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With internet usage increasing by an average of 10% a year over the last five years, Vietnam is one of the fastest growing digital economies in the world, creating an amazing opportunity for ecommerce.

Over half the population of Vietnam are now online, representing a market of around 50m people. This growth has created huge potential in the online economy — but there are some factors slowing progress.

First, let’s take a look at what the Vietnamese are up to online.

Data collected by The Connected Consumer Survey shows that 72% of Vietnamese are online using their smartphone.

There’s a huge desire to be online via mobile — a recent study by Reaching Vietnam revealed that Vietnamese often own multiple phones in order to take advantage of the best deals with competing providers. Despite this, smartphone penetration is still only around 55%, leaving plenty of room for expansion.

In terms of where they’re spending their time, according to Alexa the top 10 most popular sites are:

Vietnamese are also extremely social. Data collected by We Are Social shows that there are 35m active social media users, making up about 37% of the total population. 29m of these users are accessing via a mobile device, meaning 31% of Vietnamese are using their phone for social media.

Here are the most popular social media platforms:

It’s interesting to see Zalo – Vietnam’s domestic social media network – giving Facebook such a good run for its money. Its popularity comes from how tailored it is to the Vietnamese user’s needs — as well as chat and voice call services, it also allows users to search for administrative information such as vaccinations and appointments.

Clearly, Vietnam is loving life online. However, it’s important to understand how the country’s complex sociopolitical and economic climate impacts its digital economy. Only then will companies be able to realise the huge business potential.

1. Vietnam has a socialist-oriented market economy

Vietnam is one of only four socialist states remaining worldwide, along with China, Cuba and Laos.

After the the Vietnam War ended in 1973, North and South Vietnam were slowly reunified, leading to the creation of today’s Socialist Republic of Vietnam in July 1976. The country has been ruled by the Communist Party of Vietnam ever since.

However, in the 1980s the party conceded that pure socialism was not serving the people of Vietnam as it should. In 1986 the Doi Moi reforms were made with a view to creating a ‘socialist-oriented market economy’ — one where the state retains significant control over the economy, but private companies and cooperatives play a major role in commodity production and service provision.

This is almost identical to the approach adopted by China. The idea is that in the early stages of developing a socialist economy a country must first adopt capitalist techniques in order to thrive.

In theory, private enterprise exists in Vietnam with the sole purpose of strengthening socialism. In practice, this means private companies can operate within Vietnam as they can in basically any other country. The difference comes in at the consumer level.

2. Vietnam operates media censorship

One of the reasons why digital media has taken off in Vietnam is because traditional media such as print and TV are monitored and censored by the government. Reports say that the government calls in editors every week – on Tuesdays in Hanoi and Thursdays in Ho Chi Minh City – to tell them what to cover and what to conceal.

There is obviously more freedom of information online, but the government has also shown attempts to censor digital and social media.

Despite Facebook being the most popular social network in the country, problems accessing the site have been reported since 2009. Whilst living and working in Ho Chi Minh City in 2016 my business partner Paul Hewett had issues accessing the site, which affected his ability to run social campaigns.

The problems don’t end there. In 2010 the government introduced a law requiring all public places offering internet services to install monitoring software. This is especially troubling as Vietnam has a thriving café culture, and many Vietnamese connect to public WiFi networks to use the internet.

To top things off, in 2013 the Vietnamese government introduced Decree 72, making it illegal to distribute any materials online that "harms national security” or “opposes" the government. This has led the UK government to classify Vietnam as a “country of concern” with regards to freedom of expression.

3. The infrastructure is not up to scratch

The final issue facing the digital economy in Vietnam is the infrastructure. Up until last year, the country was connected to the world wide web by just four internet cables: the Asia America Gateway (AAG) cable, which runs via Hawaii to the USA; the Intra Asia (IA) cable, the SMW3 cable (Southeast Asia, Middle East, Western Europe 3) and TVH cable (Thailand- Vietnam- Hong Kong).

Of the four, the AAG is by far the most important, holding the largest bandwidth and crucially connecting Vietnam to American websites. Unfortunately, it’s also the least reliable connection, and has already suffered one serious outage in 2017. Rather pathetically, the government often reports the problem being caused by sharks biting the cable, with connectivity issues sometimes lasting as long as three weeks.

Luckily, the infrastructure is improving. A seven-year-long project to build a cable connecting the whole of Asia Pacific was completed in October 2016. The cable saw investment from digital giants like Facebook and China Telecom, demonstrating the high levels of corporate interest in the digital economy of Southeast Asia.

In summary…

There’s a huge appetite for digital media and ecommerce in Vietnam that shows no sign of slowing down.

Unfortunately, it’s a case of demand far outstripping capabilities. The investment in new internet infrastructure is positive and shows that Vietnam is set to benefit from the digital revolution as much as its neighbours already have. But the increasingly strict digital surveillance laws passed by the government pose a bigger problem — and we simply do not know how far they will go.

It’s a frustrating climate for any digital company to work in. However, I would urge business owners to have faith that the burning desire of the Vietnamese people to be online will defeat anything the government might do to stand in the way.

This article is part of a series looking at digital in Asia Pacific. Thanks to my business partner Paul Hewett, who lived and worked in Vietnam for a period last year and contributed to this article.

And for more on this topic, read:

Frederic Chanut

Published 20 March, 2017 by Frederic Chanut

Frederic Chanut is the Managing Director of In Marketing We Trust, a Sydney-based Digital Marketing consulting firm. You can connect with him via LinkedIn.

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