DFJ VinaCapital heats up Vietnamese teen social networking with Yeah1 investment

Vietnamese media reported on May 28, 2008 that DFJ Vinacapital has invested an undisclosed amount into SuperStar, the company behind the teen forum Yeah1. This has a little bit heating up the teen segment competition in Vietnam, but it seems there will be a lot of difficulties ahead for the players. It would be interesting now to look at the evolution of the teen segment in Vietnam and what trends are taking shape in this heavily competitive category.


Evolution of a hot segment


Vietnam’s first successful teen website would be Loitraitim (words of love hearts), which dated from 2002 from YoMost, once the coolest brand in Vietnam’s recent marketing history. With a very appealing tagline “A Very Yomost Style”, YoMost, owned by DutchLady/Foremost Vietnam, stormed the Vietnamese market with a wonderful through the line marketing campaign that quickly made YoMost the ultimate Vietnamese teen icon. Loitraitim, a teen website then, was quickly absorbed by YoMost branding team, then redesigned, and relaunched in a Valentine promotion campaign. Teen-oriented design with youthful color palette and entertainment news update, low competition and abundant marketing budget injection from YoMost branding team has quickly catapult Loitraitim to become the leading teen website at that time.


However, in the following years, Loitraitim was quickly dethroned by many amateur music sharing websites. Vietnamese teenagers flocked to these websites to listen and download online music, making online music the most trafficked segment in teen category. From 2004 to late 2006, amateur music websites made their names into most of the top 100 websites in Vietnam, with some representatives like Nghenhac.info, HoangClub.info, Nguoidaukho.vn and Vui.vn etc.


Then came in web 2.0 big players in early 2007. On one hand, music vertical search engines, including Zing, Baamboo, 7sac, Socbay, Uizaa with better services and user experience has gained most of the traffic from amateur online music. On the other hand, social networking services like Cyworld, Yobanbe, Timnhanh Cafe, MyLife has attracted a good number of teen users from web 1.0 players.


In early 2008, more bad news for Vietnamese pirate online music websites came when Ministry of Information and Communications issued a document requiring all pirate music websites to stop uncopyrighted online music services and strictly follow the law on intellectual property. So far only a few online companies which are heavily financed could afford the price tag by Recording Industry Association of Vietnam (RIAV), rumored to be in billions of Vietnamese dong per year, including Vui.vn (owned by 24h Group), Yeuamnhac (an invested company of IDG Ventures Vietnam), Pops Media (still in preparation for a heavily-clamored new online music service) etc..


Teen segment is a hard sell in Vietnamese online advertising space. Though teen oriented websites in Vietnam recorded a good user base, with monthly pageviews from a few hundred thousands to some millions, monetization from these website are still a far future. Major advertisers that have ventured into teen website in their media mix remains less than a dozen. Almost all teen websites are operating in the red, mostly financed by VCs or big Internet players. This is forecast to continue in the near future.


Future trends


Social Networking is very popular among the teenagers worldwide and most of them spend on an average one hour daily to either post or read postings. In the United States, MySpace.com, Facebook.com, Xanga.com, Tagged.com, Friendster.com, Twitter.com etc. are the most popular social networking services among the teenagers. Video and photo-sharing websites like YouTube.com and Flickr.com are fast catching on with the teens, which are creating profiles and sharing their videos and photo collections. iTunes is another favorite of the teens. In South Korea, Cyworld social networking services was phenomenally successful with more than 20 million members. Similarly, in China the IM-based social networking services QQ (Tencent) was hugely successful with 2007 revenues of more than $523 million with net income of more than $214 million, which translates to a whopping profit margin of 42% and a $11 billion market capitalization.

Inspired by this worldwide social networking craze, Vietnamese teen segment with a 20-plus million population is a lucrative market for Internet services providers. I personally think the segment, though facing difficulties adopting international business models, building platform, bootstrapping, scaling and finding a relevant monetizing/advertising platform, will finally have their days in the next few years. Vietnamese teen websites are falling into the following categories:

      Teen Content Portal: These include Hoahoctro, the online version of Hoa Hoc Tro, Vietnam’s No.1 teen weekly magazine, with a circulation of more than 100,000 issues per week. Another newcomer is Kenh14.vn within the ChannelVN.net portal project by VC Corporation, the famous 2-million baby IDG Ventures Vietnam company. Since its debut early this year, Kenh14 has grown quickly with online fashion photo features and sensational sexual health articles. Other old players like Loitraitim are becoming obsolete, due to lack of innovation.

       Teen Online Services: These include online music and movies, with representatives as mentioned above.

       Social Networking: Players include Cyworld Vietnam, Yobanbe (within Zing portal from VinaGame), Timnhanh Cafe (another DFJ Vinacapital investee). Vietnamese facebook clones, including Tamtay, Guongmat, FaceViet and the incoming Zoomban and I-pro.vn from VC Corp. Disclosure: my company, Vinalive, after the biggest upgrade this year for women social networking PhunuNet in this coming June will also conduct a small facelift for the youth social networking MyLife.vn then. The competition therefore will only accelerate, especially when Friendster has just entered Vietnamese market this month (I will detail in an upcoming article).

It would be exciting to see what kind of business model DFJ Vinacapital investee Yeah1 will come up with. From my perception, Yeah1 looks more like a content provider (they are busy making a TV Show on Saigon Cable Television, a channel with very few audience and almost no advertising revenues). My prediction: with DFJV’s investment, Yeah1 will upgrade their platform to become a social networking services.

However, their current platform, which is much like an amater forum, will take them a lot of time and energy while other carefully prepared rivals are already running around in the street. For DFJV, this will buy them more on audience and media inventory rather than a strong, disruptive platform and a well-positioned powerful brand. Building these will not be an easy task for Yeah1.