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Category: Technology

Who Are The Likely Winners For Singapore’s Digital Banking License?

As of 2020, the Monetary Authority of Singapore (MAS) is looking at getting 5 digital banking licenses filled. 2 are full licenses, and 3 are wholesale.

Retail licenses are meant for taking customer deposits, while wholesale refers to catering for Small and Medium Enterprises (SMEs) such as for current accounts and loans.

For clarity, a full license includes being able to serve both retail and SME markets.

As Singapore is in a good position to springboard to the rest of Southeast Asia, many companies have stepped up to stake their claim.

Successful applicants are expected to commence business by mid-2021. Good news fellow consumers!

MAS’ Criteria

  1. Value proposition and business model
  2. Ability to manage a prudent and sustainable digital banking business
  3. Review of business plans and assumptions underpinning their financial projections, taking into account the impact from the Covid-19 pandemic.

This is quite generic, so we thought a little further about what makes sense to whittle down the list of companies a whole lot more.

My Criteria

Let’s be more practical and drill down into some key themes for a bank to run (profitably) in the 2021:

1. Technological and Domain Advantage. Having an infrastructure that can scale, and having the expertise of banking operations. This affects how your business model will succeed.

2. Strong Financial Position. For expansion, marketing campaigns, and liquidity buffer for lending. This affects how sustainable your operations and expansion plans can be.

3. Synergy and Growth Potential. How existing networks offer competitive products and services, and growing their existing and new users, partners, businesses. This hones your Value Proposition.

The Contenders

Full Licenses

Grab + Singtel. Well they are well known for hailing rides and deliveries, so their user base is interesting. What may tip the scales in their favor despite being unprofitable, is their backing from many investors (Softbank, MUFJ, GIC).

Plus, their mission to be the super app in Southeast Asia, putting them in a good position. They are also in talks for Alibaba to invest USD $3 billion.

All your Southeast Asia are belong to Grab (as of 2016)

Being the top ride-hailing app in SEA, the user base coverage means Grab and Singtel can leverage payments between users and merchants who use GrabPay or their digital bank equivalent. How the banking services translate into more value-add for users will need time to tell.

Razer + Consortium (Sheng Siong Holdings, technology company LinkSure Global, automotive marketplace Carro, insurance services firm FWD and Insignia Ventures Partners).

Razer is still not profitable and are primarily into hardware design. Razer Pay had a beta launch, though the traction has been rather muted. It could be due to having so many payment players in the field already.

Additionally, having too many partners thus raise some alarms. Why the need for so many? Where are the finance-technology firms here?

V3 Group Consortium (OSIM + EZ-Link), amongst others. Massage chairs and Transport payments. OSIM has delisted, and are looking for a renewed path. EZ Link has dominated the transport space, but are mostly piggybacked from banks allowing the SimplyGo campaign – who knows in the future, where said routing and payments system for transport can be provided by the digital banks too?

We also see names such as Far East Organization (private property developer), Singapore Business Federation, Mitsui Sumitomo Insurance, Heliconia Capital Management (subsidiary of Temasek). Again, too many members, yet we don’t see either technological prowess or synergy between members here.

Garena to Sea: Dragons Out, Dots In - Branding Singapore

SEA Group. This should bode well. Already profitable, and year year seems to be a boon to all their business units. Shopee, their e-commerce arm, benefited hugely from COVID, and so did Garena, their gaming arm.

ShopeePay, a digital payments mechanism for buyers, is doing well in Indonesia. Their growth strategies mimick that of GoPay (GoJek) and OVO (Grab’s local partner), with the added boon that the payments are recirculated back into the rest of the SEA ecosystem. As for other portions of Southeast Asia, SeaMoney, which covers the AirPay and ShopeePay apps, hit a “record USD $1 billion in transactions as active paying users hit 10 million“.

They would be able to produce some interesting use cases for banking products and services alongside gaming and shopping. SeaPay has a presence in most Southeast Asian markets. Introducing lending services to Shopee merchants are just some low-hanging fruit SEA can start on.

Enigma Group leads a consortium including UK-based Enigma Global Holdings, which recently entered a deal to acquire an existing challenger bank. In addition, Blockchain Worx, is a RegTech firm, and 2359 Media is an an app developer.

We don’t see much news of these companies, though 2359 is a homegrown software consultancy. Would their combined powers be enough to fight the heavyweights? Let’s take a look at who else they are up against…

Wholesale Licenses

Ant Financial targets enterprise blockchain - Ledger Insights - enterprise  blockchain

Ant Financial. Or, Big daddy Alibaba (they own 30% of Ant btw). Ant Financial has applied for a digital banking license in Hong Kong, and is one of the largest digital banks in China. Ant Financial is vying for an IPO by this year (2020), at a massive USD $35 billion valuation.

iFast + Yillion Group (largest shareholder is Meituan dianping) + Hande Group (founder was ex-president of China’s first digital bank, WeBank).

iFast is known for their investment management services, while Meituan is an e-commerce company in China. Yillion itself is a large bank in China that launched its own blockchain fund.

They intend to extend this network for banking services in Singapore, Australia and others. Their first step is to invest in and digitally transform a bank. Thereafter, “to build a global digital bank blockchain, with the digitally transformed bank as the main node”.

This is relying on existing banks to use their network – what if they don’t?

Bytedance — Mind Fund

ByteDance (owner of TikTok) + Lee Family (OCBC). Bytedance’s subsidiaries and ‘killer apps’ are primarily focused on entertainment. They do have formidable technology infrastructure for live streaming, and ability to scale very rapidly. This was only curbed due to outright bans by the US and India.

Their focus is mainly on media and entertainment, though they have been trying to go into enterprise software. They do have a rare payments license granted by the Chinese government however.

Supply chain finance company Sheng Ye Capital, investment house Phillip Capital and AI-focused fintech firm Advance AI. They have announced that they too are bidding for a wholesale digital banking license in Singapore.

With focus on supply chain financing, expertise may be too specific to cater to a wider audience. The synergy and growth with Phillip and Advance is not directly apparent as well.

AMTD led consortium consisting of Xiaomi, SP Group and Funding Societies. In Hong Kong, AMTD and Xiaomi’s joint venture named Airstar Bank successfully secured a digital banking license in 2019.

AMTD Group is an investment bank that made SGD$129 million in 2019. Meanwhile, Xiaomi is primarily known as a smartphone brand, but it also has made stakes into fintech.

SP Group is a government-owned utilities agency (gas and electricity) in Singapore. Funding Societies is a P2P lending platform operating across South East Asian markets.

So, who is in a good position to win? Why?

Unordered for now:

  1. Ant Financial
  2. Grab + Singtel
  3. SEA
  4. Bytedance
  5. iFast + Yillion Group

Here’s why I think so.

Technological and Domain Advantage

Ant Financial, Grab, SEA, Bytedance

These companies are not in start-up stage, and have demonstrated their ability to scale to cater to a large user base. We do not see that in the other players such as Razer or V3 (gaming hardware, massage products), unless it were to do with distribution. Nor in Sheng Ye, iFast or AMTD.

If one were to inspect the operations of an investment company, you would find it is very different from that is required of a technology-based one (i.e. digital bank). Compare operations with that of Ant Financial or WeBank. Fully automated, no back office cleaning up the mess – data is orderly, and have been doing banking on a blockchain way before it was cool.

Out of the four, Ant Financial seems the most advanced state of digital banking technology. This gives a very tough global fight to any competitor, as Ant would want to generate “as much as 65% of its revenues from selling financial technologies by 2021, up from 34% in 2017”.

Big bad Alibaba, coming for your next startup idea.

Strong Financial Position

Ant Financial, Bytedance, iFast, V3, AMTD

Based on their existing “cash in the bank”, one can also compare to see how much cashflows they are generating if they stop re-investing in their growth. We look at their net profit as a means to fund their digital banking endeavor.

One of the requirements that MAS set out is that the new digital bank should chart a path to profitability, and requires a minimum paid up capital of SGD $1.5 billion within 3-5 years of commencing business. No problem for some companies, but not all.

Ant Group is already profitable at SGD $4 billion Net Profit, while Alibaba made off with SGD $108 billion Net Income in 2019. Ant Group’s Dual listing gives them an even larger capital base to work from. Also, Softbank invested in Alibaba (that owns 30% of Ant). We’ll come back to that later.

Bytedance made at least SGD$4 billion in 2019. That’s showing how important ad revenues are. It remains to be seen whether this will continue. Also, Softbank invested in them.

AMTD, an investment bank, made considerable net profit of SGD$ 129 million, and can combine with Huawei and other partners for its capital requirements.

iFast made SGD $4.5 million, which looks small compared to the technology companies. V3 Group made SGD $52 million back in 2016, and it is unknown what they are making now.

Apart from that, all other competitors do not come close in terms of profitability.

Singapore’s darlings of Grab and SEA are still loss-making entities. They do have a path to profitability, though Grab is more affected by COVID, while it has been a boon for SEA. Both have also attracted very notable investors, and it seems they will do whatever it takes for the portfolio companies to succeed.

Softbank did invest in Grab though. See a pattern? Read on!

Synergy and Growth Potential

Ant Financial, Grab, SEA

The opportunities for building a strong ecosystem are apparent, and needs to be both local and global. A close example would be Rakuten, in Japan.

Rakuten has a points system, where you can offset purchases in virtually all of Rakuten’s services. Get points from e-commerce purchases, banking services, even trading – and use these points again, in your next purchases, banking and trading transactions next time.

This has proven to keep users within their ‘walled garden‘, and as a result their data quality on each user improves tremendously as well.

Think about it – you knew what people last purchased, what service they were last looking at it, what was in their respective carts left on checkout, their site visit history and so on – even Google does not have this granularity, unless you were using Gmail to sign into everything (big privacy issue everyone…).

Other companies were not included as we did not think they had much synergy (Bytedance – focused on media and entertainment, V3 and Razer group – mostly Singaporean networks).

Instead, by taking a look at the shortlisted companies’ ecosystems, you can start to see how payments and banking generally permeate all of their existing products and services. We don’t see that happening for the others! Here is why:

Ant Financial can be linked to the whole plethora of Alibaba Group’s partners and subsidiaries. You can count Lazada and Tokopedia as E-commerce partners. These companies are also backed by Softbank, who has also invested in Grab. The opportunities combinging Alibaba and Softbank’s network are tremendous. Could we see a partnership of Ant, Grab and maybe Bytedance here?

Don’t forget Bytedance. Real sneaky Softbank.

Grab has interesting mobility data that can be combined with Singtel’s. Think of offerings of telco products, with mobility and banking services. In addition, Singtel has other business lines in SEA markets such as AIS, so they are in a better position to address international markets.

I’d personally like to have my daily WiFi, taxi and checking accounts covered all in one plan please.

SEA has e-commerce (merchants), alongside various ways to pay for consumers. Merchants on Shopee can be lent to, accounting for the minute transaction and performance data collected. Not too sure how gaming can come aboard though, but who knows.

Bank with us, and enjoy 20% off Shopee discounts!”

Buy Shopee products, get $15 cashback in your Seamoney Account!

No way! Yes way. Think of any promo you saw from a bank. Now supersize it with any other product service. 6 months off insurance? Free mobile data?

This in turn, is a great data collection exercise. Digital banks can (if allowed) share this with their partners, who in turn can promote better products/services, while you get a sweeter deal. All is good.

So many Choices! - quickmeme
And more to probably come

Think about it – there will be 4 other players (in Singapore alone) who will compete with you with a diverse set of products and services for market share. We have not factored local competition from each SEA region, who may produce other offerings of their own.


Let’s have a ranking system for perspective of what we have discussed:

(Great=3, Moderate=2, So-so=1)
Ant FinancialGrab + SingteliFastSEABytedanceAMTDV3 Group
Financial PositionGreat (largest)ModerateGreatSo-soGreatGreatModerate
Technological & Domain Advantage
Synergy, Growth PotentialGreatGreatSo-soModerateSo-soSo-soSo-so

1st Place

Hands down, Ant Financial is at the top. Largest capital base, one of strongest in technological advantage and having the scale of their network to power basically any product/service line.

You have seen how much dominance they have in the discussed criteria. Imagine what saying “No” to Ant would mean for Singapore. Finding it difficult? Well, that’s why they would probably win!

2nd Place

Grab + Singtel offers the second ‘best’ synergy independently, but they linked with similar investors with other ‘competitors’ in this list. Despite not being profitable yet, they have pivoted to deliveries and need to bank on wealth management products for their revenues in the future. The synergy is a strong one if working together, and with other ‘related’ companies (*cough*, Softbank). Grab one-ups the competition because of this.

3rd Place

We see some elements of Ant Financial’s revenue stream, playing to service traditional banks with their blockchain. This is also noted to be up and running, and gathering customers daily. Capital base is not an issue combining all three companies which also have profitable operations. However it does not rank highly than the other 4 above from a lack of synergy and growth potential (China-heavy, lack of product idea diversity).

4th Place

SEA’s Garena, Shopee and Airpay has a respectable technology stack. However as a whole, they have yet to be profitable.

Garena revenues are propping up SEA – 51.7% of the group’s revenues – though it should be said that Shopee are generating lots of user traction and revenue growth, reducing their EPS loss by half by this year alone. Sort of like Amazon in its growth stage (some may contend Amazon is still growing…). SEA does have a neat ecosystem for synergy, but comparably does not rank as high as Ant or Grab.

5th Place

At this stage, comparing the criteria with the rest of the contenders, the gap starts to become much larger. The closest one that comes in 5th was Bytedance.

Bytedance is hugeful profitable off advertising revenues from Tiktok, but can be considered a one-trick pony with much focus on media and entertainment. Compared to Ant and Grab, the synergy is not as high.

Technology-wise, ByteDance has one of the most advanced stack in terms of data and AI scaled across billions of users. However, this may not be as directly relevant to banking, and they will need to build up their expertise of how to operate one for the first time.

What happened to V3 group, AMTD and the others?

Although they have a significant financial position, they do not score well on our technological and domain advantage and synergy criteria. AMTD scores at 5, while V3 scores at 4.

AMTD compared to both SEA and Bytedance by technology and synergy, seems to be somewhat far, despite having expertise in investment banking. I presume that the digital banking game is quite different, and requires more complex technology and network growth than most.

Using this line of reasoning, ByteDance still wins by a large margin to be in the Top 5 in our books.

There you have it, the projected winners for Singapore’s digital banking licenses next year. Whichever happens, It’ll be an interesting 2021 to say the least. Non-disaster wise of course.

Till next time!

The realest memes that describe our coronavirus quarantine – Film Daily
That’s enough drama for a year. 2021, reign yourself in!

Extras: What’s Next?

Enter Google Pay. Since September 2020, Google Pay has upped their game by releasing their app and generous promotions for android users as well. Google has not disclosed any plans to have a digital banking license, but that does not stop them from providing digital wallet/payment services.

This introduces more options for consumers, but will be increasingly tough for the 5 winners when they are already fighting for attention for their own products. We may we see a fragmented ecosystem of payment apps, banks and this means competitive offerings for consumers. We also haven’t seen Apple putting their hat in the ring. Prepare for more intense competitive landscape!

margins margins are my favorite - Buddy the Elf | Meme Generator
By the way, I assume this is fine, because digital banks have such huge margins…right?


  1. 1.355 USDSGD conversion rate was used throughout this post, as of 10 October 2020. The resultant numbers are still huge regardless.


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Enterprise Resource Planning: How Exactly Does it Improve The Business?

Let’s face the problem – any organization has some inefficiency from just being too large. An analogy is comparing a speedboat (start-up) with a battleship (MNC).

With so many interlocking parts, a large organization also faces silos in communications – data and processes that could have otherwise been streamlined.

Enter Enterprise Resource Planning, or ERP for short.

Now coined under “Digital Transformation”, or “Change Management” projects, ERP has always been the base that needs to be built before smaller companies turn into larger, more scaleable ones.

What is ERP then? What does it do?

Why does it have such a weird name?

Way back in the 1980s, organizations were simply ‘organized’ by its function. You had Human Resources, Sales, Operations, Marketing, PR, Accounting, Finance etc (and you still do today!)

Of each function, you had departments of varying size, and within it, teams.

Depending on the company style, you had different structures .

Business Insider
From Business Insider, 2011

OK, I was kidding, but you get the point. Of these, you had various resources, right?

Now, each of these roles in an organization fulfills an important part of an overarching process, to achieve a business goal, and drive profit.

Now, imagine 1000 of such processes running every hour, and with different types of information passing between people.

Lets call these Documents for simplicity. For a start, think of emails sent between customers, partners, departments. How about logging invoices, job applications, payslips, and more? All these are flying around the organization, and without a proper system, this can get really messy, and fast.

How does ERP help? Why does my company need it? When should I consider it?

Here are a few takeaways:

Streamlined Processes

As a company grows, so does its operations and the volume of the documents we talked about increases significantly. Sometimes new processes pop up as a ‘patch’ to old ones, and business goes on. Over time, there would be some bloat, and what used to be a rather straightforward task becomes quite convoluted.

With ERP, you get to automate all the touch points and have straightforward tasks again. Users do not have to enter data multiple times, and you get improved throughput as a result.

To Enhance Collaboration

Collaborating across teams or departments can be simple, as you can search, ask questions, or send documents across for approval quickly. No need to go up to the 21st story and get an approval signature/stamp! (unless you are in Japan circa 2020)

Virus Prompts Japan to Rethink Stamping Documents by Hand | Time
Yes, this is still a thing.

To Increase Accuracy

On an individual level, Documents processed with ERP does not get lost. Information is captured as required by inbuilt templates, that can always be re-customized for handling new situations, such as regulatory or business needs. This means if everyone just follows a process, the necessary information to drive business value, or make a decision can be made quite fast!

Mr Bean Magic GIF - MrBean Magic Snort - Discover & Share GIFs | Mr bean  funny, Mr bean, Funny gif
It is, really!

ERP makes your company have a single source of real-time information. Imagine the time saved when people don’t need to deconflict multiple sources of information, or find what is the proper way to do things, because these are already taken care of.

ROI is sure to follow. Really.

On the management level, this applies too. You can use ERP to run a glorified pivot table on your business data. Orders vs lead time, billing success and amounts and customer information… the possibilities are endless! Of course, this is subject to departmental-level approval – that is another question entirely!

Victory dance in the elevator | Office gifs, Leaving work, The office
It’s so great, you’ll be skipping to your next report meeting

With more precise analytics, day-to-day and long-term forecasting can be done more accurately.

Greater Financial Control

With finance at the heart of every organisation, managers need to keep a close watch on how the financial department is operating. ERP gives management comprehensive visibility into the department’s performance, so the functioning of accounts can be viewed with full integration of business analytics. By keeping on top of the financial situation there are opportunities to boost organisation profitability and to improve financial controls and risk management.

70+ Funny Financial images | funny, humor, bones funny
Hear, hear

Cost Benefits

With industries constantly examining ways to cut costs while maintaining efficiency, ERP can bring significant cost benefits to all sectors. Using ERP means that managers can make considerable reductions in costs relating to inventory and administrative mistakes.

With information available to be exchanged across all levels, communications between all departments is made much easier. As each department is able to access a central database (hopefully), the cost associated with multiple data centres are diminished, with both time and money saved.

Decomposing Relations - Imgflip
Happens more often than one would think

Organizational Performance and Forecasting

The creation of a single system allows management to drill down to see how efficient and productive individual employees are, using precise and accurate data from each department.

Managers are also given critical tools they need to create more accurate forecasts. Since the information within ERP is as close to ‘real-time’ as possible (HFT may disagree), businesses can make realistic estimates and more effective forecasts.

Google Analytics KPIs: Getting the Basics Right - Pace
You still need to understand your data! Beware of fallacies!

Address Regulatory Compliance

A benefit of ERP software which sometimes goes unnoticed is how it ties well into regulatory compliance, within a number of different industries. Powerful ERP solutions can keep track of regulations within the industry and monitor changes in compliance. Once the process is set into place, the system can be configured accordingly, reducing future costs due to regulatory change.

PERFECT COMPLIANCE meme - Success Kid Original (88171) Page 9 • MemesHappen
No sweat!

Enable Work From Home

Well, everything is (mostly) digital. If it fits on mobile, even better. Now everyone can work anywhere they go!

Or to work overtime - Meme by ScenerJay :) Memedroid
Hopefully not, this really depends on team culture

Allow Scaling

New employee? Just create a new user. New report? Just search for which fields you need. Since you have everything in one place in digital form, the business system can scale as fast as your business does!

What is technical debt? And why does almost every startup have it?
Or this could be your company’s fate…

That’s a lot of benefits. Any specific examples?

Here are the low-hanging fruit, by function:

Customer Relationship Management

Collect useful customer data such that your sales reps and well organized and know exactly how to follow up with customers. Customer service staff can also build relationships and support more effectively. You also get a history of what customers have done, which can be useful information for marketing new products and campaigns.

so you don't like crm tell me how you know what you did last month meme -  Willywonka (50935) Page 10 • MemesHappen
There is only so much you can store. Let computers do that for you!

Quoting and Estimating

Getting all your product data in one place helps a lot. ERP can help to generate more accurate quotes on price, cost and bill of materials (BOM). At some point you would want to do more than just ‘guess’ when quoting for your customers, or how much stock you have left!

"PRICE RANGE" - Dr Evil Austin Powers | Make a Meme
Dr Evil Agrees

Project Management

While are at it, blend production data into the mix too. If you combine project management information such as as scheduling and man hours, managers get more actionable insights for more complex decision making. Additionally, you can anticipate resource requirements more accurately.

In doing so, you can identify bottlenecks and remove blockers, and having smoother delivery of product of service. While you’re at it, why not implement JIT too?

Project Blocker I got it...Escalation laxative - Chill Out Lemur | Meme  Generator
Or at least give your PMs really awesome tools!


Compare between vendors, and analyze by cost, quality and their consistency using historical data. Since your inventory is tracked, you know what resources are more available than others, assisting in your purchase forecasting.

that costs how much - Internet Grandma | Make a Meme
You’ll be surprised at the initial results

And a whole lot more!

These are only some of the big problems ERP can address. There are many benefits to just having your data in an organized manner. Thereafter, you can do many other interesting things on top of that!

The Evolution of the Warp Speed effects | The Trek BBS
To infinity, and beyond! Wait, wrong movie

1. SalesForce has come up with an innovative way to tackle the ERP space. As ERP covers such a large swathe of functions, solutions back then used to be really bloated, and was a pain to customize. Instead of trying to solve all departmental operations’ problems at once, why not tackle the processes that drive revenue the most, then fan out to customize around how the company operates for the rest of the department. And so, SalesForce’s ecosystem strategy took off. More on that in another post!

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TikTok vs Snapchat Showdown. Who is better at what?

Wanted to scratch an itch in comparing similar technology company offerings, and decided to just compare the companies anyway as an exercise.

Let’s go through some fundamentals before diving deeper.

Let’s be clear that both apps, and its companies are burning cash. The two platforms share very similar features, and audiences. But, both have different value offerings. Tiktok, being a video sharing app, is for short clips played with music. Snapchat is more of a messaging app centered on photos and video sharing using “Stories” that can disappear.

Note also that that TikTok is named “douyin” in China, and statistics usually separate the counts for TikTok (international ex-China) and Douyin (China only).

For context, Tiktok was recently launched in 2018 (internationally). Snapchat was launched in 2011.

The number of users are massive. Tiktok+Douyin has at least 300 million users, while Snapchat has 218 million. And the number of downloads is staggeringly different – Tiktok: 738 million, and Snapchat, 75 million. Why such a big discrepancy? Well, remember this is now counting Douyin (i.e. China user base).

The demographics also differ. Tiktok appeals towards the Gen-Zers, where 42% of users are between ages 13-16. Snapchat appeals more for millenials.

For revenue models, Tiktok is mostly CPM-based (cost per 1K impressions), while Snapchat has various advertising options via its self-serve ad platform, and an e-commerce aspect.

Endless, Endless Content

One of the powerful components of TikTok is its algorithmic recommendations. You can open the app and see endless amounts of comedic material, and time just whizzes by. That is great for advertising.

The average TikTok user spends 52 minutes a day on it, and opens the app at least 8 times a day. How about Snapchat? 26 minutes a day, and at least 20 times a day. Hang on, are we on to something here?

Glorious, Glorious Marketing Funnel

Funnel Scripts - Here are some fun copywriting memes...... | Facebook

How are the demographics?

Both apps seem like a gift from the heavens for marketers. They offer top-of-funnel opportunities, which means they are very good at driving awareness for brands, as the user-generated content appeals to specific communities associated with a community influencer.

However, Tiktok is essentially driven by users, with short-lasting trends and humor which may not work for all brands.

The demographics of marketers’ target audiences matters – for a young, meme-like interests, TikTok should be the go-to. For slightly longer-term and mainstream interests, Snapchat should be selected.

How about geographic region?

As of Aug 2020, TikTok is facing lots of headwinds from the USA. Being labelled as a front for Chinese spying, there are forced to divest their US operations in 90 days, and few days later, being banned from India entirely. This leaves the door open for other apps, of which Snapchat is primed to take.

How about the numbers? Averaging out daily users, Snapchat has 210 million daily users, while Tiktok has 425 million daily users: 400 million (douyin) + 25 million (tiktok) daily users. Staggering.

According to Oberlo, TikTok has 800 million active users worldwide.

TikTok Revenue and Usage Statistics (2020) - Business of Apps

Hang on, outside of China, the next largest markets India and the USA has just banned TikTok. Uh oh.

But, subtract away these users from Tiktok’s 800 million you get….a whopping 569 million. And the revenues are insane. $17 billion in 2019, compared to Snapchat’s $1.7 billion. Look’s like China’s market alone would be enough.

Lets check out Snapchat:

How many users does Snapchat have per country? - Quora


In brief, Tiktok seems to come on top here. But let us take a look at more macro views:

Spying and Government Intervention

Johnny English saves the day again

TikTok is still in its early stages, as compared to Snapchat. TikTok does face insurmountable odds with government-level interventions however. Snapchat does have some risk in teens getting wound up in sexually suggestive content (producer or consumer), but this is not as big as a problem to governments than espionage.

UPDATE 27 Aug 2020: TikTok’s New CEO from Disney bows out

Novelty Factor & Impressions Count (literally)


My opinion favors having a novelty factor in Snapchat with their disappearing posts and videos, as compared to TikTok. It could be the reason for the increased number of opens, but basically marketers would love frequency for their CPM to hammer home a campaign’s point (and thus conversion), rather than a long duration of screen time where users may just get tired of the ads or app, and switch it off.

TikTok does has its novelty somewhat, but it boils down to the new features it offers to stay relevant, amongst all the other social media apps – not including heavyweights Facebook and Instagram already sucking away attention.

Abandonment Rates

Minecraft Has Passed Fortnite on Google Trends May 19- May 25 2019 ...

Fads come and go. More finicky audiences will demand new, interesting and hip conetnt. TikTok’s content is also not for everyone – there has been findings of abandonment rates after trying it out, similar to the path of Twitter. Along with the regulatory scrutiny, users may realize that data privacy is something worth more to them, and simply stop using, or transit to another app.

Dependency on Community Influencers

Why Influencer Marketing Should Be Your Go-To Ecommerce Strategy

Communities follow a recognized influencer. The moment influencers leave, content stagnates, the attractiveness of the app drops. This is in contrast with Snapchat, which is mainly user-generated content. Alluding to Abandonment Rates, the reason I attribute Snapchat to be stronger is due to the “power of the crowd” – a company does not have to constantly seek influencers and motivate them to keep creating content like a TV show. Why not let the user’s do it for you, while you collect the data and segment audiences yourself?

TLDR: TikTok dominates the Chinese market, and thus Ad revenues, yet will miss the growth of India and USA. Snapchat seems to be more sustainable option, both for holding on to the interest of users, and marketing dollars.

Other notes:

  1. Let’s take a step back and look at a larger picture though. TikTok is owned by ByteDance, which owns several other content platform or content-producing companies, which does crazy ML stuff (450 articles in 15 days!!).
  2. Government relationships are brought into the picture. What is going on.
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How To Value A Technology Company

Price is what you pay, value is what you get
Warren Buffet, Berkshire Hathaway

If you have not heard of this person already, and are new to finance/investing, I would recommend him a listen: Aswath Damodaran. Not your usual professor, he is able to uncover interesting valuation methodologies for different types of companies.

In my stint as an Investment Analyst, it can be difficult to look at the hot, new technology companies IPO-ing one after another. There are no revenues. Expenses are through the roof, and the business models are so out of tune with traditional businesses. There is a reason why startups or tech companies have a burn-rate and ‘runway’ – take off, or face imminent crash!

But that is also the point – their approach is different, they are disruptive, and new. The metrics are different, and so are its operations, and way of doing growth. How does one do business valuation of a company when it does not even make money yet? Hang on, perhaps there is a way!

Not all businesses, and not all users are equal

We can start with an assumption that the way to value a ‘traditional’ business (gold miner) and a technology company is different. What is constant in both however, is cashflow per action.

What is cashflow per action? There are a few activities in business that really drives profit. For tech companies, here are some of them:

Uber: Makes money whenever a user hails a ride with its app. No money is made if the user does not open the app at all.

A New App, Built For and With Drivers | Uber Newsroom
Taken From Uber’s Website

Facebook: Makes money whenever they sell an impression ad. Money is made regardless if the user logs in or not (and eventually drops off).

Here's the New Facebook App With Its Big Focus on Groups
Taken from

Netflix: Makes money whenever users subscribe to their plans.

NetFlix App - Not Optimised for IPad Pro 11 inch :( : ipad
Taken from Netflix’s website

Bread-and-butter Business Models

The Types of Business Models

Technology companies typically sell subscriptions as services, commissions from transactions if they are a platform, or sell ads based off their user data. How these are implemented depends on the company’s unique proposition, and therefore have some in-built advantage if they have for example, high user stickiness compared to their competitors (TikTok vs Snapchat as an example).

How to start making sense of numbers?

There are three main components in modelling user-based valuations.

First: The Existing users, and the value attached to them

From Aswath’s Presentation at Stern, hosted by Gartner for Marketers on YouTube.

There is existing profitability based on how much revenue is being brought in. You can model the traditional Present Value of cashflows. Other things you can do are to see how loyal they are – you want repeat customers, and you also want them to bring their friends!

So we can come up with variables to define the renewal rate, the lifetime of each user (how long they stay), the grow in cashflow per user, and their uncertainty. We can then derive what the existing customer base should be worth. You will notice that revenues are important even for a tech company. Equally or even more important in some cases, is the growth of a user base.

Second: Future users, and their future value. Taking the above “snapshot” of current users, we can project out based on changing our variables, and over N number of years, what the expected user base should be like. This is closely followed by the costs involved in doing so, to acquire users (marketing, personnel costs for customer service, etc).

Third: Corporate “drag” – expenses in running the business. This you cannot run away from, but you can gradually decrease over time. As a technology company, incorporating scaleable techniques and technologies allow you to do more, with less. As such, the larger your volume/users/transactions, it should cost less to acquire new users or maintain existing ones. We will come back to this in awhile.

A user that stays on for 20 years, is worth a lot more than a user that uses for 6 months to a year. Thus the renewal rates matter in the valuation too.

How to model the cashflows?

In comparison with these three models, which is easier to model cashflows? Take Netflix. Steady user growth, steady increase in paying customers if they convert. However, you may also see this model tapering off as users have watched enough content, and flock to other sites (read: Amazon Prime).

Which of the businesses have higher growth potential? Uber or Facebook? Facebook, because as the user base grows, the ability to sell advertisements rises – think about how many audience segments, demographics and user data is being collected. Such rich data is essential for advertisers and publishers who can make tons.

So, poor Uber then? Well no, not exactly. They are still making money, albeit not as much. The kicker is in their long-term dynamics – if and only if self-driving comes about, they essentially have an automated taxi-force. However, there is a cap to that – how many cars can be on the road at once?

The Costs of Running A Technology Business Operation

There is also the cost of every day business, an operational expense if you will.

However you also have the cost of acquiring a user. And this is the magic in the technology company’s model – The value of a user differs! A user for Facebook may be worth more than a user for Uber. However, the acquisition cost may be lower, or higher! Think about it – how does Facebook go viral? It is easy to share the link, inviting your friends, and finding their friends and so on. How about Uber? It is mostly an individual ride, and perhaps a friend of two if you share some promotional coupons. Thus, it costs tremendously more to acquire a user at Uber, as considered to Facebook.

A user base as large as Facebook’s gives you a “Real Option” value. Imagine how many ads can be sold per hour to your different audiences in your larger user base.

Projecting Value

Recall when we talked about how being larger allows economies of scale? If you can acquire users at a low cost, thats great. You would want to spend more to acquire larger users, as the user base is worth more when it is larger (multiplier effects – think of ads going into the thousands or millions of impressions).

So let’s dive deeper into Uber’s financials (circa 2016). We can use traditional “Income Statement” numbers, and upgrade it with our “growth metrics” stated above:

From Aswath’s presentation

Taking Uber as an example. Cost of servicing existing users, and acquiring users are under operating expenses. However, it is difficult to draw conclusions if they are truly losing money, or spending money for future growth.

So there is a need to separate how much went into spending for the future, and how much they are actually losing, and this is definitely possible to do.

Taking the difference in user growth, the cost of servicing existing members. Estimate that it costs Uber $239 per user in 2016. Estimate that for overall expenses, 69% of every dollar went to servicing users. Is that a lot? Well it depends, because we can do comparables now!

If we use the same approach, we can model Uber vs Lyft (comparables in the same space), but we cannot do Uber vs Amazon. That needs a totally different approach. But at least we have a basic framework to valuing technology companies now.

If Uber can help you find a way to spend 12% more every year….

Projecting Risks

Well one cannot just set a 10% year on year growth of revenues or users without incorporating elements of risk. Come 2020, technology companies are under intense scrutiny.

Facebook is getting lawsuit after lawsuit for data privacy. Google, for monopolisation and/or making free money off news publishers, Apple for similar reasons except the victims are App publishers. Uber and its rival Lyft, for classifying their drivers as non-employees, and thus saving a ton of personnel costs…The list goes on.

Now, if you were a fledgling startup, this is hard to do – you don’t have size, and your technologies are more or less the same as the larger companies. How do you differ? Why should investors put their money with you? I’ll cover this and more in the next series of posts.

View the full, excellent piece by Prof. Aswath Damodaran:

TLDR Summary
1. Profits are better than losses: If you are an investor in a business, you would rather that the business makes money than loses money
2. Young companies lose money: If you have a young company, you should expect the company to make losses, even if it is a valuable business
3. Not all losses are created equal: For young growth companies, dependent upon users or subscribers, there are good ways to lose money and bad ways to lose money.
4. Investor beware: To invest in these companies, you need to know why they lost money, not just how much
5. A company whose expenses are primarily fixed (will not grow with revenues) will be worth more than an otherwise identical company whose revenues grow as fast as costs (or not as fast!)
6. Not all growth types are equal. Rather have growing more intense subscribers, than just a user that does not monetize.
7. If everyone has low costs of acquiring users, competition kicks in.
8. Networking benefits: If you are already bigger, it is easier to grow. If networking effects kick in early, costs per acquiring user goes down quicker.

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