Being inspired by a very good report on the Vietnamese macro economy by Professor David Dapice (Department of Economics, Tuffs University and Fellow at the Vietnam Program, John F. Kenedy School of Government, Harvard University) I intend to write a brief analysis of Vietnamese Online Industry myself to help readers understand the current state of Online Marketing in Vietnam.
Updated 2019: Since this post was written back in 2008, more than 11 years ago, here is an updated post on 8 key facts about Vietnam digital marketing landscape.
The followings are solely based on my observations and understanding of the local (Vietnam) market through meeting with local professionals, local agencies (both in Ha Noi and Ho Chi Minh city), some direct clients, reading online news and my personal view on the market.
I have no ambition of matching the quality of the report done by Professor David Dapice and his colleagues. In his report, Professor Dapice addressed the current state of Vietnamese macro economy by analyzing 6 different aspects:
- Education: from primary school to university
- Vietnamese Infrastructure: Electricity, transportation etc…
- Competitiveness of local corporation in International marketplace
- Finance Market and banking system
- Effectiveness of the government
- Distribution of wealth (if any)
Instead, a SWOT analysis (Strengths, Weaknesses, Opportunities and Threats) of the Online Industry in Vietnam will be presented.
Part I: Strengths
1. Vietnam Internet Stats
To start off, let me share some of the top line information about the market. According to VNNIC (Vietnam Internet Network Information Center):
- Number of Vietnam Internet Subscribers (Dec07): 5,218,987
- Internet users: 18,551,409. This is quite a big number, however, you need to understand the definition VNNIC uses to calculate internet users. Recently with the change of definition, Chinese internet users increase substantially. I am not sure about the definition that VNNIC is using unfortunately.
- Broadband subscriber: 1,294,111
- Users per capita: 22.04%
As you can see, Vietnam enjoys a big number of internet users (almost 7 times more than that of Singapore). The government aims to increase the users per capita to 25% or 35% by 2010.
One small thing I heard is that near the end of 2007, every primary school pupil and their teachers were helped to set up dedicated email addresses across all the provinces in Viet Nam. They were asked for their name, choices of email addresses, their profile etc… and then dedicated email accounts were set up.
This news was verified by a few teachers in Vietnam.
This initiative by the Ministry of Education of Viet Nam shows that the government seriously wants to bring internet to school.
2. Popular trend: Learning English
Another good thing for the local market is that learning foreign languages, especially English is becoming a popular trend. With more people know how to read/write in English, chances are they can find more interesting things on the internet (English is still the internet language outside of China).
3. Young, active internet population
Internet users in Vietnam are young and dynamic. Most of them are between 18 to 40 years old (78%) (data gather by VnExpress.net). The majority stay in Hanoi and Ho Chi Minh city.
4. Google and Yahoo start educating the market
Local search market is dominated by Google. I estimate Google has about 90% of the market share.
As far as I know, most people don’t use Yahoo portal in Vietnam at all. Vietnamese don’t search using Yahoo i guess.
A few other local search engines are:
- vinaseek.com: nearly dead now
- hoatieu.com: share the same fate as vinaseek
- baamboo.com: this site has been advertised heavily recently. People say that it’s very strong in finding mp3, blog etc..
- monava.vn: i guess they copy the results from Google. That’s all
- timnhanh.com: it looks like they want to be a second Yahoo in Vietnam. The search function is powered by Yahoo <= which i find very weird
- zing.vn: well, again they are very strong with searching for music, i think
- 7sac.com: i haven’t tried this before
- socbay.com: i haven’t tried this before
Google hired a Vietnamese man a few years back to act as an evangelist. His role is Google Country Consultant. For the past 2 years, he has been organizing seminars, preaching about different Google services (Gmail, Google Earth, Googletalk, Google Doc, Google Image, Google Group and of course Google Adwords), how good these services are to students, agencies, big clients in Vietnam etc…
As for Yahoo, they are not ideal either. Not too long ago, local partners help Yahoo to open Internet Café in Vietnam, to boost Yahoo branding efforts.
Yahoo also starts recruiting more Vietnamese professional: Vietnam Search Quality Analyst, or Client services etc…
Occasionally Yahoo sends a few analysts to Vietnam to do market research as well.
To Know More about Yahoo Sponsored Search.
5. Booming of social sites, entertainment sites:
Without going into too much detail, I want to briefly mention the booming of social networking sites, entertainment sites in Vietnam. Some of them are:
The number of users for this site is about 100,000. I am not sure about the number of active users.
This is a networking site for Vietnamese professionals. This site is gaining popularity amongst Vietnamese professionals since it’s more or less like a One man show (the only good local networking site for professional)
Recently, there is even one site allowing users to sing Karaoke online SanNhac.com
It seems that this site is getting popular because it’s quite easy to sing online, record it and then share it with your friends.
Part II: Weaknesses
The local infrastructure still has a long way to go. For example, the international bandwidth is extremely limited so Vietnamese face a very big challenge when they want to access international portals/sites.
The last time I was back in Vietnam (2 weeks ago), the internet connection was still very intermittent. It’s common that your connection is dropped or reset every 30 minutes or so (which is very irritating).
Another practical problem with intermittent internet connection occurs when you try to have a decent online conference with partners in Vietnam. Words of advice: just be patient if your Vietnamese partners are constantly dropped from the conference 😀
2. High online service fee
Another thing is that the price of doing small things like domain registration, web hosting is almost double the normal price in Singapore.
Godaddy charges you USD $10.0/year for new domain registration. However, other service providers in Vietnam charge USD $20.0 or $25.0/year. And according to the law, if you want to do business in Vietnam, either your website needs to be .vn or .com.vn or registered your domain with a local provider so it gives you limited choices.
The price of doing web design in Vietnam is increasing as well. You can get a very cheap price, however, you can’t be sure in terms of the quality.
Anyway, from my personal opinion, the cost is relatively high compared to the living cost.
3. Lack of local talent:
Actually I think this should be the most important point because the online industry is a service industry and so people, local talent should be the focal point.
However, I am aware of the fact that there are very talented Vietnamese (local or Vietnamese who are living overseas etc…). But the current infrastructure, environment is not encouraging enough to bring those overseas Vietnamese back home or to allow local talents to shine.
In general, Vietnam is suffering from the lack of local professionals and market leadership just like many of the other SEA countries. Working attitude, professionalism, global mindset of local people are something that I feel missing also.
Having said that, I must say I am very lucky to know some extremely talented Vietnamese (those are living in Vietnam now). They are as “switched on” as their counterparts overseas.
4. Embryonic E-commerce
Well, yup, you read the right word, Embryonic!
Local and International banks in Vietnam just started issuing debit card and credit card (with Visa/MasterCard logo) in 2007 I think.
There are quite a number of problems with regards to E-commerce:
- Total lack of E-commerce law or the system is not transparency enough
- For E-commerce, you need online buyers, Payment gateway and merchants:
- Online buyers: buying things online still seems to be an unfamiliar concept to local Vietnamese. Security issue is definitely something that people worry about. Besides local banks can make mistakes like inputting wrong bank balance. In some reported cases, people can withdraw money/buy online even when their account balance is 0
- Payment gateway: if I am not mistaken, there aren’t any local payment gateways yet. People either use bank transfer or PayPal.
- Online merchants: there are a very limited number of them. It seems that chodientu.vn (a place where you can buy and sell consumer electronics stuff) allows online transaction using credit card recently.
5. Tax law
This is the challenging part.
I had the opportunities to talk to local online agencies, accountants, auditors and the conclusion was that there aren’t any concrete laws with respect to online invoicing yet.
In addition, every international company, who is benefiting from Vietnam market, needs to pay tax to the government. It doesn’t matter whether you have a physical office in Vietnam or not.
If you are wondering how this particular tax applies to online business/media owners, digital agencies, you have to treat me coffee for the sharing session then 😀
6. Small market size
Total ad spend for online market is estimated at USD $5 millions for 2006. The same figure for 2007 is expected to be USD $10 millions according to Vietnamnet. This does not take into consideration the revenue earned by international portals/search engines in Viet Nam like Yahoo or Google.
The number includes revenue from most of the online marketing activities.
7. Lack of transparency in business environment
There have been a lot of talks about this topic so I won’t try to repeat what other people already know. However, I want to list it down here as one of the weaknesses of this industry in Vietnam.
This is the weakness of the whole economy and it certainly presents in this new industry as well.
8. Intellectual Rights
With the current piracy issue (even on TV), it’s hard to convince international advertisers to associate their brand with pirated content.
At the same time it’s prohibited local companies to attract foreign investment or foreign talents.
Part III. Opportunities
1. High growth rate
By talking to some of the more senior professionals in Vietnam, I guess the growth rate of the online market should be at least 100% year on year. This growth rate is expected to continue until 2010.
At the same time, the number of internet users and broadband subscribers in Vietnam will increase very fast over the next couple of years.
2. International agencies/media owners setting up offices in Vietnam
More and more companies set up shops in Vietnam, both local companies and international ones.
Besides Google and Yahoo, even Microsoft Digital Advertising Division has Country Sales Manager. He’s a tall American born Vietnamese guy with shaved head and glasses btw 😀
With the opening of more and more international creative, interactive, search marketing companies in Vietnam, local suppliers, agencies are forced to become more competitive and professional.
Ho Chi Minh city is leading in this area. People I met there are so far more professional, hard working, competitive and witty.
3. Increased levels of investment
More and more VC companies will invest in local start ups or local agencies.
I am certainly not in a position to comment on this topic. However, picking up from local news, I feel that besides IDG and Vina Capital, there is a huge amount of money lying around from local VCs, waiting to be “snatched” by local start ups.
Online industry requires very little investment comparing to manufacturing or other traditional businesses. Most of the money would be used to pay for professionals, programmers etc…
Part IV Threats
1. Sustainable economic growth?
Well this is still a very big question with the actual inflation rate was about 20% for 2007.
Again, I am not an expert in macro economics; however, I feel that Vietnamese government would need to implement very tight control over the economy if they want to sustain the current growth.
Besides, we can’t ignore the fact the living environment in Ho Chi Minh is getting worse with traffic jam everyday, everywhere and high level of air/water pollution.
This will be a very big factor when overseas Vietnamese consider going back to Vietnam.
Hint: if you want to do online marketing (excluding publishing online newspaper), you definitely need to be in Ho Chi Minh city, you can’t seem to do anything in Ha Noi.
Currently as I see it, there is no market leader for Online Industry yet. However, it would be certainly a set back for the industry if top local corporations start to monopolize the market based on their size and connection.
Also I am concern over the fact that most of the people who are the main driving force behind this industry in Vietnam are in their 20s. No doubt that some of them are very talented. However, I feel the industry still need experienced professionals, players who can assume the market leadership and help growing the baby named “Vietnam Online Industry”
Well finally, it’s not easy for me at all to write such an article. The task is a little bit bigger than my capabilities and understanding of the local market.
Hey, I have been living in Singapore for about 6 years now anyway!
So I must stress that all of the above are based on my observations and understanding only and I would certainly welcome any comments/feedbacks via replying to this post or via email.
I will revisit this topic from time to time when I have new things to share. Obviously, a lot of other things can be shared about this industry
It’s getting late so Good Bye to you all!
P.S: Due to the popularity of this topic, i followed up with an update about Vietnam Online Industry
P.S: in another unrelated topic, I recently published a book about team management on Amazon so feel free to check it out.