geographic region, like one part of town, you can start to extract deficiencies. And that’s what Meituan did. It was one of their big levers to drop their costs. It’s definitely something that Grab is going after. It’s a good way to learn about that concept. You can go read about it in the machina I go through today. The other thing they’re going for. is revenue growth. We’ve got to grow the revenue, we’ve got to squeeze our cost efficiency, and we are going to grind our way to profitability percentage point by percentage point by percentage point, which is the same way Meituan did it. And that’s more or less what they’re doing, but within their growth strategy, they’re doing kind of a spectrum of things. And I’ll give you what I think they’re really doing. And there are some good lessons there for growth of a digital company. And I think things they could learn from Amazon who is really good at growth and things they should avoid from Facebook meta Which is you know currently blowing the world’s greatest amount of money on their metaverse big pivot Not terribly enthusiastic about that, but I don’t think a lot of investors are Anyways, so let me sort of talk about what they’re doing growth wise now. I’ll give you a couple numbers If you look at the overall, what is Grab today? Grab in my opinion is two platform business models. One is a mobility marketplace, connecting drivers and consumers, getting rides around town into the airport. The other is a food delivery marketplace, which connects restaurants and markets and marts with consumers, that’s food delivery on scooters and things like that. Two payment platforms, which are complimentary. You know I like complementary platforms as a business model. Plus they’re doing stuff in payment and financial services, which is what I’ll talk about. The latest numbers from them, they’re doing 10 million transactions daily. Mobility and food delivery tend to be the highest, most frequent local services transactions. They have 30 million, 32 million MTUs. The phrase they use is monthly transacting users, MTU. That’s a pretty good metric for users. These are people that have bought something this month. If companies start to give you annual users or annual transacting users, they’re usually hiding something. It’s not awesome. Monthly is great. So 32 million across Southeast Asia. Very good. Four million. Active merchant partners they say registered merchant partners. Sometimes they say active merchant partners, which means they’re doing some transactions It’s in the three four two million range That’s about right. That’s about the same Ratio we see at other platforms if we look at iFood in Brazil or Maituan. It’s usually one in eight Like so if you have 30 million consumers, you should have about four to five million merchants. It’s about the same And then they have about five million registered drivers, people on scooters. Again, registered is not the same as active, but these numbers are pretty good. And when you look at their growth in those numbers, which are already large, all the growth numbers are pointed in the right direction. Year over year monthly transacting users going up 20%. That’s like Q1, 2022. Active merchants going up 30%, gross merchandise value across all of it going up 30%. This is year over year quarterly numbers. GMV per MTU, which is how much is each monthly transacting user spending, is going up from about 130 to $150 million. Okay, that’s about right. So we get a sense, look, people are spending more and more. They’re more engaged, there’s more of them. All those numbers and then overall revenue. This is for first quarter, so this is a quarterly number. $216 million up to 226. Anyways, all that’s pretty good. I’ll give you some more recent numbers. Increasing spend per users, which would be dollars per MTU per year. It looks like if you annualize the 2022 numbers, your average monthly transacting user is gonna spend about $550 per year on the platform. Now that’s not revenue, that’s gross merchandise value, but that’s up from 530 last year, 420 the year before that, 348 from the year before that. Now COVID makes those numbers all funky, but trend lines going in the right direction. Estimated revenue. for 2022 for the company, $1.2 to $1.3 billion. That will be about, last year, $700 million US dollars. So now going up to 1.3. The year before that, 500 million. So revenue’s going up, everything’s going up. Okay, I think I’ve made my point. So they outline a bunch of strategic initiatives and. I think these are interesting. I’m not paying attention to most of them. I think, and the ones they list are like, grab unlimited subscriptions, grab for business, groceries as a segment, more partnerships with companies like Coca-Cola, advertising, financial services. Within all of this, there’s four to five that I would put, that I pay attention to. So I’ll go through the four to five initiatives that I think are important and sort of explain how these relate to core versus adjacency growth initiatives. Now the first growth initiative, and this is me saying this, not them, is they’re launching new services for consumers. And that’s great. I mean, that is one of the benefits of being a digital company, is it’s very easy to add additional services. If you’re Mars Candy, It’s not that easy to roll out new products and get adoption. But if you’ve already got people logging into your app multiple times, let’s say five to ten times per week, it’s very easy to start offering them new services. Here’s food delivery, here’s hotel reservations, here’s restaurant reservations, all of that stuff. It’s one of the benefits of digital products and services. You’ve already got the existing consumers, so you roll out new products and services and then you cross-sell. That’s fantastic, I love it. And I also like companies that, my digital operating basics, level two of my six levels. Digital operating basics number two is never ending customer improvements. That you have to continually innovate and offer new features, new services to your customers and improve the customer experience in a very data driven way and that treadmill never ever ends. I mean, that is just part of being a digital operating company. So this is where growth and innovation and digital operating basics, it’s all sort of one thing. Okay, so now they’re doing a decent amount of this and they sort of talk about what they’re doing and how are they improving the current services? How are they adding new services? And obviously adding a new service is the shortest path to a new source of revenue. So that’s the shortest distance to growing revenue is sell more of what you’re already selling or sell something else to your current customers, right? And if you look at the history of Grab, they actually have a fairly good track record of rolling out new services. Now they don’t do a lot of strategic moves. They don’t jump from gaming into e-commerce into local services. No, their core businesses have pretty much always stayed the same. But within then, they roll out new services all the time. So 2022, they launched Grab Ads, which is a self-service feature. 2022, they launched Grab Maps. 2020, they did Grab Merchant. 2019, they did Grab Mart, which means you can buy from like convenience stores. Grab Finance 2019, Grab Ads, there’s different types of ads. 2018, Grab Food 2018. Grab Pay 2017, Grab Car 2014, Grab Taxi 2012. So they have a very good history of this. So when they say we’re gonna roll out near services as a way to generate new revenue, okay, beautiful. Stuff they’re focusing on within that, they talk about supermarkets, which is basically bringing them on as a user group, connecting them within the food delivery marketplace platform. So then the people go into the stores and they buy whatever you want from a supermarket and then deliver it to you. That’s a nice service, incremental revenue. It doesn’t create a platform business model because typically in a local area, there are 200 supermarkets. There’s gonna be five or 10 major ones. So this is more of a service than let’s say launching third party marketplace type activity. Now they’re also focusing on markets. So those are all the little stores, the 7-Elevens, the little local merchants that aren’t restaurants. Now that expands their marketplace because that is overwhelmingly third party. So supermarkets, okay, they’re both third party, but one has a lot more differentiation, lot more things. So that’s gonna grow their platform, but both of those get you incremental revenue. Other stuff that their management team talked about in their presentation, they’re going after personalization. Personalization is a good revenue driver. I was giving kind of a lot of talks in Brazil in the last month, and I always kept saying like, look, don’t underestimate how big of an impact personalization has. The more you can personalize to your customers, it will significantly improve their experience and drive revenue. It really does matter. So they’re doing that. They’re adding content, fine. That I’m not as enthusiastic about that. That means more reviews, more photos, more recommendations. That’s all going to enrich the customer experience. And the phrase they use is this will deepen engagement, which is about right. It’s not gonna drive revenue, but it’s gonna enrich the experience. Okay, so all of that goes under. let’s do new services for our current customers. Now in the process, you’ll also get additional customers by doing new services, so then that’s a win-win as well. Okay, fine, that’s growth initiative number one, totally buy it, that’s a great lever to just keep pulling as much as you can to drive growth. Growth initiative number two, Grab Unlimited. This is their pilot subscription program, this is Amazon Prime. basically, or Walmart Plus, which is really pretty cool. This is, let’s offer a subscription service, our current customers can sign up, and we give them additional services and benefits. And the biggest thing we’re gonna give them is promotions and discounts. So if you spend this much money to join, you save this much money, right? Kind of like Amazon Prime. If you sign up for Amazon Prime, we give you free delivery. So you save money in the long run. assuming you do a certain amount of activity. So discount vouchers is what they’re doing, free delivery for Grab food. Maybe you get six discount vouchers for Grab food. Maybe you get free delivery for certain select cities and so on. A lot of vouchers, but they can build on this and start to add other things. I like subscription models for marketplace platforms and for e-commerce companies. Like one, People sign up so you get money, right? That’s very good. I mean, what’s the first thing that we’ve heard from Elon Musk now that he’s taken over Twitter? If you wanna keep your blue check mark, you’re gonna have to sign up for a subscription service. That generates revenue on day one, which is good. Incremental revenue, very good. The other thing about these subscription programs is they are really loyalty programs, they’re membership programs. You see it play out in really surprising ways. Someone asked me in Brazil, like what’s the best way to improve retention? We’re always spending all this marketing money to get customers, but then we lose some of them. We have churn, because everyone has churn. How can we increase retention? Because that plays out all over the place. The best lever I know of to retain your current users is a membership program. You get greater customer retention, you get greater engagement, and you get greater spending. It’s a really interesting phenomenon. So they’ve already said, you know, they’re rolling out this pilot program for Grab Unlimited. They’re already seeing that Grab Unlimited members spend two to three times as much as their regular customers. They do twice as many transactions. 70% of these members use multiple services. So you see all these interesting things when you see this. And that’s the same thing we’ve seen on Amazon Prime, we’ve seen these in other, so these membership subscription programs, one, you get the incremental revenue, but two, you get all these other end benefits that play out across all your other services. So that’s number two. Number three, for growth initiative that I like, This wasn’t really one of theirs, but I’m kind of pulling it out of their comments. Cross-selling. You know, I listed cross-selling as one of the soft advantages on level three, which is barriers to entry and soft advantages. I put cross-selling and bundling as two of the big levers you can pull. These are structural advantages. When you can start to cross-sell multiple services, it really helps. And they’re basically talking about this, 40, 50, 60% of their monthly transacting users are buying multiple products. So once they roll out something like Grab Unlimited or a new Food Mart program, they can immediately cross sell their current customers, low customer acquisition cost, it increases retention, it increases engagement. It’s one of those things where you win multiple ways. So I like that and they basically said that, you know. 70% of their active members use maybe multiple products if they’re on Grab Unlimited and other things. So cross-selling, that’s number three. Okay, now let me sort of take a minute and talk about core versus adjacency growth. Now, Chris Zook, Bain & Company, interesting company, good strategy stuff. They’re… They’ve written several books, I think it’s mostly Chris, but it’s probably other people. Profit from the Core, Beyond the Core, and he talks about sustainable growth in a business, which means growth over three, four, five, six, and more years, up to 10 years. You need a profitable core, core business. So you wanna focus, and if you don’t have that, you’re not gonna see these numbers. All the companies that show long-term, consistent, compelling growth all have a profitable core business where they have, he has certain definitions he talks about for this, but every business needs one to two strong cores. Now, what is a strong core? His definition is you need loyal customers, you need a competitive advantage, you need unique skills, you need profits. I don’t really buy that definition. My definition for a strong core is you need a competitive advantage, you need a significant market with the potential for growth, and you need attractive unit economics. You need the trifecta, which I’ve talked about before. If you have that core, then core growth is about adapting and innovating in that core. You’re not gonna grow the core over five to 10 years. simply by selling more of what you’re already doing. All cores have to adapt and innovate and change with the times to some degree. You can’t be stagnant. So he calls this adapting the core, which I would call growth plus innovation within the core business. What would that be? Well, that’s new products and services for your current customers. Maybe that’s adding some new customers. Maybe it’s adding one or two new geographies. That’s a lesser degree of innovation than launching an entirely new business, going into an entirely new field. This is more about adaptation and innovation that gets you growth within the core, assuming you have an attractive core to build on. Now, everything I just said for Grab, the top three things, that I think they’re doing growth wise, which I’ll repeat them for you, was, number one was new services for their current consumers. Number two, Grab Unlimited, the membership program. Number three, cross-selling. I would call all of that growth in the core, not in adjacencies. So I like all of that. Now there… Their fundamental problem at Grab is that they have an attractive market. It’s large and it’s growing. They have competitive advantages, but they don’t have super attractive unit economics in the core business. So they have what I would call sort of a medium to weak core as opposed to a strong core, which would be like Taobao, Amazon, Shopee. And that’s just where they are. So they’re gonna grind to it. Now, that would be different than, let’s say, adjacency growth. Now, and I will put these in the show notes, by the way, but Chris outlined six growth adjacencies, which are like completely new customer segments, completely new geographies like global expansion, completely new products, new to the world. completely new support services, complements, next generation products, things that we haven’t seen. Now, those sound similar to the core, but they are much bigger jumps. And that’s a judgment call. Okay, not just new products and services, but let’s say completely new businesses. Let’s say major steps within the value chain, forward integration, backwards integration. Those are much bigger moves. and they can be compelling but then you have to sort of weigh how compelling is this opportunity versus how likely am I to succeed. The further you go from the core the probability of success drops. That’s always the problem. So when Facebook said we are no longer going to be Facebook, we’re going to be meta and we’re no longer going to be a social media company, we’re going to be a metaverse company. That was a major jump from the core. And a lot of investors are very skeptical about their likelihood of success. One, the further you are from the core, the harder it is, but you also have to look at the track record of the management teams. Have you made such a jump before, or is this the first thing you’re doing? Elon Musk is very good at making major jumps into completely new businesses. He’s done it four or five times. Amazon is quite good at making jumps from the core into adjacencies. They’ve done it multiple times. Most companies can’t do it. So, what I like about the first three growth initiatives for Grab is they are core growth initiatives, they’re innovation and adaptation focused, and everything looks pretty solid. And in theory, they could maybe grind their way to profitability over the next couple of years, which is exactly what Meituan did. That’s how they got to profitability. They didn’t take major jumps. Okay. Now, hold that thought and let me jump to the last two growth initiatives of Grab that got my attention. Number four, advertising. They are gonna take a jump to, you know, they kind of have always done advertising. You can see the scooters going across town. That’s offline local advertising. You can put ads on them. You can go onto the website and the merchants can advertise and promote, buy sushi from my restaurant, not the other restaurant. Okay, fine. They’re basically moving down the pathway and making that more aggressive and sophisticated. So they’re going into search advertising. they’re going into video based advertising and the initiative they have for this year, which is their big one, is self-service advertising model where anyone can just sort of plug in, just like when you’re on Google, just when you’re on Facebook, anyone can go in and start buying ads anytime. That is a different service. That is a different skill. Advertising requires some sophistication. So I would put that more in an adjacency. Now you could argue, I’ve talked about new services for consumers being sort of a core growth plan, but they’re also, I mean, this is a marketplace platform. So they’re also doing new services for the merchants and the restaurants, right? You can innovate on both sides of the platform. So you could say advertising is, you know, just. an additional service for their merchants, which is what it’s kind of been. Well, this is the idea that they’re going to open that up to anybody who wants to advertise to their consumers any time, even if they’re not merchants on the platform. So that would be externalizing the capability. This would kind of be a new service. It’s a bigger move. I think that’s fairly compelling as an adjacency move. Chris and the folk at Folks at Bain have talked about three factors, and I’ll put this in the show notes, three factors to assess the likelihood of success of an adjacency move. Factor number one, the adjacency is tightly tied to the core. How far is the economic distance? How much does it overlap? Is there a very strong linkage? Factor number two, is the adjacency market attractive profit pools. Look, if you’re going to make an adjacency move, there better be a payoff and it better may not be too far. Factor number three, what is the likelihood of this company capturing economic leadership in that space? Now, I think for all three of those factors, advertising looks pretty good. Advertising on digital platforms is often free money. There are no costs of goods sold. There’s no shipping of boxes, it’s just pixels on a screen. It’s pretty tightly tied to the core and the likelihood of them doing well is pretty good. So I’d say as an adjacency move, that’s pretty decent. Last factor, I’m sorry, last growth initiative, number five, financial services. And this is arguably the most ambitious thing they’re doing. And their financial services is really two buckets. They have… basically GrabFin and then they have Digibank. GrabFin is the stuff that they’ve been doing on the platform that they are going to externalize to non-platform participants. So that would be GrabPay, the GrabPay wallet, fine. Merchant and driver lending, lending money to the drivers, lending money to the merchants, working capital solutions, things like that. Pay later buy now pay later, which is really consumer credit and then scenario insurance Which they could offer to drivers and things like that all one two three four of those which they currently offer within grab Pay to their current user groups Those are profitable. It’s not huge money, but it makes some revenue and it all stimulates engagement And other types of usage for example Drivers do more rides if they have insurance. Drivers spend more time on the platform if they have insurance. If you give consumers credit, they tend to buy more, almost always. If you let them pay later, they love that. So GrabFin has traditionally been services within the platform to their current users. They are now externalizing that and letting other non-ecosystem participants use this. So they’re kind of calling that, ecosystem benefits and other things. Fine, we’ve seen that playbook. I’m not super optimistic about that. I think there’s a tremendous amount of competition in that space. I think the likelihood of them achieving a leadership position off platform is not clear to me. That there’s a lot of players going into this space in Southeast Asia. Ant Financial’s on this space. The major banks are going after this space. And they’re quite good at what they do. Shopee’s going after this space. Gojek’s going after this. And there’s a huge number of players going up. So how much adoption are they gonna get off platform? What is the likelihood of leadership there? I’m not as optimistic about a growth adjacency play there. Now, if we move from Grabfin to Digibank, This is their big sort of new initiative where they’ve, you know, they’ve formed basically a joint venture with multiple partners. They’re applying, this is basically, they’re applying for a bank license. They wanna be a digital bank. That means offering savings accounts, current accounts, lending, financial services. That’s pretty far afield from where they are. So those two adjacencies, eh. I like advertising as an adjacency. I like GrabFin within the current platform as an adjacency. I don’t like GrabFin outside of the platform or DigiBank nearly as much as an adjacency. I think it’s more speculative, which is fine. There’s nothing wrong with doing speculative stuff. Just understand that’s what you’re doing. And that brings me to the last point. The other concept for today, the first concept for today was growth. core versus adjacency. The other concept for today was this explore and exploit approach, which is really what Amazon is well known for. And Alibaba is also well known for this. They make lots of small bets, and then they see what happens. And these small bets could be, let’s say for Amazon, or let’s say Alibaba, you know, they would do Youku, Tmall Genie, IOT products, Tsai Niao, a small investment in Lazada that led to a takeover, a small investment in Ilema that led to a takeover, AliExpress, they start lots of these little projects all the time, they either do it in-house or they make a minority investment and they do this all the time. And then if they take off, They call them seeds, literally when they do their investor presentation, they call these seeds. And then if they see traction, and that’s their phrase, they will then start to support them and put more money. They’re basically looking for product market fit. If they see product market fit, then they will go for scale, give them funds, help them grow. If they don’t see that, they kill them off pretty fast. So that’s lots of exploration, then exploit. That’s plant seeds. then help them scale if they get product market fit. Amazon does the same thing. Amazon is always making lots of small bets by M&A, by investment, by in-house. If they see they get traction, they will grow them. That’s how they got AWS. That’s how they got video. That’s how they got Prime. That’s how they got all their major businesses. But when they launched their own smartphone, which they spent a lot of money on actually, When they see they didn’t get traction, they killed that thing within months. So you have to sort of be ruthless in this. If that is what Grab is doing with DigiBank, cool. That sounds like a good play. It sounds like a good seed. It sounds like a good small bet. Now compare that to what Meta is doing with Facebook. They are making a major adjacency move. They have almost no history of growth plus innovation. They have very, very little service level improvements over 10 years. The only things they’ve ever added in my opinion are WhatsApp and Instagram, which they had to buy after they couldn’t do it internally. They tried to launch Reels last year as a competitor to TikTok, didn’t do well. They have very little history of innovation based growth. and they have even less history of jumping to a major adjacency unless it’s just like, let’s spend $20 billion and buy WhatsApp. And here they’re doing a major in-house top-down move where they’re spending $15 billion this year. They don’t even have product market fit yet and they’re flooding money into this. So that does not look, this looks like the exact wrong approach for this. Now if they were planting lots of little seeds and three of them started to get traction and then they flooded money into it, that’d be different. Now maybe you could argue with metaverse because of the hardware requirements. There’s no way to take a small step in that pond. I don’t really buy that. I’m not terribly optimistic. It may work out. It may work out to be beautiful. I just think this is a low probability approach. So… To sum up, I’ll finish up here. Grab to me looks like it has a reasonable playbook for getting to operating profits. I can see the cost efficiencies they’re going at and within their growth plans, I can think of three solid core growth initiatives. And I can see, let’s call it 1.5 adjacency growth initiatives which would be advertising a graphic. And then, okay, the other bit, if they’re just doing an explore and exploit approach for DigiBank and the others, fine. If they start flooding money into DigiBank like Facebook is doing, that would be very, very concerning. But apart from that, that’s kind of where they are. I’m actually feeling reasonably optimistic that they’re gonna get to operating profits. Their biggest problem is not really their fault. Their biggest problem is their core business. The marketplace platform for mobilities and the marketplace platform for food delivery is not that strong of a core. They really need a core. And financial services in theory could be one. So at least they’ve chosen a good target. If they were making major moves into bike sharing, I’d be like, dude, that’s a low probability adjacency move. And it’s not even to get you a strong core. Anyways. That’s where I sort of end up on that. And I think that is enough content for today. The two concepts, core versus adjacency growth, and then explore versus exploit as a growth approach. As for me, it’s pretty nice to be home. I tend to be really productive when I’m home just because I have sort of everything set up here. So I’ve just been, you know, I finished up the books real quick, just sort of rocking and rolling and all that, running all over town, getting everything done. Huawei was here in the past week. They had a sort of one of their big conferences, conventions here. So I went to see them and talk with some folks and just sort of see what’s new. They do a lot of stuff and they actually, there’s a lot they’re doing that’s sort of not on the radar. It doesn’t get reported that much, but like digital power is kind of a big thing for them since the smartphone business took a pretty good hit and. Cloud is a big push, Electric Vehicles is a big push. So that’s some interesting stuff. Plus it’s just fun to hang out at the big convention center here in Bangkok. So that was that. Yeah, that’s about it. Black Adam, the new movie came out. Not awesome, but okay. I’m kind of, you know, I’m a Marvel’s sort of Avengers superhero movie person. I’ve been reading those comic books since I was a little kid, so. I’m waiting for Black Panther, which I guess is in about a week. But yeah, Black Adam, eh, not terrible. Not all awesome. Anyways, so that’s my week. Yeah, I hope everyone is doing well. And if you’re interested in the Asia Tech Trip, please send me a note and we can sort of talk about it. But otherwise, I hope everyone’s doing well and I will talk to you next week. Bye bye.