eMarketer Vietnam online digital usage and behavior 2015 2020

Vietnam’s young population and low service costs help give the country a higher internet penetration rate than most of its neighbors in Southeast Asia. Usage of smartphones and related activities, including use of social media and messaging apps, are also fairly high. VIETNAM’S INTERNET PENETRATION IS DRIVEN BY MOBILE PHONES. SMARTPHONE USERS GRAVITATE TO SOCIAL NETWORKS. MESSAGING APPS APPEAL TO THE PRICE CONSCIOUS. LOCAL AND REGIONAL PLAYERS RULE ECOMMERCE. PAYING CUSTOMERS STILL PREFER CABLE AND SATELLITE OVER VIDEOONDEMAND.

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VIETNAM

ONLINE

Digital Usage and Behavior, 2015-2020

NOVEMBER 2016

Rahul Chadha

Contributor: Dustin Sodano

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VIETNAM ONLINE: DIGITAL USAGE AND BEHAVIOR, 2015-2020

Vietnam’s young population and low service costs help give the country a higher internet penetration rate than most of its neighbors in Southeast Asia Usage of smartphones and related activities, including use of social media and messaging apps, are also fairly high

■ In 2016, more than half of the country will access the

internet at least once a month—a higher rate than in

India, Indonesia and Thailand

■ According to Nielsen, internet users in Vietnam spend

nearly 25 hours per week online This is high compared

with elsewhere in Southeast Asia

■ One poll found that mobile phones are the most

common device used to access the web in Vietnam,

employed by 85% of internet users ages 15 to 49

Nearly three-quarters (73%) used laptops

■ More than one-third of Vietnam’s population are social

network users By 2020, that figure will approach half

(46.7 million) Smartphones, used by 38.3% of adults

at least monthly, are a main reason behind social

networking’s growth

■ Messaging apps are even more popular One survey

found that 74% of smartphone users used a messaging

service more than once per week, while only 60% had

used social media apps

■ Retail ecommerce sales, excluding travel, will total

$1.71 billion in 2016, accounting for just 1.1% of total

retail sales in Vietnam By 2020, that figure will expand

to only 1.5%

■ Purchasing online video is not yet very common One

poll found that only 13% of internet users in Vietnam

had paid for an online video provider By comparison,

78% had paid for cable TV and 40% had paid for

satellite TV

■ Online video viewers have one destination that stands

out from the rest: YouTube

WHAT’S IN THIS REPORT? This report looks at some of

the most crucial aspects of Vietnam’s digital usage and

behavior, including internet penetration, smartphones and

social networks, messaging apps, ecommerce and video

% of respondents

Average Daily Time Spent Online Among Internet Users in Vietnam, 2015

<3 hours 7%

3-5 hours 26%

5-7 hours 32%

7-9 hours 15%

9+ hours 20%

Note: n=967 ages 15-49 Source: Vietnam Ecommerce and Information Technology Agency (VECITA),

"2015 Vietnam Ecommerce Report," April 15, 2016

210076 www.e Marketer.com

KEY STAT: Internet users in Vietnam tend to spend a great deal of time online In 2015, 58% of users spent an average of 3 to 7 hours daily online, while 20% spent 9 or more hours on the web

CONTENTS

2 Vietnam Online: Digital Usage and Behavior, 2015-2020

3 Vietnam’s Internet Penetration Is Driven by Mobile Phones

4 Smartphone Users Gravitate to Social Networks

6 Messaging Apps Appeal to the Price Conscious

7 Local and Regional Players Rule Ecommerce

10 Paying Customers Still Prefer Cable and Satellite over Video-on-Demand

12 eMarketer Interviews

12 Related eMarketer Content

12 Related Links

12 Editorial and Production Contributors

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VIETNAM’S INTERNET

PENETRATION IS DRIVEN BY

MOBILE PHONES

Vietnam has one of the higher internet penetration

rates in Southeast Asia thanks to a young population

and low access costs eMarketer estimates that this

year, for the first time, more than half of the country’s

population (50.6%) will access the internet at least

once a month That puts its penetration rate above

India, Indonesia and Thailand The number of internet

users in the country is expected to grow from

48.2 million in 2016 to 61.7 million in 2020, when the

penetration rate will reach 62.5%

Vietnam’s internet growth is complicated by the active

role the government plays in regulation While the

economic reforms begun by the government in 1986—

known collectively as Doi Moi—have liberalized the

country’s economy, the government still monitors online

content and suppresses anything deemed subversive

While the level of control over the internet in Vietnam

does not approach that seen in China, the country’s two

largest internet service providers, Viettel and Vietnam Post

and Telecommunications (VNPT), are state-run entities

However, these controls have not tempered residents’

interest in accessing the internet According to November

2015 data from Nielsen, internet users in Vietnam spent

an average of 24.7 hours per week online, tying them

with internet users in the Philippines, and trailing only

internet users in Singapore, a country with a much more

robust internet infrastructure

hours

Weekly Time Spent Online According to Internet Users in Select Countries in Asia-Pacific, Nov 2015

Note: n=1,000 ages 16+ in each country Source: Nielsen, "Cross-Platform Insights Report 2015" as cited in press release, June 21, 2016

The amount of time internet users spend online daily was also substantial According to the Vietnam Ecommerce and Information Technology Agency (VECITA), only 7% of internet users in Vietnam spent an average of 3 hours or less online each day in 2015, while 58% spent between 3 and 7 hours

% of respondents

Average Daily Time Spent Online Among Internet Users in Vietnam, 2015

<3 hours 7%

3-5 hours 26%

5-7 hours 32%

7-9 hours 15%

9+ hours 20%

Note: n=967 ages 15-49 Source: Vietnam Ecommerce and Information Technology Agency (VECITA),

For consumers in Vietnam, the route to the internet will increasingly run through mobile devices VECITA also reported that in 2015 mobile phones surpassed laptops as the device most commonly used to access the internet: 85% of internet users ages 15 to 49 said they relied on mobile phones to get online, while 73% of respondents used a laptop

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% of respondents

Devices Used to Access the Internet Among Internet

Users in Vietnam, 2014 & 2015

Laptop

75%

73%

Mobile phone

65%

85%

Desktop

33%

38%

Tablet

19%

Note: n=967 ages 15-49

Source: Vietnam Ecommerce and Information Technology Agency (VECITA),

Internet access via mobile phones will continue to grow

in part due to the continued adoption of smartphones

in Vietnam eMarketer estimates that the number of

smartphone users in the country will increase from

36.5 million, or 38.3% of the population, this year to

58.4 million users in 2020, when they will account for

59.2% of residents

Mobile Phone* and Smartphone** Users in Vietnam,

2015-2020

Mobile phone users*

(millions)

—% of population

—% change

Smartphone users**

(millions)

—% of population

—% of mobile phone users

—% change

2015 57.1

60.5%

4.4%

27.2

28.8%

47.6%

40.4%

2016 59.2

62.1%

3.7%

36.5

38.3%

61.7%

34.4%

2017 61.0

63.5%

3.1%

43.7

45.5%

71.6%

19.8%

2018 62.9

64.8%

3.1%

49.5

51.0%

78.7%

13.3%

2019 64.5

65.9%

2.6%

54.5

55.6%

84.4%

10.1%

2020 65.9

66.8%

2.2%

58.4

59.2%

88.6%

7.3%

Note: *individuals of any age who own at least one mobile phone and use

the phone(s) at least once per month; **individuals of any age who own at

least one smartphone and use the smartphone(s) at least once per month

Source: eMarketer, Sep 2016

A May 2016 survey of smartphone users in Asia-Pacific

from research firm GfK found that 81% of respondents in

Vietnam used their devices to access the internet daily

That figure was higher than the one reported for Japan,

India and Australia, underscoring just how fundamental

smartphones have become to gaining internet access

in Vietnam

SMARTPHONE USERS GRAVITATE

TO SOCIAL NETWORKS

Internet users, particularly those on advanced handsets, have been quick to join social networks eMarketer estimates that 35.8 million people in Vietnam will be social network users in 2016, or 37.6%

of the population By 2020, those figures will climb to 46.7 million people and a penetration rate of 47.3%

Social Network Users and Penetration in Vietnam, 2015-2020

2015 2016 2017 2018 2019 2020 Social network users (millions) 32.3 35.8 39.1 42.1 45.1 46.7

—% change 13.8% 10.9% 9.2% 7.8% 6.9% 3.6%

—% of internet users 72.7% 74.2% 75.1% 75.5% 75.6% 75.7%

—% of population 34.2% 37.6% 40.7% 43.4% 46.0% 47.3%

Note: internet users who use a social network via any device at least once per month

Source: eMarketer, Nov 2016

Kantar Media Vietnam (KMV) found that 80% of internet users ages 15 to 54 in urban areas in Vietnam polled

in 2015 used social networks, making it the most popular internet activity in the survey, tied with visiting news websites

% of respondents

Leading Internet Activities Among Internet Users in Vietnam*, 2015

View video clip 47%

Send/receive emails 39%

Watch TV shows 34%

Academic/research 33%

Note: n=5,775 ages 15-54; *urban areas Source: Kantar Media Vietnam (KMV), "Vietnam Media Habit Survey," May 5, 2016

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Smartphones will play a key role in facilitating access to

social networks among internet users Research from

W&S Group found that social media app use was already

deeply entrenched in the behavior of smartphone users

in Vietnam, a mobile-first market According to a poll of

smartphone app users in Vietnam conducted by W&S

Group in March 2016, 84.1% of respondents opened a

social networking app daily

% of respondents

Frequency with Which Smartphone Social Media App

Users in Indonesia, Thailand and Vietnam Use

Smartphone Social Media Apps, March 2016

Indonesia Thailand Vietnam

5-6 times per week 10.7% 7.7% 8.5%

3-4 times per week 3.9% 3.0% 3.0%

1-2 times per week 2.2% 1.5% 3.6%

Less than once per week 2.4% 0.9% 0.8%

Note: Indonesia n=460; Thailand n=465; Vietnam n=504; ages 17+;

respondents referred to their most used social media apps in the past 30

days; numbers may not add up to 100% due to rounding

Source: W&S Group, "Tracking Study on Smartphone Applications," May 11,

2016

In addition, W&S Group reported that 84.0% of

smartphone users in Vietnam had opened a social

networking app sometime in the 30 days preceding its

March 2016 poll That put social networking apps ahead of

other app categories in the poll, including games, music,

and photo and video apps

Facebook has already established a strong presence in

Vietnam, with an estimated 91.5% of all social network

users in the country accessing the platform in 2016

eMarketer projects the number of Facebook users in

Vietnam will increase from 32.7 million this year (34.4%

of the population) to 43.5 million (44.1%) in 2020

Facebook Users and Penetration in Vietnam,

2015-2020

2015 2016 2017 2018 2019 2020 Facebook users (millions) 29.4 32.7 36.0 39.0 41.9 43.5

—% change 14.5% 11.5% 9.8% 8.4% 7.5% 3.8%

—% of social network users 91.0% 91.5% 92.0% 92.5% 93.0% 93.2%

—% of internet users 66.2% 67.9% 69.1% 69.8% 70.3% 70.5%

—% of population 31.1% 34.4% 37.4% 40.2% 42.8% 44.1%

Note: internet users who access their Facebook account via any device at

least once per month

Source: eMarketer, Nov 2016

Facebook’s dominance over competing social networks in Vietnam also extends to smartphones According to We Are Social, Facebook’s social media app had a penetration rate of 29% among the overall population as of Q4 2015, putting it ahead of local chat app Zalo, Google+, Line, Twitter and Instagram, among other social media and messaging platforms

% of population

Social Media/Messaging App User Penetration in Vietnam, by Platform, Q4 2015

Instagram 9%

WhatsApp 6%

Source: We Are Social, "Digital in 2016," Jan 27, 2016

While Facebook has experienced success in capturing market share, its gains also face a potential threat Vietnam’s government has shown a willingness to block the platform at moments of political unrest, as when protesters gathered for rallies in May 2016 following mass fish deaths attributed to pollution released into waters from a plastics manufacturing company

While Facebook once faced competition from local upstart Zing Me, the latter was unable to keep pace with the innovations offered by Mark Zuckerberg’s company, and was eventually abandoned by users Now Facebook

is the clear leader in Vietnam, with a penetration rate that will be hard for competitors to reach or even approach

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MESSAGING APPS APPEAL TO

THE PRICE CONSCIOUS

In Vietnam, messaging apps are broadly adopted by

smartphone users for a simple reason—they provide

users with over-the-top (OTT) services that allow

customers to avoid sometimes costly texting services

provided by mobile network operators

The GfK survey found that 74% of smartphone users in

Vietnam used a messaging service more than once per

week, a higher figure than those who used either social

media (60%) or shopping apps (31%)

% of respondents

Smartphone Users in Asia-Pacific Who Use

Smartphone Messaging, Social Media and Shopping

Apps Regularly*, by Country, May 2016

Messaging Social media Shopping

Note: n=8,099 ages 18+; *more than once per week

Source: GfK, "The Connected Consumer: Insights into Digital Consumer

Behavior in APAC," June 22, 2016

Messaging app users in Vietnam have embraced local

platform Zalo in a market that is now crowded with

international competitors According to DI Marketing,

80% of smartphone users polled in June 2016 had Zalo

installed on their devices, more than the 73% who

had installed Facebook Messenger Global messaging

giants WeChat and WhatsApp barely registered among

smartphone users in Vietnam, with install rates of 5% and

4%, respectively

% of respondents in each group

Messaging Apps that Smartphone Users in Vietnam Have Installed on Their Smartphone, by Age, June 2016

18-25 26-30 30-35 35+ Total

Facebook Messenger 78% 72% 75% 55% 73%

Note: n=1,200 Source: DI Marketing, "Chat Apps Usage in Vietnam," June 10, 2016

Zalo’s parent company, VNG, reported in April 2016 that its messaging app had 50 million registered users Despite its near ubiquity among smartphone users in Vietnam, Zalo still faces a formidable opponent in Facebook Messenger, which had nearly the same install rate as Zalo among those ages 18 to 25, according to DI Marketing

In addition, We Are Social data cited earlier found that Zalo and Facebook Messenger had the same install rate, 25%, among smartphone users in Vietnam as of Q4 2015 Zalo has benefitted from a lack of strong competition from regional messaging platforms like Line and Kakao Talk This is partly due to resistance among consumers

to digital payment systems In underbanked Vietnam, consumers still rely on cash to pay for most goods and services While Facebook generates its revenues largely through advertising, platforms like Line and Kakao Talk are heavily reliant on in-app purchases made using digital payment systems, which are not yet widely adopted

in Vietnam

The use of messaging apps in Vietnam is not a zero-sum game, with a majority of end-users installing a number of apps that provide essentially the same service According

to DI Marketing, 89% of messaging app users in Vietnam used more than one messaging app

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% of respondents

Number of Messaging Apps Used by Smartphone

Messaging App Users in Vietnam, by Age, June 2016

18-25

26-30

30-35

35+

Total

Note: n=1,200; via smartphone; numbers may not add up to 100% due to

rounding

Source: DI Marketing, "Chat Apps Usage in Vietnam," June 10, 2016

The market for messaging apps was most fragmented at

the younger end, with 45% of respondents ages 18 to 25

using four or more messaging apps In fact, the research

showed that those under 35 were using only one app in

significantly smaller numbers than those who were 35

or older

LOCAL AND REGIONAL PLAYERS RULE ECOMMERCE

Ecommerce has yet to take off in Vietnam eMarketer anticipates retail ecommerce sales, excluding travel, will total $1.71 billion in 2016, accounting for only 1.1% of the $161.16 billion in total retail sales

Retail ecommerce sales in Vietnam will total

$3.26 billion by 2020, constituting 1.5% of all retail sales, eMarketer estimates

billions, % change and % of total retail sales

Total Retail and Retail Ecommerce* Sales in Vietnam, 2015-2020

Total retail sales

—% change

Retail ecommerce*

sales

—% change

—% of total retail sales

2015

$147.99

9.9%

$1.37

43.5%

0.9%

2016

$161.16

8.9%

$1.71

24.3%

1.1%

2017

$174.37

8.2%

$2.08

22.0%

1.2%

2018

$187.45

7.5%

$2.47

18.5%

1.3%

2019

$200.57

7.0%

$2.88

16.8%

1.4%

2020

$213.61

6.5%

$3.26

13.2% 1.5%

Note: converted at the exchange rate of US$1=VND21,913.7; excludes travel and event tickets; *includes products or services ordered using the internet via any device, regardless of the method of payment or fulfillment Source: eMarketer, Aug 2016

VECITA reported that ecommerce revenue in 2015 had totaled $4.07 billion, an increase of 37% from the previous year

The country’s ecommerce landscape is dominated by local and regional players Lazada Vietnam, which is majority-owned by China’s Alibaba Group and carries its own inventory and serves as a marketplace, ranks among the top players in the country According to SimilarWeb, Lazada Vietnam recorded the highest number of monthly page views in Vietnam in August 2016 at 24.5 million That put it ahead of consumer electronics retailer The Gioi Di Dong, business-to-consumer (B2C) platform Tiki.vn, online retailer Sendo.vn and several others

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Leading B2C Ecommerce Sites in Vietnam, Ranked by

Monthly Page Views, Aug 2016

Vatgia.com 10.4

Fptshop 7.7

Hotdeal

3.2

Nguyenkim.com

3.2

Lozi 2.4

Phongvu

1.5

Note: represents activity tracked by SimilarWeb, broader industry metrics

may vary

Source: SimilarWeb as cited by ecommerceIQ, Sep 27, 2016

According to data from DI Marketing, advanced handsets

have still not yet displaced desktops and laptops Its

August 2016 survey of digital buyers in Vietnam found

that 75% of respondents used a PC to make a purchase,

while 51% used a smartphone and 21% used a tablet

% of respondents

Devices Used for Digital Purchases by Digital Buyers

in Vietnam, Aug 2016

Tablet 21%

Note: n=565

Source: DI Marketing, "Study About Online Shopping Behavior in Vietnam,"

Sep 12, 2016

However, there are signs that advanced handsets are

making inroads among digital buyers in Vietnam Tran Hai

Linh, CEO of Sendo.vn, said in June 2016 that 75% of its

customers accessed the site by smartphone

The growth of mcommerce in Vietnam is also in line with

wider regional trends Online marketing services provider

Criteo found that mobile transactions made up 54% of all

digital ecommerce transactions in Southeast Asia in Q2

2016, an increase from 39% in Q4 2015

VECITA found that 64% of digital buyers in Vietnam had

purchased soft goods and cosmetics digitally in 2015,

making them the most popular product category for

ecommerce Consumer electronics ranked second (56%),

followed by kitchen and other home appliances (49%)

% of respondents

Product/Service Categories Purchased Digitally by Digital Buyers in Vietnam, 2015

Clothing, shoes, cosmetics

64% Tech/electronics

56% Kitchen and home appliances

49%

Books, stationery, gifts, flowers

42%

Travel (airfare, train ticket)

34%

Food

33%

Movie or concert tickets

22%

Hotel bookings, tours

19%

Education/business services 7%

Music/videos/DVDs/games 7%

Spa and beauty services 6%

Other 2%

Note: ages 15-49 Source: Vietnam Ecommerce and Information Technology Agency (VECITA),

DIGITAL BUYERS ATTACHED TO CASH

ON DELIVERY

In Vietnam, cash on delivery (COD) remains a favored payment method among consumers, especially in urban areas

According to a July 2016 survey of digital buyers living in urban Vietnam conducted by Q&Me, 85% of respondents used COD as their main payment method for digital purchases Bank transfers were the primary payment method for 8% of those polled, while only 6% said they relied on debit or credit cards, a reflection of the low penetration rate of payment cards in the country

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% of respondents

Primary Payment Method Used for Digital Purchases

According to Digital Buyers in Urban Vietnam*,

July 2016

Cash on delivery 85%

Bank

transfer

8%

Credit card/

debit card 6%

Note: numbers may not add up to 100% due to rounding; *Hanoi and Ho

Chi Minh City

Source: Q&Me, "Vietnam Ecommerce Market Survey," July 19, 2016

Similarly, VECITA reported that 91% of digital buyers in

Vietnam had used COD to complete an ecommerce

transaction in 2015, an increase from 64% in 2014 Digital

buyers’ use of ewallets actually declined from 37% to

11% over the same time period, while bank transfers

were used by 48% of buyers in 2015, up from 14% the

year before

% of respondents

Payment Methods Used for Ecommerce Transactions

According to Digital Buyers in Vietnam, 2014 & 2015

Cash on delivery

64%

91%

Ewallet

37%

11%

Bank transfer

14%

48%

Scratch cards

11%

6%

Payment card (credit, debit, gift, etc.)

7%

20%

Other

1%

Note: ages 15-49

Source: Vietnam Ecommerce and Information Technology Agency (VECITA),

Vietnam is similar to India in its adherence to COD as a preferred payment method As in India, consumers have little incentive to switch over to other payment methods, with many services accepting cash as a matter of course

“Even if I want to pay my electricity bill, someone comes around and collects cash,” said Richard Burrage, managing partner at Vietnam-based market research firm Cimigo Furthermore, COD also makes it easier to refuse

an order once it arrives “If I do some shopping online, I’ll pay them in cash All of the fears of online shopping are dispersed; if I don’t like it, I can turn it away,” said Burrage The ability of consumers to inspect goods purchased online before paying has alleviated some of the trust issues related to the nascent ecommerce market in Vietnam, but it has also provided an incentive for vendors and third-party logistics providers to keep the cost of COD free or low And when costs related to COD purchases are incurred, they are usually shouldered by the merchant

In addition, merchants and consumers prefer cash payments because it’s easier for such transactions to remain off the books, thus avoiding taxes

Bank cards are rarely used to buy goods or services thanks to the combination of an underbanked populace and a dearth of point-of-sale (POS) terminals for offline purchases The government in Vietnam has moved in recent years to encourage consumers to move toward payment methods other than cash by establishing new regulations for digital payments

Still, much work remains to be done if vendors are going

to start accepting more payment methods According to

a November 2015 survey of businesses in Vietnam by the Vietnam Ecommerce Association (VECOM), nearly all (97%) respondents accepted bank transfers, while only 16% accepted payment cards, a category that included credit and debit cards Only 4% accepted digital wallets

% of respondents

Noncash Payment Methods Accepted by Businesses

in Vietnam, Nov 2015

Payment card*

16%

Digital wallet 4%

Scratch card**

2%

Note: n=4,735; *includes all types of payment cards (credit, debit, gift, etc.);

**type of preloaded payment card Source: Vietnam Ecommerce Association (VECOM), "Viet Nam E-Business

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The digital wallet sector in Vietnam remains fractured

Online newspaper VietnamNet reported in August 2016

that there were 16 digital wallets in operation in the

country as of May 2016, but many of them had been

developed by ecommerce platforms and worked solely on

those websites In order for digital payment methods like

mobile wallets to catch on in Vietnam, they will have to

provide a greater range of service options for consumers

PAYING CUSTOMERS STILL PREFER CABLE AND SATELLITE OVER VIDEO-ON-DEMAND

Despite the emergence of various video-on-demand (VOD) platforms in Vietnam, paying for online video services has not yet become a widespread behavior among consumers there

A September 2015 poll of internet users in the country conducted by Nielsen found that only 13% of respondents paid for an online video service provider Cable TV remained the dominant mode of pay TV, used by 78%, while 40% paid for satellite TV

% of respondents

Internet Users in Vietnam Who Currently Pay for Select TV/Video Services, Sep 2015

Satellite provider 40%

Online service provider 13%

Other 7%

None of these 4%

Source: Nielsen, "Global Video-on-Demand Survey" as cited in press release, March 18, 2016

Despite the uphill battle online video services face from traditional TV platforms, digitally savvy consumers are turning to online resources in search of more and different programming, as well as the freedom offered

by on-demand services, according to data from Nielsen’s November 2015 study

“Consumers are exercising their choice of how, when and where they can obtain their content and are more active

in their media habits than ever before,” said Doan Duy Khoa, director of consumer insights for Nielsen Vietnam

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