Fifteen years ago, the internet was not popular in Vietnam. So was online games. Most youngsters played Snake game in their (parents’) Nokia phone and competed with each other by bragging about who had the highest score. Even most local gaming cafes did not have access to the internet: they installed video games like Counter-strike and Age of Empire into computers and let players compete with each other via LAN.
Five years later when the internet became popular, online video games gained traction: more and more people started playing titles such as Audition, Legend of Swordsman, and MU. Players were really engaged in the games: they talked about strategies, the ventures they took, the rare items they had collected along the way, and how much they had paid to own some fancy weapons and accessories. Actually, there was also a group of gamers who found a way to earn some money by playing game; they played long hours to unlock or achieve rare items then sold them to other players, or even sold their entire account.
Fast forward to now, youngsters still love games, and smartphone has massively increased the revenue pie of the whole gaming market. Smartphone penetration rate in Vietnam is really high; in fact, currently, more than 80% of the population, around 75 million people, uses smartphones. High-speed internet coverage and 4G allow them to play games whenever convenient. These elements explain why Vietnam gaming industry is still among the fastest growing markets in the world. According to Statista, revenue in video games is expected to show an annual growth rate of 11.6% from 2019 to 2023, resulting in a market volume of US$147m by 2023. Interestingly for mobile game segment, according to the reports by Google and Temasek, Vietnamese mobile game market has increased by more that 50% in 2018. Until 2025, the forecast Internet economy in Vietnam will reach growth of US$33 billion, 11 times as large as the one in 2015 and becoming the third in the whole South-east Asian region.
As we have seen, the market is big and fast growing. Gamers are sticky. Publishers target this region. Hence, what’s more interesting about this market? And are Vietnamese game developing studios worth investing in? We delved deeper and here’s what we uncovered:
1. Gamers’ preference
Chinese stories, the Middle Ages, Manga, and football are among the most favorite themes among Vietnamese gamers. They like these themes partly because of television influence. From long ago, Vietnamese television programs were filled with historical Chinese action movies, animated movies for kids from Japan, and Medieval ages movies from U.S. and U.K. Gamers have already been familiar with the stories and themes of such games before playing them.
As football is the most popular sport in Vietnam, football games are extremely popular in the country. As a result, football esport is the second most popular esport game in Vietnam after Age of Empires by Microsoft Studios. Two of the most popular football esport games are FIFA Online and Pro Evolution Soccer (PES). PES Vietnam team is among the best teams in Southeast Asia; in recent years they have always placed first or second in the Southeast Asian Championships. This is the result of millions of PES gamers across the country and many local PES-focused gaming cafes to serve them.
Previous research shows that when it comes to payment methods, 85% of paying gamers paid via prepaid phone card, 10% of them paid via domestic bank cards, and 5% of them paid via Visa/ master cards. The research uncovered two interesting facts about the monetization factor in Vietnam market. First, besides a small group of hardcore gamers who make upfront payments to buy games or make an in-app purchase, many game players stick with casual games or games that do not encourage (high) spending. Even paying to remove ads on the games is not a good enough reason for making a purchase. That explains why the average revenue per user (ARPU) in Vietnam gaming market is quite low, just around US$12. Second, many game players are young; and bank cards are not something really popular across this segment of population, and cash is still the most popular payment method in Vietnam. According to the World Bank, 90 percent of everyday transactions are paid via cash.
In April 2018 the Government just banned payments via phone card due to an online gambling scandal involving three biggest telecom companies in Vietnam and Rikvip/Tip.Club who took advantage of scratch card as means of payment. So for any publisher who is interested in monetizing gamers, partnering with major publishers for, or having game card distribution channels is quite essential. Luckily for game developers on the Android Platform and unfortunately for those on IOS as Google has taken care of offering an alternative payment method by adding a feature that allows users to pay via telecom billing whereas in App Store users still need to use credit card.
2. Competitive landscape & the Sources of Competitive Advantage
Competition in Vietnam gaming industry has always been fierce; the market is swamped with a bunch of local and foreign players. Here we delve deeper to see how player set out their strategy to mitigate the pressure of competition to survive and achieve superior profitability.
Where the local knowledge helps
The market for complex hardcore games (battle royale, sports, real-time strategy) is dominated by overseas developers from U.S, China, Korea, and Singapore. They do produce high-quality games that attract millions of players across the countries, and some of their games have become popular eSport which in turn attract millions of viewers and fans. But in order for these games to succeed and to be popular, overseas developers tend to partner with Vietnamese publishing firms to leverage their knowledge for localization and market navigation such as establishing platform, building and managing a community, marketing games, and conforming to regulations. For example, Audition game which is developed by T3 Entertainment from South Korea is published by VTC game. Game MU developed by Webzen from Korea was imported and published by FPT Online. Swordsman Online developed by Kingsoft from China is published by VNG; in fact, it used to be the goose that laid golden eggs for VNG. Continuing to its success, in October 2016 VNG published the mobile version which attracts three million players in just six months. Another major publisher is Garena (Vietnam Esports). It is really famous for its publishing games such as League of Legends, Arena of Valor, Fifa Online 3, Blade and Soul, and its live broadcasting platform and Garena platform.
According to Newzoo, Vietnam ranked 26 in top 100 markets and ranked 4 in Southeast Asia by game revenues with US$472M; however, most of the revenues went straight to oversea developers in terms of royalties and payments for exclusive distribution in Vietnam. Vietnamese studios do develop and publish their own games, but the top firms are usually the ones that import and localize foreign games.
Where Vietnamese engineers are the source of competitive advantage
Besides importing and marketing games, Vietnamese engineers are really good at developing casual mobile games. On the other side, besides battle, sports and the like genres, the demand for casual game is huge. This is also the kind of market where pure Vietnamese studios can pull out their strength to compete directly with foreign games and enter international markets.
In terms of cost, Vietnamese engineers and developers cost less than those in other markets, especially when compared to U.S, South Korean, and Singapore. Furthermore, developing casual game does not require much capital outlay; a team of three or four developers can start working on the game and market it. A case in point is Flappy Bird, Nguyen Ha Dong developed the game by himself. After six months of lying around, Flappy Bird started becoming a real international hit with 50 million downloads in App Store and Google Play.
In terms of quality, graphics, and user interface, casual games by Vietnam studios might be as good as those developed in the U.S and South Korea. Here and there, we always see some local games famous in overseas markets. Caravan War developed by Hiker Games was among the top games in Korean Google Play and Chinese Apple Store in August 2018. Tiles Hop: EDM Rush! developed by Amanotes is currently ranked 8 among top 10 free game in Google Play in the United States.
With quality engineers and cost advantage in hand, many local studios target both local and international markets. In doing so, they bypass existing problems like low-spending habits of regional players, start gaining some market share in each and every market, and take advantage of the value of foreign currency such as revenues are in U.S. dollar or Euro, but developing costs are in Vietnamese currency. Although casual game is a lucrative business segment for Vietnamese developers to target, it has its own disadvantages. Casual game is easy to learn and good for spontaneous play but, unlike complex games, casual games cannot encourage high spending, and tend to be short-lived. While the life cycle of a complex game can span for years, even decades, a famous casual game can die within months. Thus, for casual game studios, sustaining growth is really hard. And, the only way to achieve consistently high growth is to consistently develop new games and market them successfully in time. So, the sustainability of a studio lies in its ability to do so.
3. The next big Vietnamese studio?
After going through a list of more than one hundred studios, we pick five young interesting startups to present. We believe these five companies have the quality needed to rise in the near future.
Started by several engineers in 2014 in Ho Chi Minh City, Amanotes focuses on casual music games and makes its mission to mainly target U.S and Europe markets. It possesses a portfolio of more than 20 music games and mobile applications with 170 million users worldwide and around 3.2 million daily active users. In 2017, it was ranked in a list of top 20 publishers in the U.S. and top 5 publishers in ASEAN, even above Grab. Interestingly, In September 2017, it beat Pokemon Go, Candy Crush, Angry Bird to become the top 1 of all games in U.S Google Play. Amanotes has a track record of developing beautiful games accompanied with funky, catchy, top hit music, so its ability to continue growing globally is quite solid.
Starting off as a casual game developer in 2014 by a team of four engineers, Wolffun now focuses on online player-vs-player games for mobile platforms. In 2017 it achieved massive success with its first action genre, Tank Raid Online which attracted more than 6 million players worldwide, and was nominated as Google Editors’ Choice. Success with Tank Raid has given Wolffun a ticket to the Korea’s largest game convention G-Star 2018. This was also the first time a pure Vietnamese independent developer had been honored by Google among its counterparts from other countries like Japan, South Korea, Taiwan, Hongkong, and the Philippines. Continue with this success, Wolffun just released a beta version of Heroes’ Strike, a MOBA genre game with three players vs. other three players. It has achieved early success as top 20 Google launcher. What interests us most is Wolffun’s ability to move up the value chain to develop more complex games. Starting from developing simple casual games, now it is building a track record of developing complex hardcore-oriented genres.
Founded in April 2017, Gemmob is an indie game developer that focuses on the global market. Currently, it has a portfolio of five games with three high-quality RPG games.
Founded in 2009 in Hanoi when Vietnam market was dominated by imported complex games, Hikers Game has experienced many ups and downs. Now it has a portfolio of around ten games. Some of their games are 3D games and has been published in Singapore, Taiwan, Hongkong, Macau, Thailand, Indonesia, and North America. Titles that have put Hiker Games on the global map are Toy Odyssey, and currently Caravan War. Recently it just released a beta version of Arena of Survivors, a title of shooting genre, which might be an international hit considering its recent record.
Founded in 2012 in Ho Chi Minh City by a team of five developers, now Divmob has forty members and more than ten games with well over forty million downloads. It has achieved massive success regionally and globally. Some of its awards are Google Editor’s’ Choice Zombie Age 3 and Epic Heroes War, best graphics award by Unity Unite Singapore 2017 for Heroes Infinity, Android Excellence Award for Zombie Age 3.
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