By Patrick Brzeski
International start-ups and investors seeking to tap into Southeast Asia’s rising middle class and remarkably high rates of mobile and social-media usage have commonly targeted Singapore or Indonesia as the launch pads for their Internet businesses.
The benefits of Singapore, entrepreneurs say, include its buzzing tech scene, ease of doing business and abundant investor capital, while Indonesia offers much-feted growth potential and a huge population of more than 240 million—which also skews advantageously young and tech-savvy.
But a start-up called Zodio is pinning its hopes on Thailand.
“Bangkok is a good middle ground, where you can successfully test an idea before going regional or global,” said Jai Govindani, the 28-year-old co-founder and managing director of Zodio, which offers local business searches and reviews. “The city has some of the sophistication and organization of Hong Kong or Singapore, which Indonesia and the Philippines are generally lacking, but labor cost and space are still very cheap here.”
Zodio is closely modeled after Yelp, the well-known social business reviews service based in San Francisco. By imitating Yelp in Thailand, Zodio is also imitating a business model most associated with the German tech incubator Rocket Internet, which has found profit in copying successful Internet services from the U.S. and launching them in developing markets not yet reached by the originals.
Low costs and respectable infrastructure are among the benefits of operating in Bangkok, Mr. Govindani said. Less intuitively, Mr. Govindani also argues that the Thai language and somewhat closed local culture of Bangkok can also be beneficial to startups: These challenges provide a valuable trial by fire for foreign Internet business ideas intended for scaling across Southeast Asia, he says.
“If you can successfully localize and acquire users in Thailand, we believe you’ll be better equipped for expansion into say, Indonesia or Vietnam, than a competitor that’s only launched in Singapore in English,” Mr. Govindani said. “You get that firsthand experience of localization, which is crucial in this market.”
Thailand’s substantial middle-class consumer base and Bangkok’s heavy Facebook usage—it led the world in number of users in a count earlier this year by social-media analytics company Socialbakers—also make the country an attractive market in its own right. Since its debut in May, Zodio has attracted 33,000 users in Bangkok. In September it launched in the Philippines, where so far it has picked up roughly 15,000 users.
Ensogo, a Groupon -like daily deals site, launched in Thailand in 2009, and after gaining traction expanded to the Philippines and Indonesia in 2010. In 2011 it was acquired by the Washington D.C.-based daily deals site LivingSocial for an undisclosed sum.
Many entrepreneurs and industry watchers say the Internet start-up scene in Bangkok has only become more active and organized in recent months. Meet-up events—Bangkok Entrepreneurs, Mobile Mondays, Web Wednesdays, Founders Drinks—can be found in hotel conference halls on almost any night of the week. And the Bangkok scene is beginning to import and adopt professionalized tech-world activities, said Maxim Titov, a Thailand-based representative of Singaporean venture capital fund, Digital Media Partners.
“Six months ago, start-ups were occasionally meeting at some business gatherings, but no one was getting more organized,” he said recently. “But just this week we had a conference called VC Wednesdays where we had five VCs in one room, listening to start-ups pitching—all targeting different stages of investment, from incubator to late stage. In Silicon Valley or Berlin, this is no big deal, but it’s the first time these things are happening here.”
Global players are taking notice of the region. Rocket Internet opened a regional headquarters in Singapore at the end of last year and has since launched three Web businesses: Zalora, a fashion retailer; Food Panda, a restaurant delivery service; and Lazada, an Amazon clone. Zalora and Food Panda both arrived in Thailand in March, and are now active in Malaysia, Vietnam, and Indonesia as well. Lazada launched in Indonesia in March.
According to Food Panda’s 27-year-old co-founder and managing director in Thailand, the Thai branch’s user base has expanded by 10% to 20% a week since its launch.
Others have followed. Yelp itself opened a Singapore office in September, and began offering its services locally in an English version of the site and app.
Thai-American Paul Srivorakul, co-founder of Ensogo and chairman of Bangkok investment fund Ardent Capital, said he views the global interest in the region as an endorsement rather than a competitive threat.
“In the last year, things have really started to pick up here—you can feel it’s becoming a scene,” he said. “Having the big players here is great for the ecosystem.”
But as an investor, Mr. Srivorakul said the biggest challenge in Bangkok is finding Internet services that have a built-in plan for producing returns. “We meet a lot of guys producing some great product, but the challenge is always the market opportunity,” he said.
“Yes, it’s nice to become the local Yelp,” he went on, “but what’s your plan for making money from it?” Yelp, Mr. Srivorakul noted, has yet to report significant profits, largely due to its constant investments in expansion.
Zodio is trying to beat a path to monetization early on. According to Mr. Govindani, the company is negotiating with daily-deals companies in Bangkok and the Philippines to integrate their services into the app under a revenue-sharing agreement. Zodio is also developing an instant-payment system for the next release.
“We’re finding that users here are interested in discounts and offers, not just reviews, which also suits our monetization plans,” he said. The company also intends to ramp up spending on local marketing, before seeking a large round of venture capital investment to prepare for an Indonesia launch early next year.
“Becoming No. 1 here is the same as anywhere,” Mr. Govindani said. “At the end of the day, it’s all about getting those big user numbers.”