Vietnam Online Advertising Industry: A quick overview

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Slide 1: Vietnam Online  Adver/sing Industry:  A Quick Overview  26‐Nov 2008  Bryan Pelz  Slide 2: Vietnam Online  Troubled mes  Slide 3: Vietnam: Basic Stats   Annual data     Population (m)     GDP (US$ bn; market exchange rate)     GDP (US$ bn; purchasing power parity)     GDP per head (US$; market exchange rate)     GDP per head (US$; purchasing power parity)     Exchange rate (av) D:US$     2007(a)    85.9   70.7    221.6  823  2,579   16,179     Historical averages (%)     Population growth     Real GDP growth     Real domestic demand growth     Inﬂation     Current‐account balance (% of GDP)     FDI inﬂows (% of GDP)    2006  8.2  17  3.4  7.4  6.6  11.2  2007  8.5  17.3  3.4  8.3  12.6  11.4  2008c  6.9  15.9  3.5  23.3  21.9  20.8   2003‐07   1.3  8.1  8.4  7.1  ‐3.6  4.9  2009c  7.7  16.5  3  12  8.9  17.3  Real GDP growth  Industrial production growth  Gross agricultural production growth  Consumer price inﬂation (av)  Consumer price inﬂation (year‐end)  Lending rate  Source: Economist Country Briefing Jun-2008 Slide 4: Recent news  •  AC Nielsen: Consumer conﬁdence  down in Vietnam  HANOI, Nov. 10 — An AC Nielsen  survey has shown that Vietnamese  consumer conﬁdence con/nued to  drop in the second half of this year  due to high inﬂa/on and slower  economic growth, Vietnam  Investment Review reported on  Monday. In the ﬁrst 10 months this  year, Vietnam's inﬂa/on rose 23.15  percent over the same period last  year. The economy rose by 6.52  percent in the ﬁrst nine months year‐ on‐year, lower than the 7.4 percent  growth for the ﬁrst quarter, oﬃcial  sta/s/cs showed.   Source: AC Nielsen, VietnamNet •  Vietnam Net: October 2008 vs  October 2007 Consumer Price  Index  Slide 5: Tech company layoﬀs announced in the last 5 weeks  Company    Sun Microsystems   Applied Materials   Wired.com   Six Apart   Tucows   Circuit City   BitTorrent   Insight   Honeywell   Zappos   LinkedIn   AMD   Nokia   THQ   Motorola   Electronic Arts   Xerox   Date    11/14/08  11/12/08  11/11/08  11/11/08  11/11/08  11/10/08  11/10/08  11/10/08  11/7/08  11/6/08  11/5/08  11/5/08  11/4/08  11/3/08  10/30/08  10/30/08  10/23/08  How many    6,000/15‐18%   1,800/12%   3 of 28   8%  15%  20%  50%  240, 4%   700  8%  36, 10%   500, 3%   600  4‐5 studios   3,000  600  3,000  Company    Xerox   Avid Technology   Nokia   Tektronix   Spot Runner   Circuit City   THQ   Break.com   Eons   Dell   SanDisk   ManiaTV   iMeem   HP   Yahoo   Sony Ericsson   eBay   Date    10/23/08  10/23/08  11/4/08  11/3/08  11/3/08  11/3/08  11/3/08  10/23/08  10/23/08  10/22/08  10/22/08  10/22/08  10/22/08  10/22/08  10/21/08  10/17/08  10/6/08  How many    3,000  500  600  150  115, < 30%   17%  4‐5 studios   11 of 80   8 of about 33   8,900  TBA   20 of 70   25% of 80   24,600 over three years   10% of ~14,300   2,000 globally   1,000  Source: CNet Slide 6: More recent doom & gloom  •  VinaSME Urges a Rescue of SMEs  Vietnam Net – Nov 14, 2008  VinaSME has released the report that said 20% of SMEs are currently on the verge  of bankruptcy. These enterprises have narrowed or stopped produc/on, while the  business of some enterprises has come to a stands/ll. Vinasme’s sta/s/cs showed  that 95% of 200,000 businesses that pay taxes to the state are SMEs. The SMEs  make up 40% of GDP and put out 30‐40% of export and consumer products for the  country. Moreover, SMEs use up to 50% of the total laborers used by enterprises  throughout the country. SMEs contribute 17.6% to the state budget.  Source: Vietnam Net Slide 7: 2009: What we might see  •  •  •  •  •  •  As global situa/on worsens, local economy will face more challenges  Inﬂa/on will subside  Housing prices will con/nue decline; construc/on will stall  Foreign investment will contract  Exports will slow  Businesses and consumers will become more conserva/ve  Bryan’s guesses. Your results may vary. Slide 8: Time to get innova/ve  Source: VN Express Slide 9: Vietnam Online  Huge potenal,  despite the environment  Slide 10: South  East   Asia  Slide 11: Vietnam Internet Growth  100%  90%  80%  70%  60%  50%  40%  30%  20%  10%  0%  Broadband  Online Games  >Web Content  >Mobile  Internet  100,000,000  90,000,000  80,000,000  70,000,000  60,000,000  50,000,000  40,000,000  30,000,000  20,000,000  10,000,000  ‐  VinaGame projections Population  Internet Users  Growth  Slide 12: Top 20 Internet Countries 2007  Japan  Korea  USA  Internet Penetra/on  Vietnam  China  India  50M GDP / Capita  Slide 13: Vietnam & developing countries  Vietnam 2009?  Internet Penetra/on  Vietnam 2007  Vietnam 2005  China 2007  India 2007  50M GDP / Capita  Slide 14: Vietnam: Home Internet access is growing  Urban Home Internet  Penetration (%)  40  35  30  25  20  15  10  5  0  1999  2001  2004  2006  2008  3  8  9  21  34  Urban v Rural – 2008 (%)  Surfed Internet in  Past Wk  Mobile Phone  Penetration  Home Internet  Penetration  Home PC  Penetration  1  37  9  51  0  20  40  60  80 100  33  84  Rural  Urban  54  Source: TNS Consumer Trends 2008 Slide 15: Vietnam Internet Users – by Age  2006   16  14  12  10  8  6  4  2  0  0‐4  5‐9  10‐14  15‐17  18‐19  20‐24  25‐29  30‐34  35‐39  40‐44  45‐49  50‐54  55‐59  2014   16m  16  14  12  10  8  6  4  2  0  47m  Internet Users  VinaGame projections Popula/on  0‐4  5‐9  10‐14  15‐17  18‐19  20‐24  25‐29  30‐34  35‐39  40‐44  45‐49  50‐54  55‐59  Internet Users  Popula/on  Slide 16: Vietnam Online  The good, the bad, and the ugly  Slide 17: Online ad growth in US grinding to a halt (US$M)  $9,000  $8,000  $7,000  10.0%  $6,000  $5,000  $4,000  $3,000  4.0%  $2,000  $1,000  $0  Q3‐2007  Source: TechCrunch 14.0%  12.0%  8.0%  AOL  Microsoft  Yahoo  Google  Growth (%)  6.0%  2.0%  1%  Q4‐2007  Q1‐2008  Q2‐2008  Q3‐2008  0.0%  Slide 18: Vietnam Online Adver/sing Market ($M)  10%  9%  8%  7%  6%  5%  4%  3%  2%  1%  0%  2012E  2007E  2008E  2009E  2010E  2014E  2011E  2013E  80  70  60  50  40  30  20  10  0  •  We had expect the online  ad market to reach $75m by  2014  •  We had expected online  would exceed 9% of total  ATL adver/sing (on+oﬀ)  •  PROBLEM: adver/sing will  ramp at a slower rate due to  troubled economy  Online Advertising  Internet Users  % of ATL Advertising  VinaGame projections Slide 19: Evolu/on of VN Ad Market: 2009 vs 2014  80  70  60  50  40  30  20  10  0  2009E  Display  VinaGame projections •  We had expected increase  in paid search  –  Paid search would reach > $35m  –  Paid search would reach  0.036% of GDP in 2014,  eventually exceeding 0.10% in  long‐term  •  PROBLEM: adver/sing will  ramp at a slower rate than  an/cipated  2014E  Paid Search  Slide 20: Some bright news from China  •  CCTV prime /me auc/on  –  strong ad spending by domes/c Chinese ﬁrms, up 15% YoY  •  Online ad spending may s/ll grow, es/mates are ~20%  –  Online media demographics are complementary to TV’s, as most youth  spend more /me on online media than TV  –  Online media rate card will be raised auer the raising of CCTVs rate  cards  –  Due to economic slowdown, people will spend more /me at home  and, thus, both Internet and TV will beneﬁt.  •  THE PROBLEM IS: China is a more mature market than VN  –  Twice the GDP/Capita  –  Large base of SMEs adver/sing already  Slide 21: Vietnam Online  It’s up to us to make a diﬀerence  Slide 22: The market situa/on here  •  More people spend me online in a troubled  economy  –  Cost‐eﬀec/ve form of diversion  •  Online becomes more important to young  people  –  This country is full of early adopters  –  Using the Internet in increasingly diverse ways  Slide 23: Business environment  •  In hard mes, spending should shiH from  retro media to online ;‐)  –  The ROI for online is quan/ﬁable  –  Retro media is only indirectly quan/ﬁable  •  No shiH in VN (yet). Why?  –  Companies don’t pay enough aven/on to the  numbers  –  Our ecosystem is incomplete (does anyone verify  our numbers?)  –  No serious eﬀort to evangelize SMEs  Slide 24: What we should do  •  Shiu spending to online  •  Educate the market  •  Cooperate to develop the ecosystem  •  Invest in evangelizing SMEs  Slide 25: Q&A  Contact info: email: bryan@vinagame.com.vn skype/twitter/yahoo/gtalk/yahoo/tumblr: bryanpelz