Online Marketing Market: Race between Domestic and Foreign Enterprises

Not very long ago, sharing on his personal page on the Zing me social network, General Director of VNG Mr Le Hong Minh expressed his concern that in 5 years time, 50-60 percent of online advertisement revenue of Vietnam, worth US$50-100 million, would go into the pockets of the two giants Google and Facebook. Hundreds of Internet providers and Vietnam’s online news websites would fight hard against each other to gain profit from only the remaining 40 percent.

 

Although Google and Facebook have a lot of advantages, Vietnamese enterprises still manage to find a way out for themselves. Maybe Mr Minh was over-concerned as at present, in terms of users, the majority of the most visited sites belong to Vietnamese enterprises, including dantri.com, vnexpress.net, zing.vn, nhaccuatui.vn. According to the survey conducted by Kantar Media on the 10 most viewed websites in Hanoi, Vietnamese websites account for nearly 90 percent, and the rest belong to Google and Youtube. In Ho Chi Minh City, although Google is the most visited website (accounting for 28 percent) and the number of people visiting Facebook accounts for 5.1 percent, most people visiting those sites are also visiting other Vietnamese sites. This is the biggest advantage for Vietnam’s online marketing service enterprises.

 

In terms of revenue, the revenue structure of the companies operating on the internet platform is divided into two areas, one from charging users and one from charging advertisers. However, internet companies in Vietnam are mostly focusing on revenue from advertising, shown by the length and frequency of ads. Therefore, websites strong in the number of users will be in the top 10 in terms of sales, and this is the second advantage of Vietnamese enterprises. According to TNS Media, vnexpress.net is currently the market leader, holding 31.1 percent of advertising revenues of the overall market in 2011. Following is the website of 24h.com.vn (accounting for 25 percent). The ad areas of these two pages always account for about 20 – 30 percent of the surface area of the page, and the place is always full and rarely sees advertising vacancies or self-service of managing unit. Weekly ad prices for these two pages is always much higher than other newspapers; many areas can reach up to VND80 million per week.

 

For advertising rates calculated per click, formerly the starting price applying to all websites is VND1,500 per click, excluding VAT. At present this price ranges from VND1,100-2,000 per click. According to marketing experts, this poses a huge impact on ad revenue of enterprises. Specifically, the rate of revenue sharing between the website owner and customer is 40 to 60, with the reduction from VND1,500 per click to VND1,100 per click, the revenue of enterprises will reduce by 26 percent.

 

If comparing a local business with a foreign counterpart, it’s obvious that Vietnamese enterprises out-number foreign enterprises in terms of service providing units, but don’t have good competitiveness in market, sales, and forms of advertising. Focusing on content to make the difference is the key in the success of VnExpress, Dan Tri, 24h and in some ways, Zing MP3. “Content is always the advantage of domestic firms, but a large and long-term problem that will not make those enterprises go big is that if based purely on the content (especially in a market that has a tradition of not paying money for content such as Vietnam) we would not step out of the 'village pond' to compete globally," said Mr Le Hong Minh, analysing on his personal page.

 

In order to survive and develop, each business must find a new more effective direction. Vnexpress.net is still appreciated but its selling banner advertising model is considered out-dated. There was a time when Vnexpress.net had so much vacant areas and this business had to accept unfriendly advertisement with content such as "Congratulations! Your IP address has been selected in your area. You have 2 minutes to receive your award. "

 

To create a jump in business, FPT Online (owning unit of Vnexpress.net) has quietly released the website www.eclick.vn and started implementing some ads on its system. The operation mechanism of eClick is similar with other ad networks in Vietnam, which is attracting publishers to participate in the system to place ads. Pricing model to advertisers, as well as income for publishers, is based on the number of clicks. Current price per click of eClick is VND1,500, a moderate price compared with Admarket, Ad360, Adnet, etc. The goal by the end of 2012 is to reach 1.25 billion page views across the system. With the existing reputation of the parent company and the large amount of page views (over one million per month), eClick is considered a formidable competitor of the remaining Adnetwork companies in Vietnam. At this time, VCCorp is holding about 30-40 percent of the overall online advertising market with more than 150 websites and core values focusing on networking advertisement. However, to catch the mobile development trend, VCCorp also promptly launched an ad network on mobile devices (i.e. Mobile Ad-network). In particular, this unit has officially joined hands with Google and become its partner from October 2012 to develop forms of advertising on search engines.

 

On the social network market, Tam Tay is also finding its way to focus on introducing the benefits of online advertising to potential customers, gradually building customer confidence. Mr Tran Thanh Son, director of Tam Tay, shared that revenue from online advertising is still very small, accounting for about 5 percent of the company's revenue. The company’s target to the end of 2013 is to make online ad revenue reach 15 percent of the company’s total revenue. Currently, Tam Tay does not advocate investment in the expansion of online advertising business due to economic difficulties of the whole economy. Zing Me social network of VNG also quickly launched the official membership program to realize its ambition of forming an advertising system driven by demographics, like Facebook.

 

Take a look at what Vietnamese enterprises are doing, we can see that although Facebook holds more than 90 percent of social network users, while Google holds 95 percent of the search market in Vietnam, the door for local business has closed. The fear of the VNG owner is somehow reasonable, but if they know how to capture opportunities, businesses will very likely come back to win over their foreign counterparts.