Valuation metrics favoured by digital economy firms going public need a long, hard look

DIGITAL services platform Grab released a set of earnings last week with particular focus on gross merchandise value (GMV), one of the ways it assures investors its business has been growing well despite the Covid-19 pandemic. GMV measures the total dollar value of transactions from Grab's services, such as ride hailing and food delivery.

Grab's GMV in the third quarter increased 32 per cent year on year to reach a quarterly record of US$4.0 billion - but even this growing GMV number carries some caveats with its interpretation.

Grab's revenue for the latest quarter was 3.9 per cent of GMV, down from 5.6 per cent a year ago and 4.6 per cent in the second quarter of 2021. This means that for every dollar transacted on its platform, the company got to keep less for itself.