Vietnam Online Advertising Revenue Report 2009 March 2010 0
TABLE OF CONTENTS Preface 3 Background 5 Executive Summary 7 Revenues 9 Revenue Breakdowns 11 By Industry 11 By Advertising Format 12 By Pricing Model 13 Future Projections 14 Appendix 16 Definitions 16 Methodology 17 Cimigo Profile 19 1
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PREFACE Vietnam is wired. It has the highest Internet penetration of any developing country. Over the last 5 years, bandwidth consumption has increased 80 times. But online advertising in Vietnam lags behind. Only just 50 cents per year is spent for online advertising per internet user. China spends 15 times that amount. Advertisers in Vietnam are still hooked on TV, even though it's nowhere near as cost-effective as online. I applaud Cimigo's initiative in putting together Vietnam's first report on online ad spending. This report helps advertisers, websites, agencies, and the entire online ecosystem quantify where the market is going, so we can plan and invest appropriately. Bryan Pelz, Co-founder of Vinagame and member of IAB steering committee in Vietnam 3
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BACKGROUND The online advertising market in Vietnam is in rapid development. Despite the increasing importance of the internet, the online advertising market still represents only a small percentage of the total advertising spend in Vietnam. Compared to other countries in South- East Asia, the share of online advertising spend in Vietnam is considerably lower. There is a variety of data sources available about the size and composition of the Vietnamese online advertising market. However, most of these figures are just approximate estimates and not collected using a clear and transparent methodology. For the further growth of the market, it is vital to have reliable data about the market size and composition. Cimigo took the initiative and conducted an industry survey among online advertising selling companies in Vietnam. The study measured revenue data from websites, advertising networks, media agencies and other companies involved with online advertising. All revenue data is directly compiled from the companies that sell online advertising. Since all data is measured directly at the source, this methodology is considered to be the most accurate measurement of online advertising revenues and is widely used in other countries. This study is conducted independently by Cimigo. Cimigo does not audit the information received from survey participants and provides no opinion or other form of assurance with respect to the information. All information in this report is only shown on an aggregated level and company specific data is held in strict confidentiality with Cimigo. Further details about the scope and methodology are provided in the appendix. 5
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EXECUTIVE SUMMARY The size of the online advertising market in 2009 is estimated at VND 278 billion VND (approx. USD 15.5 million). The market size increased by 71% compared to 2008. The major online advertising spending industries are fast-moving consumer goods (FMCG) and telecommunications, accounting for about 50% of the total online advertising spend. Display advertising is the major format in Vietnam, accounting for about 75% of advertising revenue. The share of rich media is at about 15% and has nearly doubled between 2008 and 2009. 75% of online advertising inventory is sold at fixed costs. 20% are sold using CPM (cost per impression) and 4% CPC (cost per click). CPM and CPC models have only gained slightly in importance over the last year. According to company-specific forecasts, the market will grow further by more than 80% and top VND 500 billion VND in 2010 (approx. USD 28 million). 7
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A - REVENUES The overall online advertising market in 2009 is estimated at 278 billion Vietnamese Dong (VND), up by 71% compared to 2008. The market size in 2008 was VND 162 billion. The survey covered the period Jan 2008 Jun 2009. Data for Jul-Dec 2009 was computed using company-specific growth forecasts. Fig. 1. Revenues 2008 and 2009 (in billion VND) 350 300 Total: 162bn VND Total: 278bn VND VNDbillion 250 200 150 100 100 +71% 155 2nd half 1st half 50 0 62 123 2008 2009 Revenues went up from VND 62 billion in 1 st half 2008 to VND 155 bn in 2 nd half 2009. Year-to-year growth was at 97% for the first half of 2009 and 55% for the second half. Every six months, total revenues increased by about VND 30 billion. Fig. 2. Revenues 2008 and 2009 by half year (in billion VND) 200 160 155 VNDbillion 120 80 62 100 123 40 0 Jan-Jun 2008 Jul-Dec 2008 Jan-Jun 2009 Jul-Dec 2009 (forecasted) 9
Converted to US dollars, revenues in 2008 were at 9.7 million and increased to 15.5 million in 2009 (for currency conversion, historic exchange rates were applied). 2009 revenue growth in USD is lower than in VND. This is due to the variation in exchange rates USD / VND over time. The results of this study are very similar to a forecast recently published by Vinagame. Other studies estimate the market size considerably smaller (e.g. DMS estimates, study from Yahoo). Fig. 3. Revenues 2008 and 2009 in million USD 20.0 15.0 15.5 USD million 10.0 5.0 9.7 0.0 2008 2009 10
B - REVENUE BREAKDOWNS Revenues by industry Fast-moving consumer goods (FMCG) represents the largest category in internet advertising spending, accounting for 30% in the first half of 2009. The share of FMCG of the total advertising spend increased by 10 percentage points compared to 2008. The second largest industry in online advertising spending is Telecommunications. Two telecommunications related categories were included in the study: a) non-mobile phone telecommunications and b) mobile phones. Both of these categories accounted for 12-13% of the market. Combined, the telecommunications industry accounts for about 25% of the total online advertising market. The third largest category of online advertising spending is Financial Services, accounting for 13% of first half revenues in 2009 (up 3 percentage points from 2008). Motorbikes / Cars have a similar share with 11% in 2008 and 13% in 2009. The share of advertising revenue with Online Media (websites) and Pharmaceutical and Healthcare was at 2-3% in 2009. Online Media experienced a sharp decrease in the first half of 2009 compared to 2008. Tourism / Travel and Media (TV, Newspaper) account for less that 2% of the total market. 7% of advertising revenues were from other industries (e.g. real estate, education and entertainment). Fig. 4. Revenues by industry 30% 30% 2008 1st half 2009 20% 20% 10% 3% 2% 2% 1% 4% 10% 13% 13% 12% 13% 12% 13% 11% 10% 8% 11% 1% 1% 7% 4% 0% FMCG Financial services Telecom (nonmobile phone) Mobile Phones Motorbikes / Cars Consumer electronics Online media (websites) Pharma & Healthcare Tourism / Travel Media (TV, newspapers) Other 11
Revenues by Advertising Format Display advertising (banners, buttons) accounts for three quarters of the total online revenues. The share of display advertising has decreased by 3 percentage points in the 1 st half of 2009 vs. 2008. The share of rich media (e.g. overlays, videos) has nearly doubled in 2009 and rich media has become the second largest advertising format. The share of search engine marketing of the total revenues in 2008 and 2009 was at 8-10%. The share of search engine marketing is typically much higher (up to 50%) in more mature markets such as US, Australia and Singapore. About 5% of the revenues are represented by other advertising formats such as classifieds / auctions, mobile phone display, email etc. However, most of these other forms are still in their infancy. Fig. 5. Revenues by advertising format 80% 76% 73% 60% 2008 1st half 2009 40% 20% 8% 14% 10% 8% 0% Display advertising (banner ads, buttons) 1% 2% 2% 1% Rich media (e.g. overlays, video) 1% Search engine marketing 0% SMS / mobile phone display 1% 1% Classifieds and auctions E-mail Other 12
Revenues by Pricing Model Fixed cost advertising (price for advertising at a fixed space and for a fixed time period) accounts for about three quarters of the total advertising revenues in Vietnam. CPM (cost per impression) is at 20% and CPC (cost per click) is at 4% in the 1 st half of 2009, slightly up compared to 2008. There is a trend to move away from fixed costs and towards CPM and CPC models. About 5% of revenues shifted from fixed cost to CPM/CPC in one year. In more mature markets, fixed costs play only a minor role and most revenues are based on impressions (CPM) or performance (CPC). Fig. 6. Revenues by pricing model 16% 2008 1 st half 2009 2% 4% 20% Fixed cost (cost per space / time) Cost per impression (CPM) 81% 76% Cost per click (CPC) Sales Channels Publishers sell about 40% directly to advertisers ( direct sales ) without any involvement of third parties. 60% of publisher s inventory is sold to media agencies or via advertising networks. Fig. 7. Revenues by selling channel (for publishers only) 41% Directly sold to advertisers (direct sales) 59% Sold to media / digital agencies or via advertising networks 13
C - FUTURE PROJECTIONS All survey participants forecast an increase in revenues in the next 12 months. 78% expect a strong increase and 22% a slight increase. None of the participants expect a decrease or stagnation. Fig. 8. Development of revenues in the next 12 months 22% 78% increase strongly increase slightly stay the same decrease slightly decrease strongly Most companies forecast a growth of 10-50% in 2010. 17% expect a growth of 50-100% and 17% by more than 100%. Fig. 9. Development of revenues in 2010 compared to 2009 17% 17% 67% increase by 10-50% increase by 51-100% increase by 101-200% 14
Considering the revenues in 2009 for each participant, the overall advertising market is expected to grow by 86% in 2010. Accordingly, the online advertising market size in 2010 is estimated at around VND 500 billion (approximately USD 28 million). Fig. 10. Revenue forecast 2010 600 517 400 +86% VNDbillion 200 162 +71% 278 0 2008 2009 2010 (forecasts) 15
APPENDIX Definition of online advertising Online advertising INCLUDES any form of promotion or advertising on the internet (Media Spend), which mainly includes the following categories Advertisements on websites (e.g. banners, buttons, text ads, rich media) Paid appearance in search engine results pages (search engine marketing) Paid listings on websites (classifieds) Similar forms of digital advertising (e.g. advertising in e-mails, SMS etc) Online advertising in this study does NOT INCLUDE: Revenues from creation and production of advertising campaigns Revenues from website or microsite development and hosting Definitions of advertising formats Display Advertising (Banner Ads): advertiser pays an Internet company for space to display a static or hyper-linked banner or logo on one or more of the Internet company s pages. Rich media: advertisements that incorporate animation, sound, and/or interactivity in any format. It can be used either singularly or in combination with the following technologies: sound, Flash and with programming languages such as Java, JavaScript, and DHTML. Search: fees advertisers pay Internet companies to list and/or link their company site domain name to a specific search word or phrase (includes paid search revenues). Search categories include: Paid listings text links appear at the top or side of search results for specific keywords. The more a marketer pays, the higher the position it gets. Marketers only pay when a user clicks on the text link. Contextual search text links appear in an article based on the context of the content, instead of a user-submitted keyword. Payment only occurs when the link is clicked. Paid inclusion guarantees that a marketer s URL is indexed by a search engine. The listing is determined by the engine's search algorithms. Site optimization modifies a site to make it easier for search engines to automatically index the site and hopefully result in better placement in results. Classifieds and auctions: fees advertisers pay Internet companies to list specific products or services (e.g. online job boards and employment listings, real estate listings, automotive listings, auction-based listings, yellow pages). E-mail: banner ads, links or advertiser sponsorships that appear in e-mail newsletters, e- mail marketing campaigns and other commercial e-mail communications. Includes all types of electronic mail (e.g., basic text or HTML-enabled). SMS / mobile phone display: advertisements that are delivered via SMS, or advertisements that appear on internet pages downloaded to mobile phones. 16
Methodology This study followed the scope and methodology of similar studies conducted by IAB (Interactive Advertising Bureau) in other countries. The IAB approach is considered as the most accurate measurement of the online advertising market because all data is gathered directly at the source, i.e. with companies selling advertising online. This study was conducted for the first time in Vietnam. Participant types The target audience for this study were all companies located in Vietnam that earn revenues with online advertising (see definition of online advertising above). The following types of companies were included: Web publishers / website owners ( publishers ): companies that own websites and its content and sell advertising space on their websites. Media agencies: Companies that mainly do online media planning for clients and buy online advertising space. Digital agencies: Companies that are specialized on the creation of online campaigns. They also do media planning and buying, but not as a principal activity. Advertising Networks: companies that sell advertising space for a wide array of different websites simultaneously. Advertising networks usually group different websites to channels. Resellers / advertising sales houses: companies that manage / sell all or the major parts of advertising space on individual websites. Participant selection Cimigo set up a database with all major companies of the types above. The survey focused on the major industry players only, and priorization was mainly necessary for publishers due to the large amount of websites. To select and prioritize participants, Cimigo used the following data sources: Results from market research studies about website usage in Vietnam (Netcitizens, Cimigo). Publicly available website statistics (e.g. Google AdPlanner, Alexa). Publicly available information on company websites. Personal interviews with some senior representatives in the internet advertising industry. Each company was checked individually for suitability. Publishers that do not offer online advertising were excluded. 17
Fieldwork The study was conducted online, using an encrypted online questionnaire with password protected access. The fieldwork happened between October and December 2009. Non-responding companies were followed up by telephone or e-mail a maximum of 5 times before closing the survey. A signed non-disclosure agreement was provided by Cimigo on request. Companies responding to the survey receive one copy of the report for free. Response rate to the survey was at about 40%. The publishers that responded to this survey cover about 50% of page views of the top 50 websites in Vietnam. Analysis Data of each participating company was checked for consistency and accuracy. Implausible data was removed or replaced with a conservative estimate. To anticipate double counting along the value chain, total market size was calculated using the following revenue data: o Total revenues of publishers o Gross margin of Advertising Networks and resellers o Management fees of media / digital agencies (Gross margin and management fees were calculated by subtracting the net amount spent on advertising space from the total revenues). Revenue data of non-participants was estimated using publicly available sources (publishers only). The main method of estimating revenue for non-participants was comparing page view data with page view data of survey participants and attributing a conservative revenue amount. 18
Cimigo Company Profile Cimigo is an independent team of marketing and brand research specialists. Cimigo employs over 200 research specialists contributing to great brands and their effective communications. Founded in Ho Chi Minh City, Vietnam in 2003 Cimigo then expanded across major cities in Vietnam and beyond. Within 12 months Cimigo opened offices in Ha Noi, Hai Phong, Da Nang, Can Tho, and Nha Trang. In 2004 Cimigo developed operations in China and India. Today Cimigo operates across the Asia Pacific region from Japan to Cambodia. Cimigo provides research based consulting. Cimigo advises four of the top five advertisers in Vietnam. Contact Information Cimigo 9 Nguyen Huu Canh Street Binh Thanh District HCMC Vietnam T: (84 8) 3822 7727 Ext: 320 E: adrevenue@cimigo.com www.cimigo.com 19