Magic clones in Southeast Asia are dying

Photo credit: macrovector / 123RF Stock Photo.

Virtual personal assistant services in Southeast Asia are dying. Don’t agree? Just look. Startups in this business are either shutting down or pivoting.

Last week, YesBoss in Indonesia announced it would reduce operating hours before stopping the service entirely by the end of October. YesBoss’ rival in the archipelago, HaloDiana, closed down early this year.

Djenee, which is based in Singapore, has pivoted to focus solely on travel. And the co-founders of Malaysia’s Bemalas confirmed to Tech in Asia that they’re “disengaging completely from concierge” by the first quarter of 2017.

All of these startups are clones of US-based Magic, which graduated out of Y Combinator. It’s an SMS-based virtual assistant that helps you with anything – as long as it’s possible and legal. You may text a request to Magic and its “magicians” will deliver it to you for a price. In the background, the company uses artificial intelligence to help its assistants complete the tasks.

Doing too much

The ability to request anything was the reason why the concept immediately became popular among users. Yet it’s also the very thing that’s causing the category to crash – in Southeast Asia, at least.

Why isn’t the model working? First of all, for an on-demand service to succeed, there needs to be quality, consistency, and speed in the delivery of the service.

“The business model of getting anything done for a customer leaves the possibility of errors too big,” a former Bemalas executive, who requested anonymity, tells me. “Nearly 60 to 80 percent of tasks fail due to unforeseen circumstances such as traffic, store availability, stock availability, etc.”

The supply side is a problem since many vendors are still conventional businesses, another industry insider who’s an ex-official of HaloDiana, points out. It forces startups to deal with thousands of vendors across a wide range of industries (since you’re in the business of delivering anything), and that means connecting them to the virtual assistant system is laborious. Without connecting them, the system won’t know whether a store is open or closed, or whether or not an item a customer is asking for is being sold.

“Without real-time connection to the vendors, it will be very difficult to scale and make the operations efficient,” the person adds.

The lack of focus on a particular task or a range of tasks also makes optimization “crazy,” notes the former Bemalas exec. It’s not like other on-demand services such as Foodpanda, for instance. Foodpanda zeroes in on restaurant orders – it has restaurant partners that customers can choose from and whom the company already onboarded to its system, making store and stock availability predictable. Foodpanda is also doing the same task over and over again, helping it provide consistency in the experience.

What Magic and its clones sometimes do is piggyback off Foodpanda-like services and act as a convenience layer, taking orders. But pricing becomes a problem. Those delivery services already charge a fee, which means the virtual assistant would need to add its own markup, making it more expensive for customers. In Southeast Asia, logistics can get really troublesome and expensive.

So if you can’t build a consistent experience or keep your prices reasonable, you’d see high churn rates, the sources tell me. Customers would rather tap specialized services which they trust to deliver a quality job at a lower price.

“Trust is another issue. One service for all isn’t a viable product mainly because people trust focused businesses. A person would rather call a plumber than Bemalas or YesBoss or use Foodpanda instead of Bemalas,” says the former Bemalas exec.

We approached the Bemalas and YesBoss teams for their insights on what makes it difficult for them.

Bemalas co-founder Suthenesh Sugumaran says it’s hard to generate income on customer requests. “The model has challenging unit economics. We believe that we are still a good three to five years away from finding a model that would make personal assistants financially feasible for everyone, whilst still being profitable.”

YesBoss refuses to discuss the specifics.

Daunting price

If virtual assistants are dead in Southeast Asia, that leaves you wondering what’s happening to Magic in the US.

Magic co-founder David Merriman told Tech in Asia the service “did run into the same problems the clones are facing,” but declined to give details. “There are a ton of challenges when you promise to do anything […] but our team is extremely driven to innovate both on the operational and software side.”

Magic came up with a pricing model – it doesn’t charge per task but per hour – and it works for them and their clients, David says. “US$35 per hour is the current price we are testing.”

That means Magic users pay only for the time it takes to accomplish their requests which is still cheaper than hiring a face-to-face assistant in the US, explains David.

Our Bemalas source found Magic’s rate steep and said its pricing model wouldn’t work in Southeast Asia, where help is really cheap. “There are dispatch guys that charge 50 ringgits [US$12] for complicated requests.”

David says “our mission is to continue to drop the cost as we increase our efficiency, so that one day the entire world will be able to use Magic.”

TechCrunch last year reported that Magic was raising from Sequoia but it was unverified. David declined to comment on funding matters at this time.

Changing direction

YesBoss and Bemalas have decided to pivot to chatbots and build their AI and natural language processing technology.

“Right from the beginning we know we are a tech company, this is exactly the direction we are aiming for,” says YesBoss co-founder Irzan Raditya.

Suthenesh says Bemalas will focus on businesses as clients. “Our chatbots will power commerce, customer support, and marketing and advertising platforms […] We are looking to launch it by the end of the year with our first client.”

Chatbots are the next big opportunity that companies like Facebook and WeChat are trying to capture.

A chatbot is a service that you interact with via a messaging app or SMS. For example, if you want to buy clothes or accessories from an ecommerce site, you can simply message the bot and say what you’re looking for, and the bot will get it for you. There’s no need to go to the site and browse. It’s like talking to a real person in a retail store.

This post Magic clones in Southeast Asia are dying appeared first on Tech in Asia.

from Tech in Asia https://www.techinasia.com/magic-clones-southeast-asia-dying
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