A deeper look at Southeast Asia’s only two unicorns: VNG and Garena

Jump over to VentureBeat and check out their interesting report on the billion dollar startups coming out of South Korea. The obvious leaders are Naver and KakaoTalk. In Japan, there’s Line and Rakuten as the acting unicorns. In China, we don’t even have to get into it. Tencent, Baidu, Alibaba, and JD.com are obvious mammoths. But down in Southeast Asia, where markets are smaller, spending power is weaker, and development is still fresh, there are only two unicorns that lead the pack: VNG and Garena.

For such big companies, which were listed as worth a billion dollars on the World Startup Report, these two are particularly secretive.

VNG, with $100 million in revenue and 2,000 employees spread across Vietnam, is Vietnam’s behemoth. Its product spread spans from social media to entertainment to mobile games to a flagship chat app called Zalo. Zalo currently has over 15 million total downloads. But the company, despite its size, is totally focused on Vietnam. Thus, it’s an anomaly. Unlike Line and KakaoTalk, who both ventured regionally with their chat apps, VNG is so focused on the domestic market that most outside of Vietnam have no idea who or what this company is. VNG has made just a few attempts into the Asian market with a game in China and a game in Japan, but hasn’t had explosive success from there. VNG also hasn’t IPO’ed so it’s not clear what the real valuation of the company is.

(See: Le Hong Minh and his VNG Story)

Garena, by contrast, wants to be the Tencent of Southeast Asia. It’s also got a flagship chat app (wait a minute, Line, KakaoTalk, VNG, and Garena all have chat apps. Is a chat app a rite of passage for unicorns?!) called BeeTalk, which has already amassed over 10 million users regionally in four months. According to some sources, Garena’s revenue was near $200 million in 2013. And, like VNG, Garena has over 2,000 employees currently. Like VNG, it’s not clear Garena’s real market cap is since it also hasn’t IPO’ed.

They’re both in games and investing into chat apps

The interesting thing is, both of these gaming unicorns piggybacked off of licensing. VNG’s early days were launched by a game called “Vo Lam Truyen Ky”, licensed from Chinese gaming company Kingsoft. With that license, VNG went on to build a sophisticated social media platform called Zing that tied in its users and continues to benefit VNG to this day. It has allowed VNG to launch a number of its own and other licensed games. This has made VNG the dominant player in the Vietnamese gaming market, mainly on the web.

(See: In Conversation with Forrest Li, Founder of Garena)

Garena, likewise, built a platform that allows gamers to chat and play a series of games. In the very early days, Warcraft 3 DOTA was the game that launched them into early prominence. But today, it’s riding on the popularity of League of Legends. For Garena, that platform is called Garena+. Since 2009, Garena has launched over ten games on its platform.

As you’ve guessed already, Garena and VNG are both dominant on the web in their respective categories. Their problem now is tackling mobile. It’s increasingly clear that mobile is quickly eclipsing desktop in growth, total usage, and market size. And Garena and VNG are desperate to be there. Although their billion dollar cash cows are Zing and Garena+, they’re pushing hard to transition into mobile with Zalo and Beetalk. It’s a risky play but it’s likely what they believe will ensure them to be the next Line, WeChat, or KakaoTalk.

But can these Southeast Asian giants monetize where their East Asian counterparts have struggled? It’s no doubt that the East Asian chat apps have pulled in millions of dollars of revenue, but that’s largely back home in their local markets. And although they’re expanded successfully into countries like Thailand, Indonesia, and the Philippines, monetization is another issue entirely. Maybe VNG and Garena offer a Southeast Asian solution to a Southeast Asian problem.

Why only Vietnam and Singapore?