Is VNG Taking a Bold Step or a Gamble with its Ambitious Ventures?

VNG has unveiled its three new growth strategies: AI, Go Global, and Platform. The company has ambitious plans to become a pioneer and leader in Vietnam and the region, with a particular focus on AI. As the world undergoes an AI revolution, is this goal within reach?

0
70

To answer this question, we must first examine VNG’s current assets. Two decades ago, VNG began as an online gaming business and quickly rose to success with titles that became icons of Vietnam’s gaming and internet industry, such as ‘Vo Lam Truyen Ky’. It’s unclear how they did it, but this young startup with just a handful of employees became the first Vietnamese company to successfully negotiate with global gaming giant Kingsoft to bring licensed games to Vietnam. ‘Vo Lam Truyen Ky’ saw an impressive 120,000 account registrations for its Closed Beta within just 48 hours of the website launch, and it peaked at 20,000 concurrent players within a month.

While riding high on the success of PC games, VNG was also one of the few domestic enterprises to make a complete shift from PC to mobile. They consecutively launched familiar applications and platforms such as Zing MP3, Bao Moi, and especially Zalo, which is currently Vietnam’s most popular communication app, surpassing even global applications like Facebook Messenger, Viber, and Instagram.

By 2018, according to the founder and CEO, Le Hong Minh, at the 2024 Annual General Meeting, VNG ventured into a new business area: cloud computing. They then bet on the electronic payment and fintech market with Zalopay.

“We have not only maintained our core products and services from the past two decades but have also continuously innovated and adapted new technologies to keep up with the latest global tech waves,” said Mr. Minh.

However, the reality is that the gaming business, their first core segment, remains VNG’s primary revenue generator. Zalo has been actively introducing business models and developing fee-based features to create value for enterprise users or those with specific needs. The goal is to become the number one platform for users to interact with enterprises in Vietnam. Zalo currently has 75.8 million monthly active users, with a 150% year-on-year growth in revenue from B2B services compared to 2022.

Zalo is Vietnam’s most popular communication app.

“Zalo has been profitable, and its revenue has been growing well since 2019. VNG’s investments in Zalo focus on building long-term revenue streams. We believe that charging for services and providing value-added services to enterprises will generate good and stable revenue in the future,” revealed Mr. Minh.

However, the game seems more challenging when it comes to Zalopay. In 2021, Zalopay recorded a net loss of over VND 1,200 billion, a loss of over VND 1,300 billion in 2022, and a loss of VND 721 billion in 2023. The electronic wallet market is not easy either. After Grab’s departure from the e-wallet Moca, only a few significant players remain in this market, such as Momo, Zalopay, and VNPay. “We aim to maintain growth while reducing investment levels to optimize efficiency. Zalopay’s focus is to develop the app beyond the limits of an e-wallet, such as enhancing the multi-purpose VietQR payment code and expanding the payment scope,” said Mr. Minh. With this strategy, VNG expects Zalopay to grow in the right direction and reach breakeven soon.

Pursuing Bigger Ambitions

Despite not having the most impressive financial indicators, VNG remains determined to enter the AI and data center arenas, which require substantial resources. However, Mr. Minh affirms that investing in Zalo, electronic payments, AI, and foreign markets is necessary for VNG’s sustainable growth.

Among these, AI is the top strategic priority, as it will “profoundly transform the global economic landscape over the next 10-20 years.” As early as 2023, VNG recognized the importance of investing heavily in AI, and this direction has been consistent across all their activities and development strategies. VNG is one of the few enterprises investing in AI across all three layers: Infrastructure, Platform, and Application. They are accelerating decisively in the infrastructure layer, sharing a vision with NVIDIA founder Jensen Huang about the potential of AI infrastructure and AI Cloud to revolutionize the world.

On June 24, GreenNode, VNG’s AI Cloud business unit, collaborated with NVIDIA and STT GDC to launch a large-scale AI data center in Bangkok, Thailand. They provide a comprehensive range of services, from infrastructure to AI applications, for global customers. This is one of the first large-scale AI Cloud infrastructures in Southeast Asia, operated by the GreenNode team. Despite being established only in November 2023, GreenNode is already a preferred cloud service partner of Nvidia.

“VNG aims to lead in investing, implementing, commercializing, and profiting from AI,” emphasized Mr. Minh. This is evident in GreenNode securing multiple initial contracts worth millions of dollars with international clients, a commercialization speed that their partner STT GDC described as “exceptionally fast.”

Similarly, with data centers, VNG is adopting a well-thought-out strategy. Sharing insights on this strategy, Mr. Minh explained that data centers are the backbone of any internet business, but VNG is aware that they are not a large-scale data center operator. “The data center business is global, and even the biggest players like Microsoft and Amazon have a strategy that includes both building their own facilities and renting from others to save resources and construction time.” Additionally, data centers require enormous capital investments. Therefore, VNG’s challenge is to ensure a global presence while minimizing investment levels. Hence, partnering with a strong player like STT GDC, Asia’s largest data center developer with 95 data centers worldwide, is a smart move. This collaboration ensures VNG doesn’t expend excessive resources while leveraging STT GDC’s infrastructure to support its business.

STT VNG Ho Chi Minh City 1 (formerly VNG Data Center, located in Tan Thuan Export Processing Zone)

Earlier in May 2024, VNG and STT GDC officially announced their partnership to build and operate internationally-standard data centers in Ho Chi Minh City. This collaboration includes the continued operation of the STT VNG Ho Chi Minh City 1 data center (formerly VNG Data Center) and the establishment of a new data center, STT VNG Ho Chi Minh City 2, expected to be operational in early 2026.

As VNG confidently moves forward with its infrastructure strategy, including data centers and AI Cloud, it is also quickly entering the AI platform and application layers. In December 2023, Zalo introduced a large language model with 7 billion parameters, assessed to have achieved 150% of GPT 3.5’s capability according to the VMLU Vietnamese Language Model Evaluation Standard. In the application layer, GenAI (generative AI) is being actively utilized to enhance user services. A notable example is AI Avatar, Zalo’s first GenAI application, which attracted 6.8 million users in 2023. The smart assistant Kiki has been installed on 600,000 automobiles and records approximately 230,000 daily accesses.

Large Language Models led the Kahoot challenge, organized by Tinhte.vn.

“I think the challenge for us, like any other tech company or startup, is to balance following the hottest trends and truly focusing on a few things we believe we can do well, build credibility, and sustain long-term business,” shared Mr. Minh at the Saigon Summit in late May. The VNG founder understands that many enterprises will invest in this trending field, but VNG’s strategy is clear. They aim to master the infrastructure, generate immediate revenue and profits, and establish themselves as a global enterprise with a global market and customer vision. This is how VNG plans to boldly catch up with the AI wave and even lead in AI in the region.

VNG has made significant efforts, but technology is a ruthless and ever-changing arena. How far VNG can go and whether they will achieve their ambitious goals remains to be seen.

You may also like

Driving Digital Transformation in the HR Industry

Thanks to technology, the labor management tasks, procedures, and administrative processes that used to be done manually will be significantly reduced.

Cut Costs Immediately with AI: Spend $25 on ChatGPT to Reduce Employee Salaries by $500

This is an example of applying AI (artificial intelligence) in the Vietnam Blockchain Association (VBA) shared by Mr. Phan Duc Trung – VBA Permanent Vice Chairman, in the talk show “Journey to Mars and Our Future”.

Viettel AI App Gifts for Customers

Viettel continues to surprise by applying artificial intelligence (AI) to product design, services, and customer experience activities. And now, they have integrated this innovative technology into their Tet gift giveaway program, with customers being able to participate by texting KM to 191.

Former startup AI COO raises over $10 million in Silicon Valley: “Surpassing the AI Round, your profile is the key to accessing employers”

According to Ai Huynh, AI will “replace” humans in some tasks but at the same time create many new professions.