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Vietnam Today

Internet economy to hit $33 bn by 2025

Released at: 15:52, 26/11/2018

Internet economy to hit $33 bn by 2025

Photo: Viet Tuan

Google and Temasek release latest internet report on November 19.

by Minh Do

Vietnam’s internet economy is forecast to reach $9 billion in Gross Merchandise Value (GMV) in 2018, accounting for about 4 per cent of the GDP, according to the latest report from Google and Temasek released on November 19.

The Gross Merchandise Value (GMV) of Southeast Asia’s internet economy is estimated at $72 billion this year, an increase of 37 per cent over 2017, in the areas of online travel, e-commerce, online media, and ride hailing. The figure is forecast to exceed $240 billion by 2025. Vietnam’s internet economy is predicted to grow at a compound average growth rate (CAGR) of 25 per cent between 2015 and 2025, from $3 billion in 2015 to $9 billion in 2018 and $33 billion by 2025.

Google and Temasek’s first report on the internet was released in 2016, including ride hailing, e-commerce, online travel, and online media. Their latest report added new categories such as online food delivery and music and video on demand. Research covers Southeast Asia’s six largest economies - Indonesia, Malaysia, the Philippines, Singapore, Thailand, and Vietnam.

Vietnam has the highest ratio of GMV in GDP in Southeast Asia, at 4 per cent. The figures in the five other regional countries are 2.9 per cent, 2.7 per cent, 1.6 per cent, 3.2 per cent, and 2.7 per cent, respectively.

Since 2015, Vietnam’s e-commerce market size has grown at a CAGR of 87 per cent to $2.8 billion in 2018. By 2025, it is forecast to reach $15 billion.

Vietnam's online media market, which covers online advertising, gaming, subscription music, and video on demand, has grown from $600 million in 2015 to $2.2 billion in 2018, at a CAGR of 57 per cent. By 2025, the figure is expected to reach $6 billion.

Online travel includes online bookings and online vacations. The segment grew at a CAGR of 15 per cent, from $2.3 billion in 2015 to $3.5 billion in 2018. By 2025, the market will continue to grow at a similar pace and reach $9 billion. The ride hailing and food delivery segment has grown from $200 million in 2015 to $500 million in 2018, at a CAGR of 41 per cent. By 2025, the market is expected to grow four-fold compared to 2018, reaching $2 billion.

The report identifies six areas that were considered challenging in its report for 2017 but which have improved dramatically in 2018: funding, internet use, consumer trust, talent, logistics, and payments.

It also points out that there were 350 million internet users in the region as at June, an increase of 90 million compared to 2015. The popularity of smartphones and the development of telecommunications services has contributed to the increase.

Such growth makes Southeast Asia one of the world’s leading mobile-first regions with the world’s most-engaged internet users, with more than 90 per cent of web access being via smartphones. 4G infrastructure is also growing rapidly.

2018 is on track to become a record year in fund raising for internet companies in the region. In the first half of this year, $9.1 billion in funding was successfully raised; nearly the same figure as in 2017. Singapore and Indonesia remain the two most trusted countries for investors. However, most funds from 2015 to the first half of 2018 went to the nine largest “unicorns” in Southeast Asia: Bukalapak, GoJek, Tokopedia, and Traveloka in Indonesia, Grab in Malaysia, Razer and SEA in Singapore, VNG in Vietnam, and Lazada.

Logistics has also recorded impressive growth while online payments are booming but still marked by fragmentation. At the same time, consumer confidence in the digital economy has improved significantly, with the number of online shoppers via e-commerce growing from 50 million in 2015 to 120 million in 2018.

Areas such as ride hailing and online travel have seen rapid growth. The report points out that skilled human resources in Southeast Asia’s digital economy is around 100,000, working for tech companies, which will double by 2025.

Investments in sectors such as finance, healthcare, and education have accelerated in recent years. In particular, fintech startups in the region attracted more than $500 million in investment in the first half of 2018; double total investment in 2017. More than 300 fintech startups received investment, mainly Seed and Series A.

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