Vietnam’s chat app Zalo challenges Facebook with 30 million registered users

FPT may be Vietnam’s largest tech company with a newfangled US$3 million seed fund announced just yesterday, but VNG is considered Vietnam’s largest consumer tech company with products stretching from music downloads to news to a chat app.

Today, VNG announced that it just hit 30 million registered users worldwide on its chat app Zalo. Zalo now sees 400 million messages per day. That’s up 10 million more users from November last year and nearly 20 million up from this month last year.

Indeed, these numbers are mind-boggling for Vietnam. Especially, if from a regional perspective, most folks only talk about WeChat, Line, KakaoTalk, and the global players like Whatsapp and Viber. Consider that Zalo is the only Southeast Asian-founded chat app that has conquered its home market to this extent. Vietnam’s smartphone userbase is nearing 40 million and will likely hit 50 million by the end of next year. Thus, smartphones currently account for roughly 50 percent of Vietnam’s population. And Zalo has 75 percent of the installs on top of that smartphone userbase. At a 50 million smartphone population, it’s likely Zalo will approach 40 million users by the end of 2016.

Granted, this is a total registered users number and not an active user number, which VNG did not share. Anonymous sources tell Tech In Asia that an approximate monthly active user number for Zalo is 60 percent. That puts MAUs at nearly 18 million. That number is unconfirmed though. Note that even if the monthly active count was 10 million it’s still a lot. And for comparison, Facebook has confirmed with Tech In Asia that it’s monthly active user count in Vietnam is at 30 million already, making Zalo’s 18 million sound quite reasonable.

With Vietnam only at 50 percent smartphone penetration, there’s still a large upside. Consider for comparison that China’s smartphone growth has finally slowed after six years of explosive growth and reaching over 90 percent penetration. For folks on the forefront of mobile, like Tencent’s WeChat, they’ve been able to grow along with that curve. Zalo has several years before it reaches such a threshold, and therefore years of growth.

But the question on everyone’s mind in Vietnam about Zalo is how will it monetize. For giants like Line, WeChat, and KakaoTalk, they’ve been able to make some of their money off stickers (Zalo offers stickers for free) but had a considerable revenue base in games.

Tencent made a recent shift from mobile and game revenue to advertising. It is likely that Zalo will leapfrog straight to this. In talking with Vuong Quang Khai, executive vice president at VNG, Tech In Asia found that VNG was looking more and more closely at Vietnam’s growing SME market, where much of the market has gone underserved but is rapidly entering the mobile market.

But this also means that Zalo is clashing directly with Facebook. In the chart below, you’ll see Vietnam’s advertising revenue market and how it’s faring in the face of Facebook and Google. The trend is clear, Facebook and Google capture a considerable portion of the ad market while Vietnam’s local content players are struggling to keep up while the advertising pot grows bigger.

Facebook is doing especially well given that its ads perform strongly on mobile. It’s going to be a heated battle but this is where Zalo may be able to leverage its own local advantage, massive userbase, and mobile option.