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Losing ground

Released at: 03:39, 17/06/2014

Losing ground

Telecom operators need to jump on board and come to terms with mobile messaging apps.

by Do Huong

Instead of trying to fight over-the-top (OTT) messaging application providers, MobiFone, the second-largest telecom operator in Vietnam, is launching its own OTT service with free messaging and voice on the internet while waiting for licensing approval from the Ministry of Information and Communications (MIC). Viettel, the largest mobile operator in the country, has already told local media that it intends to buy an OTT company such as Kakao Talk, the South Korean-based provider. Vinaphone, meanwhile, remains tight-lipped about its business plans. All three mobile network operators, which are seeing turnover and profit decline daily, need OTT applications soon rather than later.

The OTT messaging apps industry in Vietnam has seen rapid growth in user penetration for mobile chat apps since 2013. Instead of paying a set amount to send a text message via a mobile provider, smartphone users have turned to apps like Whatsapp, Viber, Line, Zalo and Kakao Talk, all of which boast a large customer base and offer innovative features like the ability to send pictures and videos and even make calls based on 3G connections. Last year Viettel, MobiFone and Vinaphone, which account for 90 per cent of the telecom market share, recorded monthly losses of $5 million, equal to 10 per cent of total turnover, due to the appearance of these free chat apps. MobiFone said that Viber attracted 3.5 million subscribers from the operator, with 280,000 calls and 8.7 million messages sent for free last year. Given that early 90 per cent of its total revenue comes from text messages and calls, the provider is none too happy.

Around the world telecom companies have already shaken hands with OTT messaging app providers. In late 2013 Singapore’s second-largest mobile carrier, StarHub, signed a deal with Line to offer OTT-based data plans. This followed a similar arrangement with WeChat - the second-largest active-user free chat app of the Chinese-based company Tencent. The Singaporean company also plans to launch its own OTT app for customers this year. Chinese telecom operator China Mobile predicts its revenue from text messages and calls may fall to below 50 per cent by 2018. Analysts say that telecom operators no longer dominate the telecom industry in terms of customers, partners, devices and content providers, instead occupying only a modest position in the industry and are working with relevant units to build a sustainable business model.

Simply put, local operators must adapt to the new environment or die. What they don’t seem to realise is that Zalo and Viber gets people on to 3G and this may bring in greater revenues from other online services in the future, such as virtual items, SMS banking, and e-commerce. There are two key points telecom companies are currently missing, according to Techinasia. Firstly, they remain too focused on texting and calling rather than on the growth of 3G. Secondly, they are skimming way too much off the top of SMS transactions (sometimes up to 40 per cent), stifling many potential business models. If they get more people signed up for 3G and making SMS transactions, they will significantly grow their revenue in the long term.

The OTT messaging industry is in the midst of a land grab, as Rakuten, a Japanese e-commerce giant, has bought Viber for $900 million, while Facebook spent $19 billion on gaining exclusive access to Whatsapp’s 450 million subscribers. The large personal computer-based service providers began invading the mobile-based data market after seeing the potential of free messaging apps, which secure a great deal of personal information on registered users. “This is an advantage for telecom companies that have a large number of subscribers,” said Mr Bui Quang Huy from a member unit of Viettel. “The challenge is how to monetise the amount of data, like OTT service providers are doing. Cooperation with or acquisition of OTT messaging apps is the way to continue to attract and retain subscribers.” Actually, the military telecom company has spent a lot of money and human resources on developing mobile apps over the last two years. Mr Nguyen Manh Hung, General Director of Viettel, has said many times at OTT-related conferences that the operator is willing to cooperate with OTT service providers for a win-win outcome. It’s also clear that the other two telecom giants have had the same idea as Viettel. “Telecom operators have little time to decide to penetrate the free chat apps market when demand in user communication is changing,” Mr Huy said. “Change in the ICT industry occurs every second.”

Analysts commented that the mobile chat apps production line continues unabated. Just a few months ago a Singaporean-based company, Garena, launched BeeTalk, a mobile chat app, in Thailand and Malaysia, and then headed to Vietnam. Vietnam still has space for mobile chat apps, with 2.5 million instant messages (IMs) per user per year and 44 per cent daily active users (Taiwan has 3.6 million IMs per user and 60 per cent daily active users and is considered the most saturated market for mobile IMs worldwide), according to TNS Mobile Life 2013. Vietnam falls into the category of moderate saturation and an increase is anticipated. According to market research and consulting company Spire, Vietnamese consumers have shifted to using smartphones to connect to messaging, social networks, digital entertainment and internet access. In particular, smartphone users who own an iPhone, Blackberry or Samsung can take advantage of in-phone services such as Facetime, iMessage, or Blackberry Messager.

OTT service providers haven’t neglected approaching feature phone users as the market hasn’t been fully exploited. Whatsapp, Line, Kakao Talk and Zalo are available on the Nokia Asha series. Estimates show that Asia and Africa have 580 million mobile phone users and while 70 per cent have internet-connected devices most are not smartphones. “The demand for basic-function mobile phones that access the internet is high,” said Mr Nguyen Duy Hien, CEO of GSM. “Mobile chat apps are doing well in building their user community on feature phones before feature phone users move to smartphones in the future.”


Mobile messaging apps approach users simply by allowing them use their regular phone number to register and then access their phone book to send messages. The apps provide users with the ability to share photos, videos, voice and a lot of entertainment apps. The app with the largest number of users is usually the one that advertisers and service providers seek to cooperate with.

A new chapter in the OTT story has begun, with the official participation of Viber and local telecom companies early this year. The race among OTT service providers continues to be more competitive. Last month Viber reported hitting 12 million users in Vietnam, followed by Zalo with 10 million. This is no surprise, as Viber has been spending large sums on marketing in Vietnam this year. As at November last year it had 8 million registered users in Vietnam minus any advertising. After pouring tens of millions of dollars into advertising on TV and also conducting marketing campaigns, Zalo took second place in the competition with 7 million registered users and 77 million messages sent daily.

Last year, the race among Zalo, Line and Kakao Talk came to an end after Kakao Talk withdrew from its cooperation with VTC Online. The three rivals had focused on building a mobile platform that allows the integration of value added services and social networks. Meanwhile, Viber, whose advantages lie in voice services, may be acquired by e-commerce giant Rakuten, raising questions about whether Viber’s main focus will turn to e-commerce. In Vietnam, Viber has been targeting customers who have relatives and friends overseas and wish to communicate with them regularly. Viber Out allows users to make calls to fixed subscribers at a low cost (VND400 per minute) - cheaper than Skype, which is a popular service in Vietnam. The PC version also allows free calls from computer to computer when both are installed with Viber and from computer to mobile phone. Viber is considered not only as the biggest threat to other chat apps but also to telecom operators in Vietnam.

Each app has its own strengths. Line is strong in entertainment, Kakao Talk is strong in social media, and Zalo wants to push ahead with communication platforms. All are free of charge, because “users are the most important factor in developing the app,” said Mr Vuong Quang Khai, Deputy General Director of VNG, which owns Zalo. “We focus on improving and upgrading our products to satisfy the demand of users.” When asked about monetisation, most of the apps, including Zalo, Viber and Line, declined to comment. Analysts said that to create a successful content app is difficult and monetisation is even more difficult as Vietnamese users have become accustomed to free use of internet-based services and mobile platforms. “Line and Kakao Talk earned money from purchasing stickers, games and e-commerce in Japan and South Korea but are struggling with the situation in Vietnam,” said Mr Hien from GSM.

The mobile chat app industry is expected to see no real dominant player as users have multiple apps on their mobile phones. “It’s a co-existence,” Mr Hien said. Providers, though, rely on transmission quality and so must strike agreements with telecom companies to create packages that benefit both. Viettel and Blackberry are already working together. Mr Khai from VNG confirmed the company has tried to negotiate with two of the three giant telecom operators in Vietnam but no specific cooperation has been agreed upon as yet. Local insiders said that as Vietnam has no legal framework on cooperation between telecom operators and OTT enterprises, such cooperation is limited to mere discussions for the time being.


Mr Jason Martin Lusk, Head of the Social Media Curriculum at ARTI Vietnam and former Vice President, Management Supervisor at Cramer Krasselt, spoke with VET about the development of mobile messaging apps in Vietnam for social marketing.

Q: What do you think about the potential for marketing from mobile messaging apps in Vietnam?

WhatsApp and other platforms like Viber have grown rapidly in countries like Vietnam. They have millions of users, and those users are exactly the consumers that many brands want to reach: teens and young adults in Vietnam’s fast-growing middle class. There is no doubt that mobile apps are going to be a great marketing platform in the very near future. That is why Facebook, a public company, paid $19 billion for WhatsApp. Mark Zuckerberg saw an opportunity to monetise a huge population of young consumers. You can bet that Facebook will invest a lot of money in optimising WhatsApp for advertising.

Only time will tell how marketers in Vietnam and around the world will use mobile chat apps for marketing. The big players like WeChat, WhatsApp and Viber are in user acquisition mode. They are focused on building the biggest base of users possible by providing the best user experience possible. For that reason, they’re not ready to monetise their apps as advertising platforms. Facebook followed the same strategy during its early years. We’re starting to see mobile chat apps evolve away from chat into being full service platforms for games and content discovery. That opens up opportunities for marketers, but it will take time before we have a clear picture of exactly what those opportunities are.

Marketers always go where the users are. When people read newspapers and magazines, marketers advertised there. When consumers started watching television, marketing budgets shifted to TV commercials. Facebook and pay per click advertising have been the hot investments in recent years. Now young consumers are flocking to mobile chat apps. How marketers will respond remains to be seen, but there is no doubt that they will respond. The potential opportunity is too great to ignore.

Q: Do you think mobile chat apps as a mobile platform can push the development of social media marketing in Vietnam more rapidly in the near future?

It’s going to take one or two years for marketers not just in Vietnam but also around the world to fully understand the potential of mobile chat apps as a marketing platform. British boy band One Direction’s recent campaign on the Kik chat app reminded me of some of the early social media marketing experiments on Facebook six or seven years ago. It was a good use of the app’s functionality but not especially creative or compelling. As other marketers follow the lead of these early adopters and experiment with the platform, I think you’re going to see some exciting campaigns in the near future.


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