VietnamOnlineAdver/singIndustry:AQuickOverview

26‐Nov2008BryanPelz

Troubled*mesVietnamOnline

Vietnam:BasicStats

Annualdata 2007(a) Historicalaverages(%) 2003‐07

Population(m) 85.9 Populationgrowth 1.3

GDP(US$bn;marketexchangerate) 70.7 RealGDPgrowth 8.1

GDP(US$bn;purchasingpowerparity) 221.6 Realdomesticdemandgrowth 8.4

GDPperhead(US$;marketexchangerate) 823 Inflation 7.1

GDPperhead(US$;purchasingpowerparity) 2,579 Current‐accountbalance(%ofGDP) ‐3.6

Exchangerate(av)D:US$ 16,179 FDIinflows(%ofGDP) 4.9

Source: Economist Country Briefing Jun-2008

2006 2007 2008c 2009cRealGDPgrowth 8.2 8.5 6.9 7.7Industrialproductiongrowth 17 17.3 15.9 16.5Grossagriculturalproductiongrowth 3.4 3.4 3.5 3Consumerpriceinflation(av) 7.4 8.3 23.3 12Consumerpriceinflation(year‐end) 6.6 12.6 21.9 8.9Lendingrate 11.2 11.4 20.8 17.3

Recentnews

•  ACNielsen:ConsumerconfidencedowninVietnam

HANOI,Nov.10—AnACNielsensurveyhasshownthatVietnameseconsumerconfidencecon/nuedtodropinthesecondhalfofthisyearduetohighinfla/onandslowereconomicgrowth,VietnamInvestmentReviewreportedonMonday.Inthefirst10monthsthisyear,Vietnam'sinfla/onrose23.15percentoverthesameperiodlastyear.Theeconomyroseby6.52percentinthefirstninemonthsyear‐on‐year,lowerthanthe7.4percentgrowthforthefirstquarter,officialsta/s/csshowed.

•  VietnamNet:October2008vsOctober2007ConsumerPriceIndex

Source: AC Nielsen, VietnamNet

Techcompanylayoffsannouncedinthelast5weeksCompany Date HowmanySunMicrosystems 11/14/08 6,000/15‐18%AppliedMaterials 11/12/08 1,800/12%Wired.com 11/11/08 3of28SixApart 11/11/08 8%Tucows 11/11/08 15%CircuitCity 11/10/08 20%BitTorrent 11/10/08 50%Insight 11/10/08 240,4%Honeywell 11/7/08 700Zappos 11/6/08 8%LinkedIn 11/5/08 36,10%AMD 11/5/08 500,3%Nokia 11/4/08 600THQ 11/3/08 4‐5studiosMotorola 10/30/08 3,000ElectronicArts 10/30/08 600Xerox 10/23/08 3,000

Company Date HowmanyXerox 10/23/08 3,000AvidTechnology 10/23/08 500Nokia 11/4/08 600Tektronix 11/3/08 150SpotRunner 11/3/08 115,<30%CircuitCity 11/3/08 17%THQ 11/3/08 4‐5studiosBreak.com 10/23/08 11of80Eons 10/23/08 8ofabout33Dell 10/22/08 8,900SanDisk 10/22/08 TBAManiaTV 10/22/08 20of70iMeem 10/22/08 25%of80HP 10/22/08 24,600overthreeyearsYahoo 10/21/08 10%of~14,300SonyEricsson 10/17/08 2,000globallyeBay 10/6/08 1,000

Source: CNet

Morerecentdoom&gloom

•  VinaSMEUrgesaRescueofSMEs

VietnamNet–Nov14,2008

VinaSMEhasreleasedthereportthatsaid20%ofSMEsarecurrentlyonthevergeofbankruptcy.Theseenterpriseshavenarrowedorstoppedproduc/on,whilethebusinessofsomeenterpriseshascometoastands/ll.Vinasme’ssta/s/csshowedthat95%of200,000businessesthatpaytaxestothestateareSMEs.TheSMEsmakeup40%ofGDPandputout30‐40%ofexportandconsumerproductsforthecountry.Moreover,SMEsuseupto50%ofthetotallaborersusedbyenterprisesthroughoutthecountry.SMEscontribute17.6%tothestatebudget.

Source: Vietnam Net

2009:Whatwemightsee

•  Asglobalsitua/onworsens,localeconomywillfacemorechallenges

•  Infla/onwillsubside

•  Housingpriceswillcon/nuedecline;construc/onwillstall

•  Foreigninvestmentwillcontract•  Exportswillslow

•  Businessesandconsumerswillbecomemoreconserva/ve

Bryan’s guesses. Your results may vary.

Timetogetinnova/ve

Source: VN Express

Hugepoten*al,despitetheenvironment

VietnamOnline

SouthEastAsia

VietnamInternetGrowth

‐

10,000,000

20,000,000

30,000,000

40,000,000

50,000,000

60,000,000

70,000,000

80,000,000

90,000,000

100,000,000

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Population InternetUsers Growth

OnlineGames

Broadband

>MobileInternet

>WebContent

VinaGame projections

InternetPen

etra/o

n

GDP/Capita

USA

China

Vietnam

India

Korea

Japan

50M

Top20InternetCountries2007

Vietnam&developingcountries

InternetPen

etra/o

n

GDP/Capita

China2007

Vietnam2007

India2007

50M

Vietnam2005

Vietnam2009?

Vietnam:HomeInternetaccessisgrowing

3

8 9

21

34

0

5

10

15

20

25

30

35

40

1999 2001 2004 2006 2008

UrbanHomeInternetPenetration(%)

Source: TNS Consumer Trends 2008

51

37

84

54

9

1

33

0 20 40 60 80100

HomePCPenetration

HomeInternetPenetration

MobilePhonePenetration

SurfedInternetinPastWk

UrbanvRural–2008(%)

Rural

Urban

VietnamInternetUsers–byAge

2006 2014

0

2

4

6

8

10

12

14

16

0‐4

5‐9

10‐14

15‐17

18‐19

20‐24

25‐29

30‐34

35‐39

40‐44

45‐49

50‐54

55‐59

InternetUsers Popula/on

0

2

4

6

8

10

12

14

16

0‐4

5‐9

10‐14

15‐17

18‐19

20‐24

25‐29

30‐34

35‐39

40‐44

45‐49

50‐54

55‐59

InternetUsers Popula/on

16m 47m

VinaGame projections

Thegood,thebad,andtheuglyVietnamOnline

OnlineadgrowthinUSgrindingtoahalt(US$M)

1%0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

14.0%

$0

$1,000

$2,000

$3,000

$4,000

$5,000

$6,000

$7,000

$8,000

$9,000

Q3‐2007 Q4‐2007 Q1‐2008 Q2‐2008 Q3‐2008

AOL

Microsoft

Yahoo

Google

Growth(%)

Source: TechCrunch

VietnamOnlineAdver/singMarket($M)

•  Wehadexpecttheonlineadmarkettoreach$75mby2014

•  Wehadexpectedonlinewouldexceed9%oftotalATLadver/sing(on+off)

•  PROBLEM:adver/singwillrampataslowerrateduetotroubledeconomy

0

10

20

30

40

50

60

70

80

0%

1%

2%

3%

4%

5%

6%

7%

8%

9%

10%

2007

E

2008

E

2009

E

2010E

2011E

2012E

2013E

2014E

OnlineAdvertising

InternetUsers

%ofATLAdvertising

VinaGame projections

Evolu/onofVNAdMarket:2009vs2014

•  Wehadexpectedincreaseinpaidsearch–  Paidsearchwouldreach>

$35m

–  Paidsearchwouldreach0.036%ofGDPin2014,eventuallyexceeding0.10%inlong‐term

•  PROBLEM:adver/singwillrampataslowerratethanan/cipated0

10

20

30

40

50

60

70

80

2009E 2014E

Display PaidSearch

VinaGame projections

SomebrightnewsfromChina

•  CCTVprime/meauc/on–  strongadspendingbydomes/cChinesefirms,up15%YoY

•  Onlineadspendingmays/llgrow,es/matesare~20%–  OnlinemediademographicsarecomplementarytoTV’s,asmostyouth

spendmore/meononlinemediathanTV

–  OnlinemediaratecardwillberaisedauertheraisingofCCTVsratecards

–  Duetoeconomicslowdown,peoplewillspendmore/meathomeand,thus,bothInternetandTVwillbenefit.

•  THEPROBLEMIS:ChinaisamorematuremarketthanVN–  TwicetheGDP/Capita–  LargebaseofSMEsadver/singalready

It’suptoustomakeadifferenceVietnamOnline

Themarketsitua/onhere

•  Morepeoplespend*meonlineinatroubledeconomy– Cost‐effec/veformofdiversion

•  Onlinebecomesmoreimportanttoyoungpeople– Thiscountryisfullofearlyadopters– UsingtheInternetinincreasinglydiverseways

Businessenvironment

•  Inhard*mes,spendingshouldshiHfromretromediatoonline;‐)– TheROIforonlineisquan/fiable– Retromediaisonlyindirectlyquan/fiable

•  NoshiHinVN(yet).Why?– Companiesdon’tpayenoughaven/ontothenumbers

– Ourecosystemisincomplete(doesanyoneverifyournumbers?)

– NoseriousefforttoevangelizeSMEs

Whatweshoulddo

•  Shiuspendingtoonline

•  Educatethemarket

•  Cooperatetodeveloptheecosystem

•  InvestinevangelizingSMEs

Q&A

Contact info:

email: bryan@vinagame.com.vn

skype/twitter/yahoo/gtalk/yahoo/tumblr: bryanpelz