Vietnam Internet Industry Special Report 2012

Special Report on Vietnam Internet Industry 2012

Special Report on
Vietnam Internet Industry 2012
Consultant/ Reporter: Duy Doan

I’ve done this at the request of Duxton Asset Management Pte Ltd. Every information in this report is
confidential, excluding my personal opinions (which were in many of my presentations), and public
data.

This report is made under a Scope of work, which was agreed by me and Duxton.

-------

2/2012


ANALYSYS THE 4 BIG
ECOSYSTEMS
1 Contents
2 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 .............................................................................................. 7
3 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 .............................................................................................................................. 10
4 Social Network ............................................................................................................................. 11
4.1 Strength and Weakness ........................................................................................................ 11

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 ................................................................................................................................ 13
5 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


GAMES

SOCIAL
NETWORK Internet EDUCATION

E-
COMMERCE

2 Games

2.1 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:

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.

2.2.1.3 Will still grow in 3-5 years later, with Vietnam’s internet.

2.2.2 Weak Points

2.2.2.1 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.

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).

- 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

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 services

3.1.5 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.

What's more, the real competitors of e-commerce is brick-and-mortar retail chains. Therefore, any
competition will only enlarge the market.

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.


4 Social Network
4.1 Strength and Weakness

4.1.1 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 Corp

4.1.2 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 behavior
4.2.1 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.

4.2.3 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 Trends
4.3.1 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.

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

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 / Weakness
5.1.1 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.

- 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.

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 documents

5.4 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.


DIGITAL LANDSCAPE
Contents

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

8.2.2 Use the local advantages and focus on the niches:.......................................................... 24
8.2.3 Make good products:...................................................................................................... 25
9 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. ......................................................... 26
10 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.


6 Global
6.1 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


6.3 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).

6.4 In my opinion, the new battlefields on Internet are
6.4.1 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)


Ads

Online
Payment Social
Mobiles
+ Network
Datamining

Applications

6.5 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/)


6.5.1 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

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

(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.

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-

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.

- 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/10150592253953866

9.2 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.

Vietnam Internet Industry Special Report 2012

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