Can Vietnamese Web 2.0 start-ups make money?

Web 2.0 start-ups are surely hot, with a slew of new-comers springing up every now and then, caravat.com, yume.vn just to name a few of the latest. But how will they go about making money? Running these stuffs is not cheap, and I think the launch event yume.vn was not cheap either, even though it was boring to me. So how would all of these emerging technologies start monetizing their products?

Online Advertising

No way. We don’t have an established online advertising industry. Most of the ads are unsophisticated and random popups [everybody hates popups btw] and banners spreading around a site. Cyvee’s been doing this but I can count only 1 or 2 particular ads being repeatedly displayed on their site. Don’t you think it’s a bit boring to see the same ads for months?

Companies are not spending big bucks on online advertising yet as they don’t “get it”. People are still sticking with the traditional advertising channels like TV commercials and printed ads.

Plus the technology that decides how ads are distributed across the web is not mature either. So far I can only see FPT working a bit as an online advertising agency but well, way behind DoubleClick and certainly no match for Google Adwords/Adsense.

Let’s see how the Google DevFest turns out and what’s the next move from Google. Are they changing the course of online advertising here? We’ll see.

Virtual stores

What if, however, Yume.vn decides to sell virtual goods to its users, just like what Vinagame and other online game operators are doing now. I mean, Yume.vn sells custom-built clothes, jewellery, accessories, etc. to the people who’re using their service. Here’s an interesting piece of writing from BusinessWeek:

As chief executive of Gaia Online, an Internet hangout for some 6 million teens, Craig Sherman should be worried about how the worsening economy could slam Web advertising. Nope, not a bit. Unlike so many Web startups that until recently saw ads as an easy ticket to riches, Gaia gets most of its more than $1 million in monthly revenues from sales—in this case, virtual items: clothes, jewelry, and other accessories to dress up one’s avatar, or online character. They run from a few pennies to $10 or so apiece. Gaia’s gross profit margins on sales of virtual goods, which are up tenfold from two years ago, top 95%. After all, they’re just endlessly reproducible bits and bytes.

[Lucrative alternatives to online advertising]

Again, you may very well argue that online payment is yet another obstacle to building such a system. But our online game distributors are doing really well. Besides getting players to perform bank transfers using their ATM cards, which by now is accessible to a lot of people, they’re issuing money cards with a fixed amount of money in it and a code that once entered, it will immediately entitle the player to the right to purchase a number of things [similar to mobile phone prepaid cards].

That will definitely work in a Vietnamese context. The key here is: look at what others are doing and adapt yourself. I think it’s a combination of the American way and the Vietnamese way :-)

Online subscription

This is old. You charge your users for the service they enjoy. But in order to do that, the service you’re providing has to be really fascinating and add substantial value to your clients. I don’t see such a qualified service present in Vietnam 2.0 yet. If there is, take a look at mobile phones. Some people are actually charging subscription fees on an SMS basis. That’s smart, very smart. Because it’s the easiest way to go about that considering the bewildering number of mobile users in Vietnam at the moment.

How about Caravat.com getting its users to pay for “exclusivity”? Hmm, it sounds like a bad idea because you pay for your being in league with other executives. But yeah, for those who are qualified enough to join the Ivy League of professionals, paying a small fee doesn’t hunt. [Wondering if this is already on their roadmap?]

The key here is: before you start to think about money, think about your service first. I don’t understand why most Vietnamese entrepreneurs get so excited about their products and I don’t get the same kind of excitement when I use them. Am I a bit out of touch? If no, why do investment funds like IDG Venture Capital and VinaCapital are having fun with these start-ups? Oh I guess it’s a probability game. One lucky shot and you’ll be rich, but like Huy Zing said, the chance is very odd. So you need to be more careful with your investment.

What do you think?

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8 Responses to Can Vietnamese Web 2.0 start-ups make money?

  1. charvey says:

    anh hung – i like your thoughtful comments about internet business in vietnam. i actually am involved in caravat. we have a clear roadmap for our business model but we’re not ready to reveal it yet. our model will create value for everyone, and we will not abuse our users with unwanted spam or advertising.

    stay tuned!

  2. AnhHung says:

    hi Chris,

    thanks for reading my little blog. i’m aware of the 3-year roadmap but just curious to find out what it is. Actually it was a 1 second thought i had when i was writing this entry. No big deal though, just a guess.

    If that’s what your team is planning to do, I’m curious to find out about what it is :-) it looks good though.

    best,

    hung

  3. Vu Nguyen says:

    I really think you hit the sweet spot on monetization. It’s difficult in Vietnam. It comes down to how long can these sites sustain themselves for the next five years. No Money No Business.

  4. Great post Anh Hung.

    In terms of sophistication of services (excluding online gaming), Vietnam is where the US/UK was in 2003-4. But the Ad market and monetisation is much further behind, perhaps similar to 2001-2.

    The guy’s making money here right now “should” be the infrastructure providers, hosting, domains. And the ‘old media’ newspapers who’s online brands are known by advertisers.

    In the last 12 years I have only seen a handful of big paid subscription websites working and surviving in the world, the biggest wsj.com. Unless you’ve got something very unique, absolutely necessary to your audience, it’s going to struggle. WSJ has trust, respect and content used by leading businessmen and traders.

    My view, keep costs low, don’t overdo the fancy parties, have cheap offices, eat ‘com binh dan’ and enjoy the work. Later the money will come and when it does, it will grow +100% year on year.

  5. Pingback: Google DevFest Vietnam 2008 - Nguyễn Đức Ban - web 2.0 - Bnok.vn

  6. Saldon says:

    @A.Hưng: Anyway, good luck to whom is trying push up the internet servicing. Hope Yume will be a big branch in social networking !!!

    @A.Vũ: How are you a.Vũ … still you usually go to drink … if we have chance, I really want to study from you more

  7. ML says:

    “My view, keep costs low, don’t overdo the fancy parties, have cheap offices, eat ‘com binh dan’ —> Try to have US$500,000 funded. Keep monthly expenses below US$20,000.
    Hopefully 2 year2 later the money will come and when it does, it will grow +100% (again hopefully) year on year.” :)

  8. AnhHung says:

    @ML wow, thanks for the great advice. Sustaining ourselves for 2 years is a good target to achieve :-)

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