Observers of Southeast Asia’s tech scene tend to focus on Indonesia. It’s obviously the largest market in the region. But it’s Vietnam where there’s more buzz in the air these days.
The country’s tech firms are attracting more venture capital than ever, but the same is true for Indonesia, too. What sets Vietnam apart are some unique factors that have the potential to bring about rapid digital transformation.
VNG, Southeast Asia’s silent unicorn
The Southeast Asian tech unicorns that generate the most headlines are the regionally operating ones like Lazada, Grab, Go-Jek, and the recently listed Sea.
Vietnam has a unicorn too. That’s VNG, a tech firm that started out as a gaming company and now has interests in social networking, e-commerce, and payments. It’s backed by Tencent (with which it shares its gaming DNA) and also JD. Apparently, it’s profitable. It reached the magic US$ 1 billion valuation long before Go-Jek or Grab.
VNG owns a 38% stake in Tiki, the local Vietnamese e-commerce platform that’s putting up a good fight against Alibaba’s Lazada and Shopee, both of which operate regionally. JD also threw its weight behind Tiki to fuel this competition.
With a homegrown tech firm that operates across many verticals and reports profits, Vietnam has something its Southeast Asian peers are still working on. VNG might beat other unicorns of the region to be the next one to IPO.
The firm hasn’t received that much attention from the press – possibly intentional. VNG didn’t respond to multiple requests for comment on this story.
VNG has another ace up its sleeve – Zalo, a messenger app.
Unlike in other Southeast Asian markets where local solutions have had a hard time to win a wide customer base, Zalo is super popular. In Vietnam’s Google Play store, Facebook’s messenger still ranks higher, but not by much. WhatsApp doesn’t come up in the top ranks at all. It’s roughly the same for Apple’s app store rankings.
Zalo is a versatile messenger. Most users KrASIA talked to praise it for its video call feature, but it also includes text messaging and shopping channels. Zalo may be the only Southeast Asian “super app” that can truly be compared to WeChat right now – because it has a strong social component, which Grab and Go-Jek lack. In Indonesia, a local media company took over the development of Blackberry Messenger, with a similar super app ambition. But it’s currently losing out to international apps WhatsApp, Facebook Messenger, and Line.
There’s still a way to go until Zalo fulfills the same indispensable role in Vietnam as WeChat does in China, but because it’s already well accepted among Vietnamese, it can build on these network effects.
There’s also Zalopay, Zalo’s mobile wallet, which can be the glue that links Tiki s shopping and Zalo messenger experience together seamlessly, and potentially, be the standard method of payment for other services to be integrated into Zalo.
But Zalopay isn’t the only mobile wallet in the country, there’s also Ngan Luong, affiliated with MOL and Razer. All have roots in the gaming ecosystem. Ngan Luong just rolled out a QR code payment method in collaboration with 15 banks in Vietnam, which can make mobile payments in brick-at-mortar scenarios so much easier.
Grab, the ride-hailing and on-demand services company that took over Uber in the region, also just announced plans to work with a local payments service provider, Moca, to bring more cashless payment options to Vietnam.
Grab and Go-Viet face off in a ride-hailing friendly country
Outside of Indonesia, Vietnam is now also the only other Southeast Asian country where the battle between ride-hailing and on-demand services companies Grab and Go-Jek is already starting to play out.
The intense rivalry among the two firms, who will use steep discounts to lure customers into the conveniences of booking rides, ordering food, and sending around parcels, will spur behavior change and bring people to rely more and more on apps to organize their daily routines.
Vietnamese appear to have taken to app-based transportation solutions even more strongly than their peers in Thailand and Indonesia. A survey done by a Vietnamese marketing firm with 3,200 respondents concluded that Vietnamese people use ride-hailing services more frequently than their neighbors. (The survey was done before Go-Viet’s launch.)
Navigating two operating systems
Here’s another quirky fact about Vietnam. Most of Southeast Asia is dominated by Android users, to the point where we tend to just disregard iOS app usage stats.
In Vietnam, the market share difference is less pronounced. The country has a relatively high percentage of iOS users, currently above 35% according to Statcounter.
Even in affluent Singapore, the share of iPhone owners is currently lower, although there was high fluctuation over the years. Statcounter approximates this data from browsing history, so there’s a margin of error.
But looking at actual smartphone sales points in the same direction. Vietnam was Apple’s fastest growing market in the world in 2014, so the relatively strong presence of iOS could be a result of this boom. The fact that Foxconn, one of the manufacturers Apple works with, has factories in Vietnam might be another contributing factor.
iOS relatively strong presence in Vietnam could have an important effect on Vietnam’s tech scene.
Its developers are already known to be highly skilled, an effect of a good education system.
If local app developers must consider both operating systems and navigate between them, this would make Vietnamese developers more inclined to keep up with both Western app trends and those from markets like China, which can be an advantage. It’s very possible that apps like the famous Flappy Bird, developed in Vietnam, became such a massive global hit because it was originally developed for iOS.
Chinese manufacturing shifts to Vietnam
Lastly, Vietnam is becoming an important partner for a China, who is coping with the US-China trade war and rising wages.
Some manufacturing is already shifting from China to Vietnam. An increased influx of Chinese capital and human resources can lead to tensions. Vietnam has seen anti-Chinese protests in the past. But the long-term outcome of China shifting manufacturing bases to Vietnam is an interesting one to watch and might accelerate Vietnam’s economic development and that of its tech scene.