Mr. Le Hong Minh’s prediction that the Vietnamese online industry has the potential to enjoy 20 trillion dong revenues has stirred up the discussion among somewhat weary players in the past weeks. The dominant reaction, from my observation, is disbelief in such a huge number.
This short note of mine contributes to the research side of the topic, by not directly concluding the feasibility of the prediction, but by raising awareness of the environment in which the statement was made.
The 3 elements of the prediction
Mr. Minh took the reported number of Internet users by VNNIC of 20 million as the base. Then he predicted that the number would grow by 15% per annum, which constitutes the rate.
A little calculation gives us 40 million: 20m * (1 + 15%) 5 ~ 40m
From there, he gave a rough estimation that if one person would spend VND 500,000 per year, the market would easily be 20 trillion.
From this result, I have these questions:
1. Is the base a precise estimate?
While being the officially published figure, the number twenty million is questioned by some that it might not correctly reflect the true amount.
Duplications might be counted. For example, a person goes online from his company’s workstation, then goes online on his laptop at an Internet cafe during an appointment, then goes online from his PC at home. If for some reasons the internet connection breaks down while he has important documents to send, he may go to an Internet service. At least 4 occurrences might have been recorded. The recorded number increases if he goes to multiple Internet cafes.
2. From where do we have 15% per annum?
The users that contribute to the growth can be roughly grouped into:
- Younger people growing up to be able to use the Internet
- Adults from big cities learning to use the Internet
- Users from farther provinces across Vietnam
Among these, each user from (2) has the greatest buying power compared to each user from other groups.
3. What will be the percentage of the monetizable?
To avoid complexity, we temporarily accept the 20 million figure.
Ratio of market penetration = number of monetizable users / total number of Internet users
Not all users can be monetized on. Not all new users in the following years can be monetized on.
If the total number of users can grow by 15% each year, how will the number of monetizable users grow?
The Environment
Of course, the companies operating in the industry are not separable from the environment they are in. Their possibilities of success also depend on:
The legal infrastructure
How complete will the laws for e-commerce be by 2014?
The technical infrastructure
How ready is the technical infrastructure of companies for e-commerce transactions and online games?
Internet bandwidth? Websites’ load and stress capabilities? Security?
Roles of participants
It is also important to pay attention to the role of participants in this topic.
Mr. Minh’s role is not that of an analyst, or a journalist, or a blogger. He was the Chairman of VinaGame, an entity that would benefit from any possitive information released and any buzz viralled.
Mr. Minh’s statement may have generated the following effects:
- Created a buzz in the industry at the beginning of a hard year. More than that, it was a buzz that virals.
- Motivated some of his staff, IT professionals, IT students and online enthusiasts.
Conclusion
This encapsulates some questions I raise in reaction to this prediction. I’m pretty confident I will be able to collect more data to answer some of them by near future. Meanwhile, some questions, nevertheless, needn’t answers.
How have you received this information? What role did you take?
What questions are you having? What arguments do you want to put forward?
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