As you’d expect in a country where the average age is 28, the typical Indonesian internet user is a young, tech-savvy city dweller. So it’s a surprise to learn that the most rapid growth in internet users is currently coming from the 30+ age groups and the secondary cities. We believe this is great, great news for tech investors. Because it means the market is rapidly moving away from its past obsession with social media chatting and simple free entertainment, and moving towards e-commerce, paid online content and B2B services.
Moving away from a user base which was simply too young
Five years ago, Indonesia’s mobile and internet markets were dominated by the under-25s. Energetic and talkative, they made Indonesia the social media capital of the world. The problem was, they didn’t spend much money online, in large part because most under-25s don’t have much money to spend.
Wind the clock forwards and the picture is changing rapidly. The fastest-growing age group in terms of internet adoption over the past three years has been the 35-39 year-olds. The second fastest-growing group was the 30-34 year-olds. Wealthier, busier, and with businesses to run and families to manage, they place more value on the convenience that the internet offers and have a higher ability to pay for services. The rapid rise of startups such as home food delivery and e-commerce verticals is a direct result of this user base trend.
This spreading-out of the user base is evident in other areas too. While penetration is highest in the A social class, the fastest growth is currently occurring in the C social class, and the ABC social classes are now fairly evenly represented in the overall user base. From a gender perspective, more men use the internet each month than women, but the higher growth rates are among the female age groups.
Two clear usage segments emerging
As the composition of the user base evolves, two clear usage segments are emerging. One is older (25+) and wealthier, with a primary focus on gaining utility from the internet – we call these the Utility Users. The other is younger with less disposable income, and has a primary focus on finding entertainment on the internet – we’ve named them the Entertainment Users.
Here is one example of how the two segments clearly differ in their behaviour:
The older, wealthier Utility Users primarily use the internet from home, and secondarily from their office. The Entertainment Users are very different, and still make heavy use of Wartels (public internet cafes). Beyond this graph, further statistics show that the Utility Users also access the internet through different devices: primarily desktops and laptops, then smartphones. The Entertainment Users mainly access the internet through feature phones.
A second striking difference is in what they access on the internet:
While social networking appears near the top of both lists (Indonesians really are some of the most sociable people on earth), the Utility Users are also heavy users of typical productivity services such as email and news portals.
Why does all this matter?
One of the most common (and one of the biggest) errors that new investors make in Indonesia is to think of the country as a market of 240 million people. It’s not – it’s a huge market made up of different segments with distinct needs and behaviours (with the above two segments merely representing a high-level simplification of a much richer picture).
For a startup tech company with a limited number of people and limited marketing budgets, trying to target the whole of Indonesia at once can be suicidal.
Launching a new internet company is all about focus, and that has to start with selecting a slice of the market where the planned service is most likely to thrive. Segmenting the users by demographics and behaviour is a first step. A geographic filter is a often second. More sophisticated usage habits and psychographic variables can be third. These all go towards building an actionable view of the market from which post-launch changes and pivots can be made.
The bottom line: by understanding user trends, investors can get a better return on every single dollar they put in to a tech startup.