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Are Super-Apps Coming to the U.S. Market

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Technology And Analytics
Are
Super-Apps
Coming
to
the
U.S.
Market?
by Dan Prud'homme, Guoli Chen, and Tony W. Tong
April 27, 2023
HBR Staff/Artur Debat/kimberrywood/ Roman Kulinskiy/Getty Images
Summary. Over the last decade, super-apps like WeChat, Alipay, and LINE have
taken Asian markets by storm. Could similar platforms soon be coming to the U.S.?
Elon Musk, Mark Zuckerberg, and other Western tech leaders have vocally shared
aspirations of creating... more
For more than a decade, the Asian tech ecosystem has been
dominated by “super-apps:” platforms such as WeChat, Alipay,
and Meituan that offer an enormous network of services all in one
integrated app. In contrast, analogous services in the U.S. have
remained largely distributed, with a larger array of apps and
websites each offering users a smaller subset of functionalities.
Yet recent trends suggest this distinction may be shifting. When
Elon Musk bought Twitter, he vocally argued that the move would
accelerate the development of an “everything app” and even
explicitly suggested that Twitter could become a “WeChat
equivalent.” Mark Zuckerberg has shared similar aspirations for
Meta and WhatsApp, describing a “super app–like vision” of an
integrated marketplace and chat platform.
Given the scale of these platforms’ growth in Asia — WeChat, for
example, boasts more than a billion active monthly users and
more than a million “mini-programs” on its app — it’s hardly
surprising that U.S. tech leaders are eager to replicate their
success. But of course, the U.S. market is very different from those
in which super-apps have developed, and it is defined by very
different growth paths and market positions, as well as regulatory,
technological, and cultural contexts. In light of these factors, it’s
possible that the U.S. will develop some form of super-app…but
it’ll likely be more super-ish than truly super.
What are super-apps?
A super-app is a single application, accessible by mobile device or
web browser, that offers multiple diversified services for everyday
personal or commercial life, relies on a common financial
transaction platform, leverages intra-app data to tailor offerings,
and is widely adopted.
These services range from social media and messaging to
bookings for transportation, travel, and doctors’ appointments to
food delivery to wealth management to e-commerce
marketplaces to video games and countless other products and
services. Organizing multiple offerings within a consolidated
customer journey can boost user engagement, as well as create
strong network effects and switching costs that lock in users,
sellers, and advertisers.
The super-app model also provides companies with unparalleled
access to a wide array of user data, all gathered within the app’s
walled gardens. This data can then be algorithmically analyzed to
triangulate consumer preferences; target ads; personalize
recommendations, discounts, prices, and loyalty rewards; and
facilitate cross-selling — all of which can create significant value.
Interestingly, different super-app services often don’t contribute
equally to a company’s bottom line. For example, Meituan earns
most of its profit through hotel and travel bookings, but the
majority of its user traffic comes from food delivery services.
Similarly, Alipay earns most of its profits from micro-loans, but it
acquires most of its users through cheap or even free payment
services. The super-app model enables platforms to strategically
combine complementary services to create and capture value,
often through substantial loss-leader offerings.
Super-apps have swept Asia — but not the U.S.
Over the last decade, super-apps have taken East, Southeast, and
parts of West Asia by storm. Many of these apps started in
countries with lower incomes: WeChat, Alipay, and Meituan in
China; PayTM and Tata Neu in India; GoTo GoJek in Indonesia;
and Zalo in Vietnam. But richer countries in Asia have also
launched super-apps. South Korea’s Kakao Talk was founded in
2010 (a year before WeChat) and boasts an active user base of 87%
of the country’s population. LINE, whose roots are in South Korea
but is headquartered in Tokyo, is widely used in Japan. Grab,
founded in Malaysia, is headquartered and widely used in
Singapore.
Meanwhile, functionally similar discrete services are available
through many apps outside of Asia, but consolidated super-app
platforms have yet to emerge in the U.S. So why haven’t Asianstyle super-apps found success in the American market? There are
a number of factors at play:
Different growth paths and market positions
In the U.S., many leading tech companies started out before the
widespread adoption of smartphones, offering narrow, web-only
services on personal computers, such as search (Google), social
media (Facebook), e-commerce (Amazon), and others. These
companies later developed mobile apps, but each still offered
only limited services on each app. This approach, while largely
meeting U.S. customers’ needs to date, has fragmented the U.S.
app market. Partially because of these legacies, a large number of
U.S. tech companies have continued to offer apps with a single
service or just a few services.
Concerns about user experience and technical issues have further
cemented this trend. Many U.S. tech leaders have feared feature
bloat: a phenomenon in which the addition of too many features
makes an app slow to load, introduces frictions that impede user
engagement, and potentially relegates some functions to being
“second class” in consumers’ minds.
As a result, big players that might seem to have the potential to
become super-apps have long avoided doing so. For example,
we’ve talked to Google engineers who’ve indicated that the
company’s larger apps, such as Google Maps, are already bumping
up against infrastructure limitations, making them hesitant to
further expand those apps’ functionality. Back in 2014, Facebook
even intentionally spun off its Messenger app from its main app.
And Uber kept Uber Eats separate from its ride-hailing app for
years.
There are also organizational and financial reasons why superapps haven’t taken off in the U.S. When each app can serve as a
channel for advertising, companies may be reluctant to
consolidate multiple app services into a single offering because
doing so might cannibalize ad revenues. Also, development teams
that have built an identity around one app may be reluctant to
change that identity by combining with other app teams. Broader
financing issues may also be at play: Research has shown that the
U.S. stock market tends to react poorly to “unrelated”
diversification — which may somewhat disincentivize the kind of
activities necessary to create a super-app.
In contrast, the Asian tech landscape was not built on a
foundation of fragmented, desktop-first businesses. Instead,
many Asian consumers’ first experience with the Internet was
with mobile platforms that were designed as super-app
ecosystems from the ground up. Because these consumers weren’t
already locked into a diverse array of separate apps, Asia’s early
tech players were able to quickly grow their user bases as they
incrementally bolted on new services spanning a wide range of
everyday needs.
Another driving factor centers around payment systems. In the
U.S., a legacy of reliance on credit and debit card payment
systems has stymied the adoption of mobile fintech innovations.
But in many Asian markets, credit and debit cards never became
widespread, leaving room for the mobile payment systems that
underpin many super-app ecosystems. In particular, many
merchants in China have long been reluctant to accept debit and
credit cards because of transaction fees and infrastructure
requirements. Services like WeChat Pay and Alipay meet these
needs by offering a largely free system for transacting and storing
digital funds, all with limited need for infrastructure. And in
markets such as Vietnam and Indonesia, large unbanked
populations have boosted demand for digital wallets in superapps.
Different regulatory environments
Of course, these different growth trajectories are closely
intertwined with differences between the regulatory
environments in the U.S. and Asia, especially China. Early on,
some of China’s super-apps took advantage of limited government
regulation related to data privacy protection and largely avoided
anti-trust penalties. Both WeChat Pay and Alipay also owe some of
their success to their underregulated use of customer funds stored
in their digital wallets to invest in overnight funds and interestbearing accounts, as well as to their facilitation of underregulated
P2P lending. These apps were also not required to share important
financial transaction data with regulators or implement robust
systems to prevent money laundering and other illicit
transactions.
These approaches to raising capital and expanding user bases
would not have been possible in more tightly regulated markets.
Indeed, Chinese regulators themselves have since cracked down
on companies’ use of consumer funds as well as anticompetitive
practices and data privacy. As such, neither WeChat’s nor Alipay’s
early business models would likely work in China today — let
alone in other, more regulated markets.
At the same time, the ways in which China regulates foreign apps
more strictly than other countries also contributed to the growth
of its super-app economy. While framed as necessary to maintain
national security and social and moral order, China’s decision to
block foreign platforms such as Kakao Talk and LINE, as well as
Facebook, Google, Twitter, YouTube, Snapchat, and many other
U.S. mobile and web app providers, also served to shield
indigenous infant apps like WeChat from foreign competition.
This regulatory stance afforded Chinese apps time and space to
grow, making local app markets less likely to become fragmented.
Cultural differences
Finally, while culture is subjective and constantly transforming,
differences in how the tech industry has developed around the
world have been driven in part by substantial cultural differences
between Asian and other markets. At a broad level, surveys from
KPMG, Bain, and the World Bank have all shown that Asian
consumers tend to be more willing to adopt new digital
technologies, including super-apps, than their American
counterparts.
Beyond these broad trends, there are also specific aspects of Asian
culture that may have lent themselves better to super-app
ecosystems. For example, a much more widespread culture of
monetary gift-giving in China has been critical to the growth of
WeChat’s digital payment system, which enables users to send
digital “red envelope” money transfers to friends and family. A
greater reliance on user-driven innovation, as well as consumers’
more collectivist culture and preferences, may have also helped
super-apps to take hold in China. In addition, Asian consumers
are generally more comfortable with large conglomerates that
dominate many aspects of everyday life, which may have
facilitated their greater acceptance of massive super-app
companies. In contrast, Americans tend to view large
corporations with suspicion, whether due to a simple distaste for
excessively powerful companies or concerns about privacy and
trust.
Shifting tides: Are super-apps coming to the U.S.?
Despite these differences, there are still reasons to think that
something like Asia’s super-apps are coming to the U.S. Certainly
the demand is there: A 2022 consumer survey found that 72% of
U.S. respondents would be interested in using a super-app.
In fact, many tech companies outside Asia appear to be
increasingly diversifying their offerings into more super-app-like
ecosystems. Facebook’s main app now includes Meta Pay,
Marketplace, Gaming, Dating, and Podcasts, and some reports
suggest that the company is considering reintegrating Messenger
back into the Facebook app. Similarly, Amazon’s app now
includes medical consultation services, pharmacy services,
grocery delivery, and content streaming. Spotify now offers not
just music, but also podcasts, audiobooks, and video streaming.
Uber now offers not just car rides, but Charter (for buses), Transit
(for public transportation), Travel (for booking reservations),
restaurant delivery, grocery delivery, and package delivery.
Snapchat has expanded beyond image messaging to include
movie ticket bookings, flashcards, and even a meditation tool.
Hopper, a Canadian company with a growing U.S. user base, offers
flight and hotel bookings, home and car rentals, and travelrelated financial products.
Meanwhile, companies like Apple and Google appear obstinate in
their choices to avoid app consolidation. But they are still
gatekeepers of their massive quasi-super-apps: their app store
ecosystems.
Considering all this, it’s increasingly clear that American interest
in super-apps is more than romanticization by a few tech leaders.
Moreover, there are several recent trends that may push the U.S.
further toward the development and adoption of super-app-like
products:
Regulatory pressures
Between the EU’s GDPR and a slew of U.S. data privacy laws,
Western companies are facing increasing pressure to secure their
users’ data. These regulations make it harder for tech companies
to profit from acquiring user data from third parties or from
sharing their own data with other companies. Amidst this
changing regulatory climate, Apple recently made it more
difficult for third-party iOS apps to share data for ads with other
companies, and Google is planning a similar approach for
Android. All these regulations may push other companies to work
harder to keep user data within their own apps — essentially
incentivizing app consolidation.
At the same time, the U.S. Federal Trade Commission has
expanded its investigations into possible anti-trust violations
among tech giants such as Alphabet, Amazon, Apple, Facebook,
and Microsoft, and is ramping up its capacity for future
investigations. Lawmakers have also proposed a variety of stricter
anti-trust laws targeting Big Tech, all of which could make
expansion via M&A increasingly risky for these companies. This
anti-trust pressure might push platforms to try to lock in current
customers even more securely to their own apps, driving further
internal investment into diversified digital services.
Changing demographics
On average, younger Americans are more interested in mobile
gaming, new social media, and other digital services that fit well
within super-apps. They are also more trusting of large tech
companies, and less averse to sharing their data with these
platforms. As these generations of consumers grow larger and
represent greater purchasing power, they’re likely to drive
demand for super-apps, with companies such as Meta already
explicitly targeting young people as the early adopters of their
new products.
At the same time, older consumers are also increasingly
interested in engaging with digital platforms. A 2022 study from
the Pew Research Center found that Americans over 64 are more
interested in adopting new digital technologies, and more likely
to own a smartphone, than ever before. The report also found that
older Americans’ presence on social media grew about fourfold
since 2010, with nearly half of respondents saying they use social
media sites like Facebook, Twitter, or Instagram. These trends
suggest the U.S. market for consolidated super-apps is increasing
— and is likely to continue to do so.
App overload
Another factor driving interest in super-apps among American
consumers is app overload. From booking a haircut to paying
phone bills, it can seem like even the simplest activities now
require consumers to download a dedicated app. While these apps
may add value in some cases, downloading, setting up, using, and
updating so many different apps can be incredibly frustrating.
App overload can also create accessibility issues. Some people
have smartphones with enough storage space to accommodate
the increasingly massive data demands associated with so many
apps — but not everyone does. As app overload becomes more
and more untenable, consolidated super-apps begin to look
increasingly attractive.
Technological change
Finally, while today’s super-apps can largely be defined as
smartphone-based app ecosystems, new technologies may spark
entirely new kinds of super-apps. Generative AI tools such as
ChatGPT, DALL-E, and Google’s Bard offer new possibilities for
how we access information and create content. Blockchain and
stablecoins have the potential to safely reduce frictions across the
global financial system, and the U.S. Federal Reserve is even
developing a sovereign digital currency that could further
accelerate fintech innovation. Virtual worlds like Meta’s Horizon
Worlds may be marred by challenges, but it isn’t hard to imagine
immersive products like these “out-supering” today’s super-apps.
In short, foundational technologies in AI, blockchain, VR, and
other fields may create opportunities to develop complementary
tools and super-app-like ecosystems that build on, share, and
commercialize their outputs.
At the same time, the Web3 movement may complicate this
optimistic outlook for Big Tech seeking to build the next big
super-apps. The movement, which has seen users increasingly
interested in connecting via decentralized networks rather than
on established, centralized platforms, may push some people
away from a Big Tech, for-profit super-app.
Get ready for apps that are super-ish
So is Elon Musk going to make Twitter the new WeChat? It
depends on how one interprets that ambition. On one hand, the
most literal interpretation seems unlikely to pan out, as the next
wave of apps in the U.S. will probably not look the same as those
that have dominated Asia. The differences in growth paths and
market positions, regulatory environments, and culture that have
kept super-apps from taking off outside Asia will continue to
influence the development of new platforms. This will likely limit
U.S. companies’ ability to achieve the same product diversity and
user bases that typify the big-name Asian super-apps.
On the other hand, shifting regulatory pressures, changing
demographics, app overload, and technological changes are
already pushing American tech companies toward potentially
creating their own “lite” versions of the super-app. So while the
biggest super-apps may be limited to the Asian market, super-ish
apps may indeed soon be coming to the U.S.
DP
Dan Prud’homme is an assistant professor at
Florida International University (FIU)’s College
of Business and a research associate at Duke
University’s China campus. He studies firm
strategy, innovation and intellectual property
management, institutions, and international
business. His research is informed by more
than a decade of consulting and managerial
experience in these fields in China and the U.S.
GC
Guoli Chen is a Professor of Strategy and
Mubadala Chair in Corporate Governance and
Strategy at INSEAD. He studies strategic
leadership and corporate governance to
understand organizational growth, renewal,
and sustainability. He has published widely in
top academic journals and multiple bestseller
case studies in Harvard Business Publishing.
His recent book “Seeing the Unseen: Behind
Chinese Tech Giants’ Global Venturing” studies
how Chinese internet firms innovate and grow,
what are the challenges they face in overseas
markets, and how to solve the problems by
analyzing POP-Leadership (People,
Organization and Product) issues.
TT
Tony W. Tong is a Professor of Strategy &
Entrepreneurship and currently the Senior
Associate Dean for Faculty and Research in the
Leeds School of Business at the University of
Colorado. He studies firm strategy, innovation
management, and international business. He
has published numerous top journal papers in
these areas as well as multiple bestseller case
studies in Harvard Business Publishing.
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