Sea, one of Southeast Asia’s largest internet companies, made a risky bet when it ventured out from its safe haven of digital entertainment into ecommerce. Its stock price took a beating as Sea’s financial results bled quarter after quarter while the company poured money into its online marketplace Shopee.
Things may be starting to look up. In 1Q18, Shopee booked a revenue of US$33.7 million, up nearly four times from the previous quarter. It had no ecommerce income in the same period last year.
More people are buying and selling on Shopee as well, judging from the growth in transactions on the platform and its payments service, AirPay.
Another good news is that the growth did not result from out-of-control marketing spending. As a percentage of gross merchandise value, Shopee’s sales and marketing spend stood at 6.6 percent, down from 7.1 percent in 1Q17 and 8.5 percent in 4Q17.
Shopee is not out of the woods yet. The marketplace needs to continue its momentum to become profitable. It’ll also need to fend off well-funded competitors like Alibaba, which can engage in a price war that Sea’s shareholders may not have an appetite for.
With Sea’s net loss widening to US$216 million this quarter from US$73.1 million in the same period last year, it’s on the clock to make Shopee work. The entire group is holding on to US$1.17 billion worth of cash and cash equivalents.
Garena, its digital entertainment arm, is expected to offset the losses. Despite it being the most established part of Sea’s business, it is still growing.
Much of its digital entertainment revenue is derived from in-game microtransactions. Garena is seeing a vast improvement in quarterly active users as it ventures into publishing mobile games from third-party developers and creating its own titles. However, its average revenue per user (ARPU) fell to US$1.2 in 1Q18 from US$1.8 in the same period last year. Nonetheless, its ARPU is in line with that of other mobile games like Candy Crush.
Sea’s stock price went up four percent from yesterday’s market close.
This is a developing story. Check back for updates.
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