1.    Viet nam advertising market ( 5 pages)

1.1.Top category and company in advertising:

a.    Top categories:

Industry growth was mainly contributed by increased spending of top sectors consistently led by Toiletries & Beauty, Drinks and Telecom.  Almost same top listers during the period versus last year except for Building Industry being a new entrant replacing Transport/Tourism sector. 

    1H 2005  (AdEx in USD)                                                    1H 2006 (AdEx in USD)                                           

  (source by TKL advertising co.,ltd)

b.    Top Advertisers

Lever spent as much as 26.0 Million USD equivalent to 62% increase versus 1H 2005. P & G as far second with over 9.0 Mil USD adex. Vinamilk and Dutch Lady still on close fight. VNPT and Mobifone were Telecom’s most aggressive advertisers. VBL and Nokia went down to rank  8 and 10 (from rank 3 and 5), respectively.

Nutifood lost position to Abbott Laboratories (Top 11). 

            1H 2005 (AdEx in USD)                                             1H 2006 (AdEx in USD)

  (source by TKL advertising co.,ltd)

c.    Top Ten (10) Brands

VNPT as Top brand advertised last semester with total spending of almost 7.0 Million USD followed by Mobifone, Pond’s and VP Bank. Tiger Beer fell from Top 2 to Top 9 slot. Top brands are in consistency with top advertisers. S Fone landed Top 16 ranking during the semester.   

  1H 2005 AdEx  (In USD)                                                                  1H 2006 AdEx (In USD)

 (source by TKL advertising co.,ltd)

d.    Advertising Expensive by Medium

Television share consistently increasing from 65% in Year 2001 now up to 75% as more  advertisers apparently  invest on the medium at the expense of Press media. Radio’s spend almost nil. 

1.2. Market share and Viet nam market swot analysis:

a.    Market share:

Advertising has been permitted in Vietnam only since 1990, but the industry has grown by 30% per annum over the past 5 years. Industry experts estimate foreign-invested enterprises spend around $1 billion annually on advertising in Vietnam, but more than 80 per cent of this goes to the foreign-invested advertising firms.

 (source by VNAD)

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b.    Top advertising company in Viet Nam:

                                  i.    Foreign company:

(source FTA research co,ltd)

                                 ii.    Local company:

(source FTA research co,ltd)

c.    Viet Nam market Opportunities and Threats analysis:

1.3.Learning and conclusion:

                                  i.    Conclusion:

·         There are so many reasons of weakness of local advertising company. First of all is the restriction of ability and capital. Secondly, following investment of MNCs, there are often many appreciate international advertising companies which have good relationship to MNCs. Typically, there are Coke with MC Cain, Unilever with JWT, Honda with Dentsu, Heineken with Bates…

·         Except of some local companies such as Dat Viet, Goldsun, Stormeye, VMC…the rest just focus on PR, event, Outdoor advertising… Representative of many advertising companies define that after being a member of WTO, Viet Nam will faces high pressure of competitive while many foreign guys will come in to the market. Local advertising company ‘s position is lower and lower in this scenario.

·         Most of local companies is out sourcing of foreign companies.

                                 ii.    Learning:

·         A group of local advertising companies is a trend.

·         A segmentation which foreign company, never reach is small and medium companies. They are also a potential market.

·         Foreign company is power in above the line, hence it ‘s change for local companies invest and focus on below the line services.

2.    Viet Nam online advertising market:

a.    Viet nam internet advertising vs US market:

1.  
   1. Forms of online advertsing:

1.  
   1. Trend of using online advertisng

                                          i.    Ad spend budget trend:

In US, except television advertising are maintaining the budget  the rest are reduced,  Meanwhile, internet more and more interesting with marketer with higher budget.

                                         ii.    Trend of strategic or methods in using online advertising:

Marketer more and more interesting in viral market on internet via video web, social network…!

1.  
   1. Market SWOT analysis:

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):

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.


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.

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...

Now, Google continues its expansion in local market by recruiting Vietnamese Marketing manager, Vietnamese Adwords/Adsense Strategists, Product Manager 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:

Weaknesses

1. Infrastructure:

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.

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 :D

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.

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

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:

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  • 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.

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  • 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

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 :D

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.

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.

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.

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.
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.


2. Monopoly

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 Jother things can be shared about this industry.