Back in February last year, Vietnam’s biggest consumer tech company VNG made a consumer push for its new chat app Zalo. From then until now, Zalo grew at a breakneck pace and was on track to become Vietnam’s top chat app. At the time, it was arguably behind international competitors like Viber, Line, KakaoTalk, and others.
But Zalo has emerged as a serious market leader in a year. Last time we checked, Viber was leading with 12 million total registered users and Zalo claimed to have 10 million monthly active users. But it’s possible Viber is falling behind, since VNG stated it hit the 12 million registered mark. In other words, it’s possible that Zalo is now the leading chat app on the market. For VNG however, Zalo’s success is make or break. VNG must secure the mobile market in order to remain relevant in the next decade of Vietnam’s consumer tech development.
Back in February, Zalo was on par with its foreign competitors in terms of technology. In fact, it offered some features that no other foreign competitors had, like sending doodles, word guessing games, and animated emoticons. But Zalo was a bit behind design-wise. The iPhone icon wasn’t Retina yet and aesthetically it did not match up to apps like Line and Whatsapp, which look very sleek. But that didn’t matter to Vietnamese users. In many ways the Korean and Japanese (KakaoTalk and Line) counterparts didn’t understand Vietnam’s local market enough to compete significantly with VNG, nor were they willing to spend as much on marketing.
2013 saw one of the most ferocious battles for mobile users that Vietnam has ever seen. From TV commercials to elevator videos to online mobile ads, every Vietnamese consumer was inundated with ads from Zalo, KakaoTalk, and Line. When the dust settled at the beginning of this year, KakaoTalk had removed its Vietnam team and Line had completely stopped its marketing while Zalo ads continue to run today in Vietnam’s movie theaters, taxis, and elevators. Viber and Zalo were the only survivors. But Viber hadn’t spent one cent on marketing, whereas Zalo according to our sources in digital advertising companies, was consistently outspending its competitors. In fact, Zalo wasn’t just outspending its competitors, but also doing it better. Le Hong Minh, CEO of VNG, told Tech In Asia that they had learned over the years doing marketing in Vietnam that when you sample a new product with a celebrity, you have to make sure the celebrity is using it visibly in the ads. This will make users want to use it too.
In December 2013, Viber, just months away from closing a $900 million acquisition by Rakuten, was starting to spend money on advertising in Vietnam, clearly afraid that Zalo would overtake it. Now, four months later, although the battle rages on, it’s foreseeable that Zalo will finally overtake Viber and become the dominant chat app in Vietnam.
VNG’s key advantages
Viber’s focus isn’t on Vietnam; it is just one of many markets that its 100 million monthly active users are operating in, and although this number is the envy of many startups, it’s also a weakness up against VNG. Despite getting up to US$100 million in revenue and valued by the World Startup Report at US$1 billion, VNG is totally focused on Vietnam. With the rare exception of a few games like Sky Garden, which shipped in China, or its social games that shipped to Japan, VNG has secured the majority of its revenue and users in Vietnam. Even with Zalo racking in millions of users, the Zalo team still has no interest in expanding beyond Vietnamese borders with any marketing or translation. There is no English version of Zalo.
On top of this, VNG also has a significant advantage from its early days building up Zing Me, a social media site originally titled YoBanBe, that it funded and then acquired. VNG subsequently grew this social media platform to multiple millions of users and tied this into its entire ecosystem of games, music sites, and more. Essentially, a Zing Me account was merely a passageway into VNG’s many other web offerings. This is exactly what it wants to do next in mobile.
Zalo is the Zing Me for mobile
Essentially, the battle for Vietnam’s mobile users is a battle for Vietnamese users’ time and money. The chat app is one of the primary reasons that people open up their phones multiple times throughout the day to connect with their friends. No doubt, VNG sees this as an opportunity to expand its empire into the lives of Vietnamese citizens, away from the desktop. VNG is essentially a platform company, and Zalo is its trojan horse to ship more services to users. The question now is, what services will it serve via Zalo? What services do Vietnamese people need throughout the day on their mobiles? We can look to the rest of Asia for inspiration.
Today, Zalo only has two games that are connected to it. KakaoTalk has more than 426 games on its platform. But KakaoTalk and Line both make most of their revenues from their home countries. South Korea and Japan are both highly developed in terms of payment and mobile usage. What VNG is trying to do with Zalo presents much more barriers to making money, which is why the next potential revenue source seems even more difficult.
On top of this, what kind of information, products, and services does the average Vietnamese mobile user need? There are still many areas that are untouched. Areas like content, location, and the cloud contain great potential for VNG. In fact, at Tech In Asia, we wouldn’t be surprised if VNG acquired some mobile startups along the way (or poached top people from existing ones).
Of course, this is all just speculation based on the fact that Vietnam’s biggest tech company just released a gaming app called Rocket Dog tied directly to its 10 million-strong chat platform. But with a company intent on “embracing challenges”, as its motto says, it’s possible that VNG has even more planned for Zalo.