Super App Companies Scale Back Plans Amid Funding Drought

While consumers are excited about super apps, some investors apparently aren’t as sure.

As the Financial Times (FT) noted in a report Tuesday (July 18), companies like Singapore’s Grab and the Indonesia-based GoTo enjoyed years of cash infusions for their vision of combining services like ride-hailing and food delivery into one app.

But now, those companies are cutting jobs and paring back business units, with their share prices more than 60% below their listing prices. And analysts tell the FT rising interest rates have made funding harder to get, leading these companies to reassess whether their super app visions will translate into profits.

“COVID gave GoTo and Grab supernormal growth,” Angus Mackintosh, founder of CrossASEAN Research, said in an interview with the FT. “It accelerated their take-up. They still have a superapp model but have had to pare it back a lot. They cannot go out in the same aggressive fashion they used to. They have to make a profit.”

Grab went public on the Nasdaq in 2021 via a $40 billion special purpose acquisition company merger, while GoTo — formed from the combination of ride-hailing firm GoJek and eCommerce provider Tokopedia — listed in Jakarta last year with a $32 billion valuation.

Last month, Grab announced it was laying off 1,000 of its roughly 12,000 workers in what founder and CEO Anthony Tan said was a cost-cutting measure.

“I want to be clear that we are not doing this as a shortcut to profitability,” Tan said in a message to staff posted on the company blog.

“Over the past couple of years we’ve been consistent in managing costs tightly in all areas of our operations and on improving platform efficiency. As a result, our bottom line has improved every quarter since Q1 2022.”

Meanwhile, super apps remain popular in China, where the concept was born with Tencent Holdings’ WeChat. As noted here last month, TikTok parent ByteDance is moving to rival WeChat by expanding its offerings on its Douyin app.

And research by PYMNTS and PayPal finds continued desire among consumers around the world for a super app, at least for some age demographics.

The study “Super Apps for the Super Connected,” which surveyed nearly 10,000 consumers across Australia, Germany, the United Kingdom, found major gaps between generations when it comes to interest in using super apps.

“Roughly 40% of millennials reported being very or extremely interested in using a hypothetical super app, more than 60% higher than the 25% share of the overall population that said the same,” PYMNTS wrote last week.

In addition, the research showed that 87% of millennials were at least slightly interested in using a hypothetical super app, compared to 72% of the overall population that said the same.