The Uber Grab | Patsnap’s Innovation Intelligence Platform @ Work

Carmen YUEN, Partner at Vertex Ventures SEA & India posted on 08 Dec 2021

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The Global Ride Hailing Services Market Outlook

Over the last decade, the rising popularity of the sharing economy has extended to ride hailing services, which has transformed the way we commute[1]. Burgeoning demand for this new travel modality is already reflected in the industry’s growth forecasts. After recovering from a pandemic induced demand decline in 2020, the industry recovered creditably in 2021 with revenues expected to reach USD 350B by year end. Looking ahead, the global ride hailing services market is expected to grow at an annual rate of 3.6% to nearly USD 400B by 2025[2].

While traditional ride hailing business models are offline, often involving taxis plying routes for potential customers, modern ride hailing services including Uber and Grab leverage internet access to secure prospects. Online service requests by customers are growing almost 6x faster than offline requests, with a CAGR of 7.6% online vs. 1.3% offline[2]. This is a tailwind for modern ride hailing services.

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Chart 1: Global Ride Hailing Revenue and Annual Growth Rate



Prospects in Southeast Asia

Southeast Asia has experienced strong economic growth since the 1980s with market reforms driving global and regional integration[3]. Compared to the global average, the region is still fairly nascent. Its GDP per capita (USD 4,850 vs. USD 10,925)[2], car ownership (11.1% vs. 12.6%)[2] and ride hailing adoption (13.7% vs. 19.2%)[2] are also relatively modest compared to global averages. At the same time, Southeast Asia also enjoys relatively high internet access of 70.8% vs. the global average of 57.6%[2]. Given its potential, Southeast Asia’s ride hailing industry is expected to grow at a CAGR of 6.3% - almost double the global average growth rate[2].

Southeast Asia has the largest youth labour force in the world with nearly 100,000 individuals entering the job market each day[4]. In addition, urbanization is driving migration from remote areas into urban regions, contributing to both the supply and demand for ride hailing services[5].

Grab’s Ascendancy

Prior to 2018, Grab and Uber were major ride hailing players in Southeast Asia. While Grab started off as an underdog in 2012, it grew quickly and became a leading participant by 2018. In that year, both Grab and Uber had comparable market share with active users[6] of around 25 million (Grab) and 22.3 million (Uber) respectively. The acquisition of Uber’s Southeast Asian operations by Grab in March 2018 is an interesting one.

Key lessons include the importance of localization as a strategic approach to effectively engage diverse, fragmented markets over the long term. Grab’s persistent success can be attributed to multiple factors including a sound understanding of customer preferences and intelligent investments in infrastructure. These enabled Grab to secure a broad swath of the market by choosing a differentiated strategy[7]. By 2021, Grab was the category leader in Southeast Asia – top ranked in mobility, delivery and e-wallet services[8].

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Table 1: SEA's Ride Hailing Industry Drivers



Betting on Grab using Patsnap’s Innovation Intelligence Platform

Grab’s significant growth in the recent past raises the question on whether its success was reasonably foreseeable. There is a wealth of academic literature exploring the relationship between intellectual property and corporate technological strength[9]. To this end, patent filings may indeed be a leading indicator of future service offerings in different geographies.

In the case of Grab and Uber, patent applications highlighted the difference in strategies both adopted to grow in Southeast Asia. We have used Patsnap’s competitive report feature in an attempt to review Grab’s respective patent filings alongside their strategy.

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Chart 2: Uber & Grab Patent Applications from 2012-2021



Prior to the acquisition announcement, Uber submitted 38 patent applications within Southeast Asian jurisdictions, while Grab applied for only 15. Based solely on the number of patent applications, Uber appears to have an overwhelming advantage, with a significantly higher number of patent applications per year, including an all-time high of 19 applications in 2016 alone. In comparison, Grab only had one patent in that year.

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Chart 3: Patent Diversification



Grab diversified its set of patent applications relatively more broadly across Southeast Asia, with 30% of applications being submitted across jurisdictions, other than Singapore. Uber’s patent applications were principally in Singapore. Regulatory differences and frequent changes in rules across Southeast Asian countries may be one possible reason for its reservation when applying for patents in jurisdictions other than Singapore. For instance, Malaysia’s regulators passed two bills to legalize ride hailing services as late as 2017[10]. The Philippines first introduced new regulations in May 2015, and temporarily ceased services in some regions by the end of the same year[11].

In Indonesia, regulations changed several times in 2017, and further limited ride-hailing rates in 2019, threatening existing business models by industry players[12]. These cases highlight the uncertain legal environment the industry is exposed to, possibly affecting the tradeoff between potential returns on investments and securing a presence in local markets through the protection availed by intellectual property rights. Table 2 indicates the patent-presence of Grab across multiple jurisdictions. Clearly, Grab has a keen appreciation of Southeast Asia as a diverse set of 10 different markets. Since each market is unique, Grab tailors its offerings to address local market needs.

As we reviewed major patents across two key dimensions in the ride hailing industry – (1) the provision of services and (2) requests for such services, it is evident that Uber covered the essentials of matching customers with suppliers of ride hailing services. In contrast, Grab recognized market gaps and created value by identifying under-supplied regions and availing relevant information to drivers. Furthermore, on the request side of operations, Grab applied for patents that covered technologies for the forecasting of request patterns in specific geographical regions to further enhance the reliability and availability of drivers.

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Table 2: Patent Comparison for Essential Service Domains



From an R&D standpoint, Grab’s approach appears to be more market-driven, led by insights gleaned from customer feedback. Uber seems to be more science-driven, emphasizing the breadth of its patent portfolio, with a view to diversify its patent base across multiple technological fields.

At first glance, Grab’s market-driven R&D appears to have given it an edge which raises an interesting question: “is market-driven or science-driven R&D more important as a competitive strategy for an enterprise?”

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Grab’s foray into new markets whilst adapting its service offerings to local needs is reflected in its patent filings. We noticed specific differentiators between both companies which eventually led to Grab taking the lead in Southeast Asia.

In short, while Uber had more patent applications prior to 2018, Grab tailored its patent applications to meet local consumer needs, adjusting its services based on local market conditions, engaging in collaborative R&D with market experts across Southeast Asia.

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Chart 6: Patsnap Innovation Strategy Spiderweb



Patent Analytics & Deal Evaluation

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Chart 7: Grab - Patent Applications and Post-Money Valuations



We deduced Grab’s focus on addressing local needs in Southeast Asia by analyzing patent applications between 2015 to 2017. Insights gathered would have highlighted Grab’s relative strength against Uber in these markets. Grab’s patent applications have also been a leading indicator of its rising valuations in the later fundraising rounds.

In Closing

This case study on Grab and Uber highlights the promising global ride hailing market outlook and the market potential in Southeast Asia. The region’s fragmented markets and unique dynamics require an in-depth understanding of a diverse set of local needs. Prior to 2018, Grab and Uber were the two biggest players within Southeast Asia. In 2018, Grab acquired Uber’s regional operations and transformed itself into the market leader. Grab’s success can be attributed, at least in part, to its IP strategy as reflected by its patent applications.

Grab’s decision to pursue a localization strategy that aimed at providing customized solutions across each market within the Southeast Asian region is also reflected in its patent filings. What is unseen is the work engaged prior to the filings - activities undertaken with a keen eye to customers’ preferences, and tailored solutions, thoughtfully crafted to address them.

We are delighted to see Grab attaining another milestone – that of a public company and will continue to track its journey using patents as a guide to peer into where it may lead them next.

Acknowledgement:
To the Patsnap team for the use of their platform and dialogue. Also, to my colleague Anik Bikti who spent time traversing the Patsnap platform and extracted insights for this article.

Please note: none of the above should be used as investment advice. They are shared for informational purpose only.

For the latest news on Vertex Ventures SE Asia and India and our portfolio companies, follow us on Linkedin or subscribe to our monthly newsletter.

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Bibliography


[1] Bong, A., & Premaratne, G. (2018). Regional Integration and Economic Growth in Southeast Asia. Global Business Review.

[2] Dahiya, B. (2021, October 15). Southeast Asia and Sustainable Urbanization. Retrieved from globalasia.org: https://www.globalasia.org/v9no3/feature/southeast-asia-and-sustainable-urbanization_bharat-dahiya

[3] Grab. (2021, October 15). Grab announces strong first quarter 2021 results as company progresses towards U.S. public listing in partnership with Altimeter Growth Corp. Retrieved from grab.com: https://www.grab.com/sg/press/others/strong-first-quarter-2021-results/

[4] Khozen, I., Setianty, I., & Meiriza, F. D. (2021). What can we learn from business innovation failure of Uber in Southeast Asia Market? Inovbiz Journal.

[5] Lei, L.-c., Gao, S., & Zeng, E.-y. (2020). Regulation strategies of ride hailing market in China: an evolutionary game theoretic perspective. Electronic Commerce Research, 535-563.

[6] Narin, F., Noma, E., & Perry, R. (1987). Patents as indicators of corporate technological strength. Research Policy, 143-155.

[7] Reuters. (2021a, October 19). Malaysia legalizes e-hailing services as Grab, Uber compete. Retrieved from reuters.com: https://www.reuters.com/article/us-malaysia-transportation-idUSKBN1AC1UN

[8] Reuters. (2021b, October 19). Philippines issues rules on ride-sharing services, as taxis threaten court. Retrieved from reuters.com: https://www.reuters.com/article/us-philippines-uber-idUSKBN0NY15Y20150513

[9] Silviana, C., & Potkin, F. (2021, October 21). Indonesia's plans to regulate ride-hailing rates threaten Grab, Go-Jek models. Retrieved from reuters.com: https://www.reuters.com/article/us-indonesia-gojek-grab-idUSKCN1P50ML

[10] Statista. (2021, October 15). Ride-hailing & Taxi Worldwide. Retrieved from statista.com: https://www.statista.com/outlook/mmo/mobility-services/ride-hailing-taxi/worldwide

[11] Statista. (2021, October 15). Southeast Asia. Retrieved from statista.com: https://de.statista.com/statistik/suche/?q=Southeast+Asia&qKat=search

[12] UNICEF. (2021, October 15). More than half of South Asian youth are not on track to have the education and skills necessary for employment in 2030. Retrieved from unicef.org: https://www.unicef.org/rosa/press-releases/more-half-south-asian-youth-are-not-track-have-education-and-skills-necessary

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