What the Hell Is Going on in Indonesia?

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From Silicon Valley to New York, from India to South Africa one question keeps popping up in the mind of Web and mobile Web entrepreneurs: What the hell is going on in Indonesia?

Having matured from its early 2000s Internet obsession with Friendster, it seems Indonesia has become something of a Web force, embracing everything from Facebook to Foursquare catching people off guard with some uncommon swarms. We wrote about an obscure Indonesian awards show taking over Twitter back in March, and on May 6, Indonesians flocking to see Iron Man 2 won their first Super Swarm badge on FourSquare—something US Web addicts usually only earn at large events like SXSW.

I’d like to say I hunted down some impressive Internet entrepreneurs during my current trip to Indonesia to ask them exactly what was going on here, but really they found me. (Just another sign of their Web savvy.) I had dinner with some of them in Jakarta last week, and they’re photographed above. They include (from left to right) Leontinus Alpha Edison of Tokopedia, an ecommerce platform; Eduardus Christmas of still-in-progress Evolitera; Rama Mamuaya, creator of the local blog DailySocial; Selina Limman of Urbanesia.com, a local review site; Satya Witoelar of Koprol.com, a location-based social network just acquired by Yahoo and Andrew Darwis of Kaskus, a forum and classifieds portal.

I grilled them on some basic questions to bring you a Web-in-Indonesia primer. But before we get to those, here’s what impressed me the most about this small-but-tightly-knit community: It’s incredibly collegial. Plenty of research has shown that the biggest reason Silicon Valley beat Boston as a venture capital and startup hot spot was because culturally it was open, trading employees, funding, mentorship and ideas among competitors. It’s not uncommon to see Web competitors in the Valley having dinner together and generally discussing business challenges, before they go back to the office for some late night coding to bury one another in the market.

This is something many emerging markets struggle with as they put up walls, try to enforce NDAs and are generally cagey about their ideas. But the Indonesian crew is so small that they’ve found each other—mostly via Twitter—and banded together, openly discussing challenges posed by uncertain waters of raising money and offers to get acquired.

Since Indonesia has had little hype, the community seems to have grown organically—like the early days of the Valley and very unlike Web communities in Israel, India and China. Friday night I had dinner with two leading companies Kaskus and Tokopedia—both essentially community sites that have elements of eBay and Craigslist. Edison of Tokopedia was talking about how many ideas they get from reading the forums on Kaskus. “Wait, do you guys consider yourselves direct competitors?” I asked. Both laughed and said yes, sort of, but Darwis explained, “The market is so small, we’re better off helping each other.”

This seems obvious if you’re in the Valley, but I can’t tell you how uncommon it is in most places I’ve been in the last few years. Well done, Jakarta. Don’t lose that—as Boston learned the hard way, it’s a formidable advantage.

Now, some answers to that title question, mostly courtesy of the entrepreneurs photographed above.

How Many Web Users Are in Indonesia? Reports vary from 38 million users to 8% of the population, which would equal more like 20 million. If the previous reports are true, that’s close to Internet usage totals in Brazil and India, far more hyped and targeted markets. But that’s just for accessing Internet over computers. Web mobile is huge and Blackberries are the default device. Data services and cheap and you can buy Blackberry data service by the day on prepaid phones, upping the accessibility even more. Access to Facebook and Twitter are advertised on mobile billboards around the country, which is why the audience seems even larger for these services—most people are only interacting with them on their Blackberries.

Why Is the Indonesian Web Swarmy? Part of this is answered above—it’s a huge market that few players are explicitly targeting, even larger when you factor in the mobile Web. That means that as many people may be logging onto your site from Indonesia as from India or Brazil, but you have probably heard so much about Brazil and India being big emerging markets that the swell doesn’t catch you off guard. Few people know anything about Indonesia—let alone that it has 240 million people, almost as much as the US. So the swells can be surprising.

How Many Web Entrepreneurs Are in Indonesia? This crew estimated between 300 and 1,000 in Jakarta. Mamuaya has personally written about more than 300, and upwards of 1,000 have attended different founder events. Unlike the Valley, most of the “startup people” are founders—most of these companies are still pretty small. (More on entrepreneurs outside Jakarta in a future post.)

Does Anyone Make Money on the Indonesian Web? Most of them do not. There are two problems, they tell me. Indonesians do not want to pay for the Web, so founders are loathe to follow the Chinese model of amassing a large number of micro-payments to build a big company. “There is a big difference between one penny and free here,” Edison of Tokopedia says. So most are following the Valley playbook of build-and-monetize later. That may be a risky strategy: Encouraging the idea that the Web is free, rather than setting expectations from the beginning. But the reticence is also practical: Few people have credit cards and banks don’t have a universal payment system that ecommerce can exploit.

Advertising can actually be lucrative, even at this nascent stage. Part of that is because a lot of big brands are waking up to the Indonesia’s large, untapped market and there aren’t a lot of mass media platforms to advertise over. Kaskus makes $50,000 (US) a month in advertising, more than double what it takes to run the business every month.

Are There Traditional, Early-Stage VCs in Indonesia? As far as I can tell, there is exactly one and it’s not a traditional firm. East Ventures—a Singapore-based angel fund set up by Batara Eto, the founder of mixi.jp, the Japanese social networking site and others. They’re not based here, but have spent time in Jakarta scouting deals and have recently funded Tokopedia and Urbanesia. (Mamuaya reports here that a few more firms are coming or at least considering the move.)

Is Anyone in the West Trying to Buy These Companies? Again, as far as I can tell, there is exactly one suitor, although this one is more traditional: Yahoo. This insight was a lot newsier when I first drafted this post a few days ago. But Koprol aside, Yahoo has approached half-a-dozen small, up-and-coming Indonesian Web startups, this crew said. So far no other deals have been reached. But Yahoo clearly sees something here and likely isn’t done.

What is the Biggest Challenge Indonesian Web Entrepreneurs Face? Surprisingly, no one I asked said capital or exits. The relative lack of big, lucrative coding jobs from the multinationals like Google, Yahoo and Microsoft and the lack of venture capital have kept developer wages and costs of building a startup incredibly low. No one seems to feel a real pain for venture capital, because none of these companies are started with an expectation of it. This makes Indonesia absolutely unique among the 11 or so countries I’ve visited in the last two years. Instead, the pain point is finding developers. In Indonesia, developers are considered an entry level position, not a lucrative career path. Most companies have to invest six months or so in training the talent they need, making scaling up a challenge.

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