Vietnamese tech giant VNG recorded better-than-expected earnings and plans to accelerate its core businesses of gaming and digital content creation.
The growth of key businesses
According to VNG’s audited financial statements from 2017, the corporation achieved a net revenue of VND4.26 trillion ($183.18 million) in 2017, up 41 per cent against 2016. VNG also made a pre-tax profit of VND1.15 trillion ($50 million) and an after-tax profit of VND938 billion ($40.78 million), up 72 per cent against 2016.
As a result, VNG has broken its all-time inhouse profit and revenue records since its establishment in 2004.
VNG is one of the few companies reporting healthy performance in digital content business. The company reported the accumulated profit of VND4.6 trillion ($200 million), which is 13.6 times higher than its charter capital. While many public and state companies are facing bad debts, VNG has no need to take out bank loans as its cash balance accounted for 55.9 per cent of its total assets.
VNG’s game business contributed the lion’s share of its revenue with VND3.58 trillion ($155.65 million) in 2017, a 41 per cent increase from the VND2.53 trillion ($110 million) in 2016. The company holds 35 per cent of the PC game market and 50 per cent of the mobile game market in Vietnam. Mobile game revenue has achieved an annual growth rate of 80 per cent, making up 79 per cent of VNG’s total gaming revenue.
Le Hong Minh, CEO and co-founder of VNG, said that the company saw potential growth in the PC and web games market yearly as users are increasingly switching to mobile games. He further noted that there is ample room for the development of gaming and digital content in the near future. VNG will continue to pursue the Go Global strategy and expand its gaming business to foreign markets like Thailand, Myanmar, Singapore, Indonesia, and Japan.
The expansion plan is expected to help VNG sustain its growth over the long term. Nevertheless, this strategy will affect VNG’s profit target in 2018 as the it will have to spend more on venturing into foreign markets.
Another key business is VNG’s digital content, like over-the-top (OTT) apps and entertainment portals. This area has stable growth rates, with advertising revenue rising by 45 per cent to VND600 billion ($26.09 million) in 2017. VNG also plans to raise its digital content investment in the coming time. VNG’s products are currently leading the market in terms of number of users and frequency of usage.
VNG ventures into new fields
In 2017, VNG also accelerated the development of its mobile payment platform to capitalise on the promising yet underexploited market. Minh noted that mobile payments only account for 1 per cent of total transactions in Vietnam.
Therefore, VNG will ramp up investment in technology and customer experience, while expanding the user base for its mobile payment app called Zalo Pay. The plan is part of VNG’s business strategy in the next three to five years. However, this strategy will likely affect VNG’s short-term profit margins.
In addition, VNG is a major investor in Vietnam’s leading e-commerce platform Tiki.vn. Tiki has quickly scaled up its operations and quadrupled its total merchandise after two years of receiving investment from VNG. The value of Tiki’s shares has increased considerably as several foreign investors such as JD.com have poured capital into the e-commerce platform.
In the years to come, VNG will also develop new technologies, such as Artificial Intelligence, Big Data, machine learning, and blockchain to keep up with global trends.
In addition, VNG will focus on the main areas of gaming, digital content, e-wallet, mobile products, e-commerce, as well as creating an ecosystem of its products. The company also plans to diversify its product portfolio in order to secure a stronger footprint in the local and foreign markets.