Vietnam’s first technology unicorn VNG Corporation is betting big on Southeast Asia (SEA) as it carves out its international expansion plans for its online gaming business.
The company is also engaged in digital content, social networking and e-commerce business.
Founded in 2004 as Vinagame as an online game publisher and developer, VNG claims to have recorded a modest profit of 9 billion dong the following year.
So far, gaming contributes over 80 per cent of its revenues, according to VNG’s financial statements.
VNG’s popular games include Vo Lam Truyen Ky and Dead Target.
“Gaming is still a significant part of our business from a revenue and profitability perspective, and we continue to drive growth in this area,” Kelly Wong, vice president of operation at VNG, told DealStreetAsia.
While Thailand, Indonesia and the Philippines are on VNG’s radar for immediate expansion, the company is also betting big on Singapore and Malaysia, besides Hong Kong and Taiwan for certain genres.
VNG is already present in Thailand, it’s the first market in the region touted to exceed $1 billion in video games revenue this year, according to gaming intelligence firm Niko Partners. Currently, the company has a team of about 60 people in the country.
Apart from Southeast Asia, VNG is also taking a global view and contemplates investing in emerging markets such as Myanmar and Latin America going forward.
“We have a specific team that looks at certain types of card and board games,” Wong said.
Last December, VNG announced its plan to become a global game publisher, anticipating that its international volume will outpace its business in its home market. Bui Minh Phuong, head of game publishing at VNG, had then said that the company expects to have about 30 million users from SEA and Latin America for its new game, SNK Mobile, after three years.
VNG is currently ramping up its headcount in these countries and expanding with a localisation approach, said Wong.
Increased game localisation, regional pricing strategies and new product launches were touted to drive growth in the greater SEA region in 2020, Niko Partners had earlier stated in a report released in November 2019. Greater SEA referred to Indonesia, Malaysia, Philippines, Singapore, Thailand, Vietnam and China Taiwan.
Meanwhile, in another report, it had stated that in Vietnam, China accounted for 69 per cent of the multiplayer online genre, while homegrown companies VNG and VTC Game held about 30 per cent each in the local games market.
That report estimated that Vietnam’s 2019 PC game market revenue was $477.6 million, while the mobile game market revenue stood at $263 million.
Going forward, by 2023, PC and mobile game revenue in greater SEA is expected to exceed $8.3 billion from over $5 billion in 2019, Niko Partners had further stated.
“We can’t just sit here in Vietnam and wait until someone else decides to start bringing more games in. While it is competitive in other markets, we still have our own niches that I believe we are good at,” Wong said.
Hope for Vietnam’s second unicorn
One of the challenges for overseas Internet companies in Vietnam, which is not limited to gaming firms, is that the country’s government is required to host a local server.
Over the years, VNG has extended its business to include cloud services and data centres, having developed two data centres and in-house cloud infrastructure.
“The cloud business is a natural extension of where our other businesses are coming from,” said Wong.
While global biggies AWS, Azure and Google Cloud have already made inroads into Vietnam, VNG’s cloud unit seeks to cater to the MSME segment with customised solutions.
While other Vietnamese firms are also tapping this segment, the market remains fragmented without a clear winner.
In fact, these businesses, including VNG, have joined hands to establish the Vietnam Cloud Computing and Data Center Club, to work together in developing cloud solutions in the country.
“In the long run, we hope to make meaningful revenue from this part of the business,” Wong noted.
VNG is also known for its investment in Vietnamese e-commerce major Tiki, in which it owns over 20 per cent stake, as well as its communications platform Zalo, e-payment service ZaloPay, and media units Zing TV and Zing MP3.
The future development of Zalo, Wong said, will be to expand into business communications, to enable businesses to interact within their organisations and engage with customers.
In 2014, VNG was selected as Vietnam’s first unicorn by the World Startup Report and last March, local media had pegged its valuation at $2.2 billion, following an investment by Temasek. Other shareholders in VNG include Goldman Sachs, GIC and two British Virgin Island-domiciled investors.
Wong asserted that one or two businesses under VNG will have the potential to become the next unicorn.
“We want to make this not just a unicorn of valuation, but build on profitability and stability.”
VNG claims to have earned a combined 414 billion dong in net profit in the first three quarters of 2020, compared to 539.6 billion dong in the same period last year. 2019’s full year profit was 454.9 billion dong, 36.5 per cent increase over a year earlier.