Special report on internet industry 022012

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An overview of Vietnam Internet Industry, part of my Technical Due Diligence for Duxton Asset Management Pte Ltd.
2/2012.
Published as the deal was done and under agreement from VTC. http://biz.cafef.vn/20120813024812104CA47/duxton-dau-tu-vao-vtc-online-nham-vao-mang-game-online.chn

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Special report on internet industry 022012

  1. 1. Special Report on Vietnam Internet Industry 2012 Special Report on Vietnam Internet Industry 2012 Consultant/ Reporter: Duy DoanI’ve done this at the request of Duxton Asset Management Pte Ltd. Every information in this report isconfidential, excluding my personal opinions (which were in many of my presentations), and publicdata.This report is made under a Scope of work, which was agreed by me and Duxton. ------- 2/2012
  2. 2. Special Report on Vietnam Internet Industry 2012 ANALYSYS THE 4 BIG ECOSYSTEMS1 Contents2 Games ............................................................................................................................................. 4 2.1 General view/ Users behavior ................................................................................................ 4 2.1.1 Video/NES games: .......................................................................................................... 5 2.1.2 Casual / Multiplayer: ...................................................................................................... 5 2.1.3 Online games:.................................................................................................................. 5 2.2 Strength / Weakness .............................................................................................................. 5 2.2.1 Vietnam online games market is very prominent to invest: .......................................... 5 2.2.2 Weak Points .................................................................................................................... 6 2.3 Trends..................................................................................................................................... 6 2.3.1 China: .............................................................................................................................. 6 2.3.2 Korea: .............................................................................................................................. 6 2.4 Successful Companies............................................................................................................. 6 2.4.1 Dominators ..................................................................................................................... 6 2.4.2 Disruptors ....................................................................................................................... 7 2.5 Potential successful companies .............................................................................................. 73 E-Commerce ................................................................................................................................... 8 3.1 Non group-buy........................................................................................................................ 8 3.1.1 Strengths ......................................................................................................................... 8 3.1.2 Weaknesses ..................................................................................................................... 8 3.1.3 Vietnamese users behavior............................................................................................. 9 3.1.4 Trends ............................................................................................................................. 9 3.1.5 Forecast ........................................................................................................................... 9 3.2 Groupbuy .............................................................................................................................. 104 Social Network ............................................................................................................................. 11 4.1 Strength and Weakness ........................................................................................................ 11
  3. 3. Special Report on Vietnam Internet Industry 2012 4.1.1 Strength......................................................................................................................... 11 4.1.2 Weakness ...................................................................................................................... 11 4.2 Users behavior ...................................................................................................................... 11 4.2.1 Connecting .................................................................................................................... 11 4.2.2 Entertaining .................................................................................................................. 11 4.2.3 Sharing .......................................................................................................................... 12 4.2.4 Mobile using .................................................................................................................. 12 4.3 Trends................................................................................................................................... 12 4.4 Succcessful Companies ......................................................................................................... 12 4.5 Forecast ................................................................................................................................ 135 Education ..................................................................................................................................... 13 5.1 Strength / Weakness ............................................................................................................ 13 5.1.1 Strength......................................................................................................................... 13 5.1.2 Weakness ...................................................................................................................... 13 5.2 Users Behavior / Trends ...................................................................................................... 13 5.3 Successful Companies ........................................................................................................... 14 5.4 Forecast ................................................................................................................................ 14
  4. 4. Special Report on Vietnam Internet Industry 2012 GAMES SOCIAL NETWORK Internet EDUCATION E- COMMERCE 2 Games2.1 General view/ Users behavior Casual/Multiplayers •Creating video games - (1998-2005) •Create the shape for playing behaviour for Industry: school boys •Divide gamers into 2 main •VTC goes casual •Set up basement for trends: •VNG goes MMORPG video games next to •Shooter / Casual schools (football) games •RPG / Multiplayer games Video/NES (1990- Online games 1998) (2006-present) Gaming Industry in Vietnam is the most profitable branch in the ecosystem, and has the highest growth rate. Its history can be divided into 3 parts:
  5. 5. Special Report on Vietnam Internet Industry 2012 2.1.1 Video/NES games: It has started since 1992, when the first NES console came to Vietnam, then Play station 1, Play station 2 (2002). During this time, there were many gaming center were set up, attracted most of teenager boys and young adult. These centers were mostly based in universities or next to schools, and most of them still survived till today, created a computer-games-playing-behavior for every boys in Vietnam. 2.1.2 Casual / Multiplayer: Microsoft’s Fifa, Play station 2 (2002), Blizzard’s Star craft and Diablo, and Sierra’s Half life Counter Strike wrote the 2nd part of Vietnam games’ history. These directed gamers into 2 ways, which were 2 main types of online games later then: + Football / First-person shooter games: which became casual games. + RPG and Multiplayer games: origin of MMORPG games. 2.1.3 Online games: After Vietnam’s Internet using ADSL, Vietnam gamers started to play online games like MU or King’s road, but only when VTC’s Gunbound and VNG’s Vo lam truyen ky were launched, the online-gaming- industries were officially created. The 2 very first games of these companies also shaped their models: VTC with casual games, and VNG with MMORPG games. 2.2 Strength / Weakness Strength Weakness Growth rate is incredibly good and stable Too few players. High revenue High risks and Fragile under Regulation pressures Will still grow in the next 3 years 2.2.1 Vietnam online games market is very prominent to invest:2.2.1.1 Growing rapidly in both revenue and users The growth rate of this market is about 25-40% per year (according to Mr. Hoang Dinh Cong, VP of VTC). The most dangerous year for this market were 2010, when government banned violence games and not authorized for new ones. Still, the number of online gamers growth 22% that year, and 40% last year.2.2.1.2 The revenues of gaming companies were high (comparing to ones in other branches) + VTC: 950 billions VND (according to Mr. Hoang) + VNG: 1400 billions (FPT capital’s inside data, ex-VNG senior manager’s data) + FPT online: 350 billions (FPT capital’s inside data) + Vietnam online games market is the largest in South East Asia.
  6. 6. Special Report on Vietnam Internet Industry 20122.2.1.3 Will still grow in 3-5 years later, with Vietnam’s internet. 2.2.2 Weak Points2.2.2.1 Only 3 big companies dominate the market (Vinagame, VTC and FPT). There are hardly some disruptors like VC Corp.2.2.2.2 Online gaming is a fragile and risky market If the government authorize some regulations like in 2010, violent games (most MMORPG and shooter games) will be banned, and the market will be in a crisis. - Vinagame had to change its name into VNG in 1/2010, in order to avoid any potential risk in the future. Later then in 2010, they were punished by HCM Information and Communications Office for publishing violent games. (http://nhipsongso.tuoitre.vn/nhip-song-so/419033/Manh-tay- voi%C2%A0game-online%C2%A0bao-luc.html). - Violent games are more risky that casual games, though. 2.3 Trends There are 2 main trends in VN online games: 2.3.1 China: Most MMORPG games in VN were China’s modified version and published by VNG. They are the most attractive games in the present, easy to play, with noisy events online and offline. Vo lam truyen ky (http://volam.zing.vn/), Kiem the (http://kiemthe.zing.vn/) and Vo lam chi mong (http://vlcm.zing.vn/) are the 3 most successful games. 2.3.2 Korea: “VNG goes China, VTC goes Korea” has been the right idiom for gaming industry, since 2007-2010, as VTC owned Gunbound and Audition, the most successful casual games of this company. Now VTC still tightly collaborate with Korea in publishing games and creating events / contests, especially after Fifa Online became an e-sport. 2.3.3 US US is a trend worth watching, after the success of Zynga in social games. There Farmville, Texas Hold’ em Poker and may other games were cloned by China, India and also by Vietnam Apps developers. 2.4 Successful Companies 2.4.1 Dominators There are only 3 dominators in the market at this moment: VNG, VTC and FPTonline. Moreover, market share of VNG and VTC alone are 80%. VTC’s revenue from game online in 2011 was about 1000 billions VND, and VNG’s was about 1400 billions VND, FPT’s was 300 billions.
  7. 7. Special Report on Vietnam Internet Industry 2012 2.4.2 Disruptors Games online is an attractive market, and still have rooms to grow. Many others companies joined the battles. These companies can be divided into 2 types:2.4.2.1 Big companies/ Publishers VC Corp and Viettel are the 2 leaders. VC Corp already launched their games department: http://games.soha.vn They point themselves as a games publisher, not creator, although they have a game studio. VC Corp has a great media channels back up, so they choose their right part. Their innovations are incredible Viettel only has a plan, but with their power, who knows what will happen. They are looking for talents in Product Manager position.2.4.2.2 Application Developers There are some names should be remembered: Garagames, Teamobi, Iwin, Appstorevn. They are smart apps developers, monetizing on social networks or mobile networks. Appstorevn aims to be the biggest appstore in Vietnam (they solved the legal issue in branding though). The revenues of these companies are still hidden, but must be good because they can hire skillful manager. (Scott Brewer, former Marketing Director of Vien Thong A now works for Teamobi). 2.5 Potential successful companies - In the next 3 years, it is clear that VTC and VNG will still dominate the market, for they have enough experiences, communities, technical basement and funding supports. - FPTOnline may be kicked out of the game, if they do not have focusing plan on games online. Another reason for this is FPT always have in-house troubles. + FPT system is too big, and it is hard for the board to control every subsidiary company. + Subsidiary company is given to the founders’ asssistant or successors. This fact leads to a silent war among the founders and successors themselves, in order to make their company to be the most powerful or profit. + Therefore, if a founder or a sucessor is kicked out from the board, all of his team and his product may be erased. + In a single case like FPTonline, there are aslo conflicts between News department (the most profit department) to Social Network department (the most important department theoretically).
  8. 8. Special Report on Vietnam Internet Industry 2012 - Innovative Apps Developers will find their positions in the future, if they are creative and innovative enough. These companies that I mentioned above are all prominent. - However, publisher like VC Corp may be in troubles, because they do not have experience in gaming industry. 3 E-Commerce E-commerce in Vietnam has been developing for 6 years. The majority of companies were doing C2C. 2011 marks two unprecedented trends. First is the shaping and burst of Groupon clones. Second is the move to B2C. This section is divided to non-group-buy and group-buy. 3.1 Non group-buy 3.1.1 Strengths Most companies are nimble startups which innovate quickly. 3.1.2 Weaknesses Transactions are not done onsite. While PeaceSoft provides NganLuong e-wallet on ChoDienTu and vatgia provides BaoKim e-wallet on vatgia, majority of transactions are still done offline the manual way: buyers and sellers meet in person and exchange product and cash.3.1.2.1 Lack of trust of buyers and sellers. Incomplete e-payment system. This shall be detailed in e-payment section Lack of bargain power to deal with wholesalers. Due to their small size, B2C e-commerce players cannot deal with wholesalers to procure the products. Therefore, e-commerce sites are selling for retailers. This further pushes up the price of the products and makes it unattractive to price-sensitive buyers.3.1.2.2 Weak technology. The technology base is not built to scale. Many features only serve the front-end process for users. Back-end processes are still handled manually not automated. As a result, the cost of operations is high. Human resources. Lack of well-trained and experienced human resources for the industry is an issue. Building harmonious teams is difficult and even when a good team is assembled, a good launch for their take off is scarce.3.1.2.3 Legal framework. The legal framework is running behind innovations in e-commerce. Business models are not officially recognized and certain gray areas exist. This poses a threat as regulators can deem e-commerce
  9. 9. Special Report on Vietnam Internet Industry 2012 business models going beyond existing permits and fine the business. Saying that however, the risk of shutting down entirely current players is small.3.1.3 Vietnamese users behavior The current sellers on e-commerce websites are:  Small businesses which explore more selling channels in addition to their brick-and-mortar shops  Tech-savvy sellers of IT products (laptops, mobile phones) The sellers are selling low to mid-end products. Quality control is an issue. The sellers expect store services from e-commerce platform provider. 3 industries sellers are focusing on include: IT products, apparels, and books.3.1.4 Trends Vietnamese player Company Following the model of vatgia.com Vatgia Rakuten Japan nhanh.vn Vatgia Incomplete Amazon chodientu.vn PeaceSoft eBay vinabook.com MekongCom Incomplete Amazon tiki.vn Tiki Amazon enbac.com VCCorp Taobao rongbay.com VCCorp Craigslist muare.vn VCCorp A C2C forum solo.vn VCCorp Amazon The current trends are observable:  Moving from C2C to B2C and following Amazon model. The reason for moving to B2C is to solve the basic problem of trust of buyers and sellers.  In 2012, many players focus on developing products and processes  Adding more categories in addition to the 3 main categories discussed above. The major one is consumer electrics  Retail chains start to add online services3.1.5 Forecast The market is occupied by four big players: vatgia, PeaceSoft, VCCorp, and 5giay. In the next 3 years a winner will not have been identified. Whats more, the real competitors of e-commerce is brick-and-mortar retail chains. Therefore, any competition will only enlarge the market.
  10. 10. Special Report on Vietnam Internet Industry 2012 It can be expected that all incumbent players will continue to develop and new players will join the landscape.3.2 Groupbuy Groupbuy has tremendous alleviation to Vietnam e-commerce landscape. Only within one year a Groupon market has reached $35 million, higher than what non-Groupon e-commerce has been doing for 6 years. Vietnamese buyers love discounts (Neilsen) and thus have been enthusiastic about Groupon. 4 leaders in Groupon have emerged: NhomMua (MJ group), Hotdeal (same owner as MekongCom), MuaChung (VCCorp), and CungMua.
  11. 11. Special Report on Vietnam Internet Industry 2012 4 Social Network 4.1 Strength and Weakness4.1.1 Strength - Vietnam Companies are good at catching the wave of technology, and clone world’s product like Facebook or 9gag very fast. - Vietnamese technology skills are among the best in South East Asia, they create systems can affort millions of visitors. - Some products are innovative and good, attract millions of members. Such as: + http://linkhay.com : a social media channel, from VC Corp. + http://sannhac.com : an online karaoke network, from VC Corp. + http://me.zing.vn : social network, from VNG + http://soha.vn : a social network, from VC Corp4.1.2 Weakness - Vietnam products still can not fight against Facebook in mass, they have to go niche. - Monetization is still a big question. - Data mining researches have just been started since 2 years ago, after Facebook launched “Friend suggestions” feature. - Lack of funding. 4.2 Users behavior4.2.1 Connecting Vietnamese want to connect. They move to wherever their friends move. In the past, there was a SNS named Yahoo 360. Although this is an immature and very simple product, but almost Vietnamese use it, because they already had connections on Yahoo Messenger.4.2.2 Entertaining Most users use social network for entertaining or playing games. That’s why VNG points ZingMe as a social network for gamers. Entertainment is still the best way to attract users.
  12. 12. Special Report on Vietnam Internet Industry 20124.2.3 Sharing Users want to share every interesting content they’ve got on Internet, for that they can build “credit” among their friends. Facebook is an excellent tool to share and viral information, and this is one of main reasons why it success.4.2.4 Mobile using Vietnamese start to use mobiles massively. Almost everyone has a mobile. And the rate of smartphones in Vietnam, mainly Android and Iphone, is incredibly high. They are also good at using new applications, new products. Every social network must have a mobile version. 4.3 Trends4.3.1 Facebook It is clear that Vietnam users and social networks are deeply affected by Facebook. And this trend will still lead the market, as long as Facebook still innovates and is not banned in Vietnam.4.3.2 Sina Weibo However, there is another trend should be watched: Sina Weibo from China. Vietnam Government did visit and investigate how China Government monitored and controlled their citizens by social network. And Sina Weibo is the largest one there. Sina Weibo is a micro blogging network, its content is 70% political, but controlled by China Government. No matter how social network market go, it will must collaborate tightly with government. 4.4 Successful Companies Company Members A30 (active users in 30 days) http://Linkhay.com VC Corp 120,000 80,000 http://Sannhac.com VC Corp 1,200,000 110,000 http://my.soha.vn/ VC Corp 3,000,000 1,200,000 http://Ming.vn + VC Corp 5,000,000 2,500,000 Ming Social ID http://Me.zing.vn VNG 7,400,000 7,000,000 http://Go.vn VTCOnline 3,000,000 500,000
  13. 13. Special Report on Vietnam Internet Industry 2012 Source: + VC Corp in-house data + http://blog.apps.zing.vn/amunvolam4/blog/detail/id/1079373166/request/1 4.5 Forecast The market is still open to everyone, and each company has its own plan. However, the winner will be the one who - Has the best mobile version - Has the most open platform for apps developers - Has the best product to attract users from 15-25 - Knows how to data mining. 5 Education 5.1 Strength / Weakness5.1.1 Strength - Education is always on top priority of government. Every interesting educating project has highly chance to be supported by Ministry of Education. - The market is good, can be breakdown into many branches: textbooks, references books, equipments, stationery. - The industry is stable, growth slower than others but safe to invest.5.1.2 Weakness - Have to lobby government for serious plans. - Vietnam education system is not good, and has changed unpredictably in recent years. - Students still want to use Internet to entertain, not to study. 5.2 Users Behavior / Trends - Vietnamese mostly use Internet to read news, and to entertain.
  14. 14. Special Report on Vietnam Internet Industry 2012 - Smartphone’s and Kindle becomes more and more popular, especially Kindle because it is cheap. - Users start to buy and share references books or documents online, a big part of them are young teacher. - Users start to find Internet to be a great source for studying, not only entertaining. - The education technology grows as well as the 8x and 9x generations grow, join in the system. - Pupils in schools will study in whatever method their teacher apply to. But most of them fond of using computers and creative lessons.5.3 Successful Companies There has been none companies succeed in this market, but VTC may be the leader. Some companies join the market, but still on the way building brand. - Topica.com: organize online courses, teaching useful / business skills. - Hoctudau.com: organize online courses, teaching technology skills. - Tailieu.vn: online sharing documents5.4 Forecast In the 3 next years, more attention will be paid to this market, because it is a good pie. - VTC, as long as they can keep good relation with government, may be the leader. - Online courses are good business, but their qualities should be questioned. If they are not qualified or breakthrough, they will still be small business. - However, document-sharing is a very potential market. VTC should care of this more. This market will boom if + They do not have legal issue, relating to unauthorized content. + E-Payment method is good. + Someone build up a good brand.
  15. 15. Special Report on Vietnam Internet Industry 2012 DIGITAL LANDSCAPEContents 6 Global ............................................................................................................................................ 17 6.1 Internet, with no doubt, is the 3rd science revolution of the world. ....................................... 17 6.2 Google is still the king of Internet ........................................................................................... 17 6.3 Groupon is the new trend in e-commerce. ............................................................................. 18 6.4 In my opinion, the new battlefields on Internet are ................................................................ 19 6.4.1 Digital ads....................................................................................................................... 19 6.4.2 Social Network/Profile ID:............................................................................................... 19 6.4.3 Online payment: ............................................................................................................. 19 6.5 China builds his own Internet Kingdom, after banning Google. ............................................... 20 6.5.1 My opinion : ................................................................................................................... 21 7 Macro Overview ............................................................................................................................ 21 7.1 Vietnam Internet Industry is an emerging market................................................................... 21 7.2 The Internet companies in Vietnam have some common characteristics: ............................... 22 7.2.1 Clone US websites in feature, affected by China Internet companies in trends................ 22 7.2.2 There are some big names in some branches, but no one dominates in the whole market. 22 7.2.3 Internet employees are mainly divided into 3 generations .............................................. 22 7.2.4 The links among Internet companies, and with other industries are very loose. .............. 23 7.2.5 Lacking of skillful workers ............................................................................................... 23 7.2.6 Investment in the field approaches by 3 ways:................................................................ 24 7.2.7 The products and companies become more and more mature ....................................... 24 8 How Vietnamese products satisfy the need of users?..................................................................... 24 8.1 Pressure from outsiders ......................................................................................................... 24 8.2 Therefore, they have some solution: ...................................................................................... 24 8.2.1 Clone new and successful model: ................................................................................... 24
  16. 16. Special Report on Vietnam Internet Industry 2012 8.2.2 Use the local advantages and focus on the niches:.......................................................... 24 8.2.3 Make good products:...................................................................................................... 259 How sustainable is the Vietnamese market? .................................................................................. 25 9.1 VTC, FPT and VNG will raise digital sovereignty issue .............................................................. 25 9.2 All companies will seek for funding and collaborating in other fields. ..................................... 26 9.3 In long-term strategy, all big companies will create new products and new services, mostly focus in niches of the market, in order to avoid potential risks. ......................................................... 2610 What will happen when Facebook enters the market? ........................ Error! Bookmark not defined. 10.1 In my opinion, Facebook will not enter the market easily. ........... Error! Bookmark not defined. 10.2 If Facebook enters the market, there will be some noticeable points: ....... Error! Bookmark not defined. 10.2.1 Government will force them ................................................ Error! Bookmark not defined. 10.2.2 Vietnam Companies will ...................................................... Error! Bookmark not defined.11 Are the Target’s products relevant to Vietnamese users? ................... Error! Bookmark not defined. 11.1 Game department....................................................................... Error! Bookmark not defined. 11.2 Go Online .................................................................................... Error! Bookmark not defined. 11.3 Education: ................................................................................... Error! Bookmark not defined. 11.4 E-bank and Vcoin ........................................................................ Error! Bookmark not defined.12 Competitors Assessment .................................................................... Error! Bookmark not defined. 12.1 Board .......................................................................................... Error! Bookmark not defined. 12.1.1 VTC:..................................................................................... Error! Bookmark not defined. 12.1.2 VNG:.................................................................................... Error! Bookmark not defined. 12.1.3 VC Corp ............................................................................... Error! Bookmark not defined. 12.1.4 FPT Online ........................................................................... Error! Bookmark not defined. 12.2 Management: ............................................................................. Error! Bookmark not defined. 12.2.1 Product ............................................................................... Error! Bookmark not defined. 12.3 Direction ..................................................................................... Error! Bookmark not defined. 12.4 Advantages / Weakness .............................................................. Error! Bookmark not defined.
  17. 17. Special Report on Vietnam Internet Industry 2012 6 Global6.1 Internet, with no doubt, is the 3rd science revolution of the world. It reaches every part of every industry and every human. Revenue of big Internet companies raise by month, and still has not stop. In 2011, there are some remarkable points in the industry:6.2 Google is still the king of Internet It gained 9.72 billions USD in Q3 2011. But Facebook is the one who should be notice, with 3.15 billions USD in 2011 (grew 69%), according to the February 2012 prospectus it filed in conjunction with its initial public offering (IPO) http://www.sec.gov/Archives/edgar/data/1326801/000119312512034517/d287954ds1.htm
  18. 18. Special Report on Vietnam Internet Industry 20126.3 Groupon is the new trend in e-commerce. Though it is an unstable and loss-leader model, it does push many people use e-commerce. Groupon is also a proof of the crazy-change in Internet: how a start up can make 3.1 billion dollars in 2.5 year (2008-2011).
  19. 19. Special Report on Vietnam Internet Industry 2012 6.4 In my opinion, the new battlefields on Internet are6.4.1 Digital ads With no doubt, this is the milking cow of everyone, from the big boys like Google, Facebook to small start ups.6.4.2 Social Network/Profile ID: Facebook reached 500 millions users in 2010, and 800 millions in 2011 (http://mashable.com/2011/09/22/facebook-800-million-users/). To imagine, you should know that US Population is only 312 millions, China’s is 1.4 billion. Most of them are real ID. That means, Facebook has data of 800 millions humans, to do data mining, advertise, launch games etc... Every bank, ad agency, government, organization want to work with Facebook to have a piece of cake. In response, Google has launched Google Plus, and this service may reach 400 millions users by the end of 2012 (http://techleash.com/2011/12/google-plus-to-reach-400-million-users-by-the-end-of- 2012/)6.4.3 Online payment: To buy a thing, you have to pay. To buy a thing on Internet, you have to pay online. With the growth of Internet market in users and revenue, online payment is the center of ecosystem (social network, ecommerce, application, education...), connecting every part of it. PayPal becomes popular, gained 3.4 billions in 2011 and may double revenue in 2012. (http://www.bloomberg.com/news/2011- 02-10/paypal-revenue-will-double-by-2013-ebay-chief-executive-john-donahoe-says.html). Banks did notice this market, and joined battle (http://online.wsj.com/article/SB10001424052702304066504576343870105406768.html)
  20. 20. Special Report on Vietnam Internet Industry 2012 Ads Online Payment Social Mobiles + Network Datamining Applications6.5 China builds his own Internet Kingdom, after banning Google. Sina Weibo, the micro-blogging site reached 250 millions users in 2011, and like everyone, heading for Local E-commerce. Alibaba Group, the biggest e-commerce website’s revenue was 631 millions in Q2 2011, an increase of 81.3% percent year on year. (http://news.ichinastock.com/2011/11/alibaba-group-gains-more-revenue-than-baidu-in-q2- yahoo-report-shows/)
  21. 21. Special Report on Vietnam Internet Industry 20126.5.1 My opinion : The first important part is most Vietnam e-commerce website clones taobao or alibababa, and FPT, NCT, VNG all have plans to create sina-weibo clones in Vietnam in 2012. 7 Macro Overview 7.1 Vietnam Internet Industry is an emerging market. It grows with a high rate, both in users (from 25 millions users in 2010 to 31.3 millions users in 2011), and in revenue (from 356.89 billions in 2009 to 390.82 billions in 2010). There are hundreds active Internet companies (as far as I know) in Vietnam, covering various branches in this field, from social network, gaming, e-commerce, e-newspaper, mobile content providers, technical basement (big
  22. 22. Special Report on Vietnam Internet Industry 2012 trends) to mobile applications, online education, retailers, online soft wares, news crawling, online brand management, web designs (small trends)... Source: Ministry of Information and Communication http://mic.gov.vn/Attach%20file/sachtrang/sachtrang2011.pdf 7.2 The Internet companies in Vietnam have some common characteristics:7.2.1 Clone US websites in feature, affected by China Internet companies in trends.7.2.2 There are some big names in some branches, but no one dominates in the whole market.7.2.3 Internet employees are mainly divided into 3 generations 7X + 8X PEOPLE 8X 9X •smart, •Received good •Young, experienced, take education, talented, talented, the lead innovative, open, spiritful •old fashoned , hungry for chances •Lack of stubborn, •Lack of funds, lack of experiences, depended on network, lack of funds, and goverment directions network - (6x), 7x and early 8x: They are the 1st Internet generations in Vietnam, who were young when Internet came to this country. They set up or manage some very first internet or software outsourcing companies, or work for The Ministry of Information and Media and some state-owned media firms. This generation are smart, experienced, take lead of the market, and somehow open to people. But they still have some disadvantage: some are old-fashioned, hard to change, related or depended too much on governments... Some big names in this generation are Viet Duong Minh
  23. 23. Special Report on Vietnam Internet Industry 2012 (owner of Nextcom, former Chief editor of Dantri, tintucvietnam online and many other e- newspapers), Tan Nguyen The (VP of VC Corp), Khai Vuong Quang (VP of VNG), Long Nguyen Thanh (VP of Baomoi), Thang Vuong Vu (VP of VC Corp), Binh Nguyen Hoa (CEO of Chodientu), Diep Nguyen Hoang (CEO of Vatgia), Nam Phan Sao (Chairman of VTConline)... - 8x people: The 2nd generation. They started by working for Internet or media firms founded by people in first generations, or playing computer games. These people have many advantages than their mentors: they received good education (some studied abroad), good technical basement (ADSL internet, Laptops, smart phones..), and guided by the very-talented first generations. These people are now product managers, tech lead, or system managers.., some created their own start ups. They made a big difference to the 1st generations: creating network to other industries in Vietnam: finance, funds, securities, marketing, products... They are more open, innovative, hungry for chances, idolize Steve Jobs and Mark Zuckerberg, patient to wait for chances. But they still lack of funds, lack of network, and some lack of directions. They need more guides and experiences to be successful in this industry, as long as they commit with it. Notable names are Tai Tran (Investment Associates of FPT Capital), Dong Nguyen Xuan (Business Director of Moore Corp), Tuan Nguyen (Director of E-Commerce Department in VC Corp), Quang Nguyen Minh (former Business Director of Galaxy Telecom – founder of VDEC), Hung Nguyen Anh (Digital Evangelist of Performics)... - Late 8x and 9x people: the 3rd and latest generation. They are very young, all are around 20. They received properly education (for many Internet firms set up their own Academies in Vietnam), got used to computer very soon, surrounded by global media. They are young, talented and super super creative, but to young to do big things. They have to be trained and directed correctly, for not making mistakes while working in this field. Most of these young stars are in designing or gaming field: Kien Nguyen Trung (typography and webdesigner of Tiki.vn), Long Nguyen Hai (freelance web developer)...7.2.4 The links among Internet companies, and with other industries are very loose. IT conferences have been hold monthly by 5thDesire, Launch (HN) and Open Consultant(HCMC) since 2010, some firms set up partnership (Peacesoft and VTC, Socbay and VTC...) but just to build brandname. There are hardly somebody do networking between Internet firms and Marketing or Finance ones.7.2.5 Lacking of skillful workers The business structures have not been very clear yet. Just a few companies have stock options for key members.
  24. 24. Special Report on Vietnam Internet Industry 2012 All of companies lack of skillful workers, because the market has grown too fast, but there are not may mature and talented employees, especially product manager and business intelligence.7.2.6 Investment in the field approaches by 3 ways: Ventures capitals, private funds and investing. Three main venture capitals are IDGV, Cyber Agent and FPT Capital. Actually, IDGV has share in 90% prominent Internet firms in Vietnam. Global corporation like Mitsui, Raikuten, Ebay... did step in Vietnam by investing in local company, such as Ebay invests in Peacesoft (ebay.vn), and Paypal invests in Nganluong (technically)...7.2.7 The products and companies become more and more mature They now do not do websites for fun, or focus too much in features. They start to make their structure to be lighter, in order to move fast (VTC and Peacesoft have COO). And they focus more on backing system , like data mining, analyzing users profiles, cutting unnecessary products.. 8 How Vietnamese products satisfy the need of users? 8.1 Pressure from outsiders Vietnam Internet products are in a hard battle, fighting against foreign dominator like Facebook, Yahoo and Google. It is clear that they can not fight against them face to face, like creating a social network for everyone like Facebook, a search engine for everything like Google, or a news portal+instant messenger like Yahoo. 8.2 Therefore, they have some solution:8.2.1 Clone new and successful model: Catching the Groupon’s wave, Vietnam companies set up 97 clones, gained 673 billions VND in 2011. (http://dealcuatui.com/thong-ke-deal/). Many failed, some succeed, but this pushed thousands of Vietnamese to use online payment and know very first concept of e-commerce.8.2.2 Use the local advantages and focus on the niches: o e-commerce and online gaming are two great simples for this. VNG only localizes and modifies China online games and earns thousand billions; vatgia, chodientu, 5giay, enbac.. have millions of users. Zing.me and go.vn are on the way fighting against facebook, Zingme did surpass Facebook some times in 2009 and 2010 (http://www.zing.vn/news/cong-nghe/zing-me-vuot-mat- facebook/a65955.html). o nhaccuatui is the biggest music website, gained 10 billions from Ads in 2010 ( http://nguoinoitieng.info/index.php/news/detail/29/9557/ceo-nhaccuatui-khoi-nghiep-voi-
  25. 25. Special Report on Vietnam Internet Industry 2012 10-usd ). Tiki.vn is a book e-store, but made a revenue of 15 billions in 2011. (FPT and Tiki’s in-house data )8.2.3 Make good products: Vietnam has many skillful people working in Internet industry. Some of them did make very good products, from website graphic to business model, delivery system, customer care, sale... They all prepare to battle against foreigners. Parted from the big-4 VC Corp, VNG, VTC, FPT, you should notice Peacesoft, Vatgia, NCT, thegioididong.. 9 How sustainable is the Vietnamese market? Most big Vietnam companies have 5 years-plan, including M&A, being invested, lobbying government, and collaborate with others. These are my points of view: 9.1 VTC, FPT and VNG will raise digital sovereignty issue This will make Vietnamese think that the local firms are being treated unfairly, and they have to protect sovereignty on Internet. This alliance, with the help of medias, will raise a new anti-foreign product wave and press the government to limit foreign companies. 9.1.1 The fact is: - Google and Facebook is dominating Vietnam internet market. - Facebook is more powerful and better than any other local social network - Facebook know everything that Vietnam users do, think, play, read, make friends... on their network. - Every government want to know what its people do, and Vietnam Government has no benefit if Facebook dominates the market, cause certainly they will not share these datas. 9.1.2 Soverignty issue This issue is raised by VNG and VTC, proofed that Vietnam companies is being treated unfairly. - Google and Facebook do not have to pay tax, although they have gained much benefit from Vietnam. - Vietnam companies has to obey many rules about authorized content, sexual/political/violent issue on their websites... but Google, Facebook does not. - Google, Facebook and other global companies, if they are not limited, may kill many Vietnam companies. - National Sovereignty is being threatened, as global companies can control Vietnam people. Therefore, Vietnam companies want to - Lobby government to ban or limit Facebook. - Publish officially issues on this matter.
  26. 26. Special Report on Vietnam Internet Industry 2012 - Support Vietnam companies better in battle against Google and Facebook. Recently, Mr. Minh Le Hong, chairman/CEO of company did raise this issue on his own facebook https://www.facebook.com/notes/minh-le/cu%E1%BB%99c-chi%E1%BA%BFn-internet- v%C3%A0-%C4%91%C3%A2u-l%C3%A0-c%C6%A1-h%E1%BB%99i-cho-c%C3%A1c-doanh- nghi%E1%BB%87p-vi%E1%BB%87t/101505922539538669.2 All companies will seek for funding and collaborating in other fields. The big ones like VTC, VC Corp, VNG will make social platform for other small app developers to parasite on them. They all have plan to seek for fund from local and international investors. Some did sold their shares to US companies to make alliance: VNG and Tencent, Peacesoft and Ebay, Paypal.9.3 In long-term strategy, all big companies will create new products and new services, mostly focus in niches of the market, in order to avoid potential risks.

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