Updated 05 May 2021
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As any video or mobile gamer knows, a ‘battle royale’ is one where you win by outwitting and outgunning online all-comers to be last player standing. In person, Forrest Li, founder of consumer internet company Sea Limited, bears no resemblance to the trigger-happy avatars scurrying around the island warzone of Free Fire, Sea’s smash hit game. But the game-obsessed Li must have the strategic cunning and whiplash reflexes of Free Fire’s pixilated predators to succeed.

To win as big as Li intends, Singapore’s most valuable company must gain the loyalty of gamers, online shoppers, savers and traders across the multicultural expanse of south east Asia, and beyond. In the battle royale for these online riches, his company has command of the field.

Founded in 2009 as Garena, and renamed Sea Limited in 2017, the company has three parts: Garena (games), Shopee (ecommerce) and SeaMoney (digital payments and financial services). When it floated on the New York Stock Exchange in October 2017, it was valued at $5bn. By the end of 2020 it was worth $102bn. Gaming and social media pioneer Tencent holds 25 per cent, allowing Sea to benefit from the Chinese giant’s game content and strategic guidance.

Garena’s Free Fire was the world’s most downloaded game of 2019 and has 80 million daily users. Shopee is south east Asia’s most popular shopping website. And SeaMoney is one of the fastest-growing digital financial services networks in the region. All three Sea divisions have seen demand skyrocket during the pandemic.

The group operates in seven major markets: Indonesia, Vietnam, Thailand, the Philippines, Malaysia, Singapore and Taiwan. In gaming, Sea is moving into emerging markets from south Asia to Latin America. Li’s sights are set globally.

Sea has replicated in ecommerce its success in gaming, a feat that Tencent and Alibaba struggled to pull off. Ecommerce and gaming are as different from each other as, say, advertising and investment banking: few of their skills are interchangeable. Game development people like freedom to play. Ecommerce people need rigorous targets and close monitoring. Li and Chris Feng, chief executive officer of Shopee and SeaMoney, understood this difference.

For now, ecommerce is where the most action is. Less than half of south east Asia’s 670 million-strong population shops online. The value of online merchandise could soar from $32bn in 2020 to $200bn by 2025. Shopee is well placed to dominate.

It has succeeded by being ‘sticky’ to both sellers and buyers across this multilingual patchwork of nations and cultures. Its success at connecting grass-roots traders to new buyers achieved critical mass, it could create a virtuous spiral. More users would increase the value of the site for others, making it hard for rivals to catch up.

In a region lacking commercial infrastructure, Shopee provides a social benefit via its support for small-time traders. Complacent incumbents are ripe for the kind of disruption that empowers start-ups and consumers. In 2019, Shopee overtook its biggest pan-regional rival, the Alibaba-owned Lazada Group, based in Singapore. Just as Garena has successfully localised gaming in different markets, recruiting locally for Shopee means that the webpage ‘shopfront’ is attuned to national buying preferences, while technical and administrative systems are shared.

Experience and profits from Garena and Shopee are being poured into SeaMoney, where Sea benefits from its ecommerce dominance. The most common activity for a fintech company is ecommerce payments. With an established online shop, it’s easier for it to acquire new customers for financial products than it is for pure fintech companies. Like Alibaba spin-off Ant Group, Sea can use knowledge of customers’ spending habits to tailor its products.

The digital payments market in south east Asia is expected to reach $1tn by 2025, so a dominant position could make SeaMoney, only 1 per cent of the group’s income, far more important and eventually perhaps the most valuable part of the group.

SeaMoney only launched in 2019 but it already processes 45 per cent of all transactions on Shopee platforms in Indonesia, its main market and the world’s fourth most populous country. That makes it the largest online finance company in that vast archipelago, leapfrogging incumbent payments companies Gojek (founded in 2009) and Grab (2012).

Here, as in other parts of Sea’s complex field of operations, there are local players to take on, but the quality of these incumbents is often low. There’s no guarantee that Forrest Li and Sea can execute on their three-pronged game plan but as things stand, this battle royale looks like theirs to lose.

A longer version of this article appeared in the spring edition of Baillie Gifford's Trust magazine.

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