Question

According to an exclusive report by KPMG, a world-renowned accounting organization, apps like WeChat and Alipay in China, and Grab in Malaysia are what we termed as ‘super apps’. These apps usually bundle together online messaging (similar to WhatsApp), social media (similar to Facebook), online shopping (like Shopee), e-wallet (like Touch ‘n Go eWallet), and services (like Uber). These super apps are designed with one thing in mind—to monopolize users’ time so that there is no need for them to use a variety of apps.

a)How does the monopoly of super apps result in the transfers of income?

b) Discuss how the big data obtained by these super apps can be used to collect all consumer surplus for themselves.

c) Is super app can be considered as a price maker?

d) In lieu of (c), will a super app always charge the highest possible price at all times?

e) “Being a super app guarantees economic profits.” Discuss whether this is a valid statement.

f) What are some ways that existing super apps may attempt to prevent rivals from entering into the market? Discuss an example.

g) How does super app compare with single-purpose apps in terms of price, output, and efficiency?

Answer 1

(a) Transfer of income is when one receives a payment without providing any service. It is redistribution of wealth without getting anything in return. Thus the monopoly of super apps results in transfer of income, as they have a huge customer base and brands pay them while customers get exclusive deals without paying anything extra, thus one gets multiple services by just opting for one app which services all the requirements when one goes online. Plus connectivity of several platforms leads to quick transfer of income.

(b) Consumer surplus is when consumers pay a lower price when they are willing to pay a higher price. Thus the big data obtained by the super apps can be used to collect all consumer surplus for themselves when they are able to analytically examine how consumers choices behave and market those products which they know those specific consumers will buy. This leads to more sales through their ewallets and websites.

(c) Yes, super apps could be considered price makers as they are able to gauge at what price consumers will buy specific products because of the huge database which they own, thus they know that a specific product will sell, only at that specific price, which is when they charge a lower price and other sellers have to follow because they know that the sales would be maximised at that price.

(d) No, a super app won't charge the highest possible price as it knows by reducing the price to a certain extent, sales increase, plus they have the economies of scale, thereby even when price is lowered, the reach leads to more profitability.

(e) No it doesn't guarantee economic profits as in the starting phase, they incur huge costs by giving their services for free, so that they get the necessary customer base and contact details.

f) Some of the ways that existing super apps may attempt to prevent rivals from entering the market are by charging extremely low transaction costs, so that customers don't prefer other ewallet apps. Not letting other firms and banks collaborate with other apps and sign exclusive contracts.

g) Super apps are more efficient in terms price, output and efficiency as they are cheaper because they have several other revenue streams and take advantage of the huge customer base by giving personalised benefits. There are exceptions wherein because of the huge customer base, they might have website lag, but so can single purpose apps if they don't have enough revenue generating capacity in order to maintain servers.