Wednesday, June 25, 2008

Vietnam 2.0 – Martin Sorrell & The Siliconmunists Storm Ho Chi Minh City

Last week saw the invasion of Vietnam by WPP Group, with CEO Martin Sorrell leading the charge and taking Vietnam into its 2.0 phase, at least in terms of marketing and advertising as reported by the Telegraph in London.

"The world's second-biggest provider of marketing services by revenues is buying a 30 per cent shareholding in Vietnam Advertising Company, which is based in Ho Chi Minh City and is controlled by the Communist government."

And whilst this may not seem like a big deal in the rest of the world, it belies a larger strategy Sorrell has been executing globally by investing in emerging markets where growth rates are double-digitally wiping out anything that's happening currently in mature markets.

The wire service story, was picked up by the blog Vietnam Business Finance and reprinted exactly as it appeared in the Telegraph with the only omission being the word "Communist" as a descriptor for "government". I found it funny that the Communists edited out the word Communist in their story. Seems the editors understand it's not the most sales friendly term when you're busy attracting near to 20 billion a year in Foreign Direct Investment.

In another story on the same event, City A.M. cited the following:
Ho Chi Minh, Martin Sorrell, Siliconmunists, Vietnam, Vietnam Advertising Association, WPP
"The predicted annual US growth rate for the sector is 4.8 per cent while Vietnam checks in at a mighty 29.3 per cent. Sir Martin Sorrell, boss of advertising giant WPP, must have had sight of a draft copy. As Pricewaterhouse-Coopers’s global study came out, WPP was buying a large chunk of three Vietnamese media companies."

Having lived in Korea and having formed my own advertising agency, the very first 100% foreign owned agency in Korea in 1997, I watched as Ogilvy became the second wholly owned foreign agency in a market where foreign companies held only 5% and saw WPP's share of Korea's now 8 billion dollar marketing pie rise, just as one company, to 50%. That's 4 billion of which Sir Martin now takes a chunk of – and know that he will do the same thing here.

And this IS good news. The local market is so full of non-transparent, corrupt and just plain childishlHo Chi Minh, Martin Sorrell, Siliconmunists, Vietnam, Vietnam Advertising Association, WPP y managed communications companies and associations, that having WPP come in to put some rules of order to the industry is a welcomed addition. It will help me and every real professional in country. Call 090-234-9570. I have operators standing by.

In a separate but related story, Silicon Valley has established a beachhead here in Ho Chi Minh City, the developing world's largest Internet market.

The San Jose Mercury News reports:

"Vietnam's plugged-in generation: Internet boom creates Little Silicon Valley"

"Investors and Internet giants eBay, Yahoo and even Google are taking notice of Asia's latest Internet boom. Some 20 million Vietnamese are now online - up from 500,000 eight years ago. IDG Ventures predicts as many as 36 million Vietnamese will be using the Internet in less than two years. Next year, Vietnam will begin to roll out WiMax, so DSL-quality Internet experience will increasingly be available across the country."

"Out of all the developing countries in the world, Vietnam has the highest Internet penetration," said Santa Cruz native Bryan Pelz, chief executive of VinaGame, the country's most popular online game. "One of the reasons for that is its young population. The median age is 24."

Somehow, between Sir Martin Sorrell, Bryan Pelz, General Ho Chi Minh and the Siliconmunists it seems that Vietnam is now "the place to be". A few months ago Hugh MacLeod of mused to me that Vietnam was not a particularly brilliant place to be, but now, months on, I think it's more than fair to revisit that assessment and say that it may truly be a quite cool place to be. The 2.0 place to be.

For more on digital marketing and social networking see:

Xing vs. LinkedIn: Round II
Trial and Error: The New Normal
What's Wrong With My Social Networking? Xing vs. LinkedIn I
Low Tech Germany. Who Knew?
Advertising People and Blogs
How to Write the Best Blog in the World
What If Gutenberg Had a Blog?
If Blogs Are Free Does That Make Them Worthless?
Detri-Viral Marketing II: The Top 10 Social Media Blunders
Bright Lights, Big Internet and the WWED
Saigon Digital Marketing Conference Successfully Avoids Plumbers Convention
A Tale of Many Marketing Conferences
Detri-Viral Marketing I: How Web 2.0 Can Go Against A Brand
Marketing Predictions for 2009
Barcamp Saigon 2008
"Ignore Everybody" is Born: A Plug for Hugh MacLeod
Are the Bloggerati Missing the Market? Asia has Risen,
Into the Gapinvoid - Web 2.0 Social Networking Born 20 Years Ago


  1. Interesting....but see article in the Economist this week:

    Flu symptoms

    Jun 19th 2008 | BANGKOK
    From The Economist print edition

    Is dangerous overheating contagious?

    EVEN by the standards of Asia's booms and busts, the turnaround in Vietnamese investors' sentiment has been remarkable, veering from wild optimism a few months ago to deep pessimism today. Surging inflation—it is now over 25% year-on-year—has aggravated a slump in the Ho Chi Minh City stockmarket, previously one of Asia's most bracing (see chart). From worrying about upward pressure on the dong, the authorities now fear a currency collapse. Some economists worry this could spill over to other Asian countries where inflation is also reaching alarming levels.

    The central bank has announced a 2% devaluation, hoping to relieve the pressures on the currency. It also raised its base interest rate from 12% to 14%. The moves, however meek, briefly supported the stockmarket, which had fallen for 25 trading days in a row. But offshore trading in dong futures is pricing in a further devaluation of around 30% within a year.

    It has been clear for months that Vietnam's economy is overheating. The trade deficit from January to May was over $14 billion, about the same as for all of 2007. Like the stockmarket, property prices have tumbled, leading to fears about the country's banks, which lent heavily for speculation in both assets. The government is already thought to be providing discreet liquidity support to a dozen small banks. For all these concerns, foreign investors still see Vietnam as “the next China”. It is the Vietnamese who are gloomy, and fears of hyperinflation run deep after some bruising encounters in the past.

    Already, there are signs that people are hoarding gold. Tim Condon, an economist at ING in Singapore, notes that although Vietnam imported 43 tonnes of gold in the first four months of this year, the precious metal is trading in Ho Chi Minh City at a big premium to the international price.

    Meanwhile, the government is trying to curb currency speculation by restricting foreign-exchange booths from selling dollars. To reduce imports, it is said to be allowing the central bank to sell dollars only to businesses that have its approval for their foreign purchases (such as buying capital goods). This, however, may push others towards the black market or offshore, further undermining the credibility of the official exchange rate.

    Despite the recent increases, real interest rates remain negative. Meanwhile, a daft law bans banks from pricing loans at more than 150% of the base rate and this has all but stopped lending. That, in turn, has increased the risk of a hard landing, says Dominique Dwor-Frecaut, an economist at ABN AMRO in Singapore: better to let the market set the price of credit.

    To make matters worse, the government has stopped publishing timely figures on the banking system and foreign reserves. Word is that the reserves are not far short of the $23 billion-worth the country had in December, despite its efforts to shore up the currency. But the absence of official figures “makes people think the worst”, says Mr Condon.

    Could Vietnam's difficulties be a harbinger of trouble elsewhere in Asia? The optimists say no, arguing that inflation could peak later this year, the government's measures could restore lending and imports to sensible levels and a moderate devaluation could relieve the pressure on the dong. Moreover, Vietnam's current-account deficit—13% of GDP, according to the IMF—is one of the widest in Asia. Its currency problems are in a category of their own.

    However, Vietnam serves as a timely reminder of how quickly inflation can get out of control, and the speed with which that can shatter confidence. Policymakers across Asia should be taking note.

  2. Damn straight Freeduk! But then again, that's what "emerging markets" are all about.

    The 25% inflation is killing all of us and nobody's getting a raise. My milk, my petrol, my house rent goes up and clients are cutting budgets. What's a bloke to do?

    Stay tuned!

  3. Very interesting article Dave about the 30% buyout.

    I'm hoping that the amateurs get pushed aside and will completely crushed.

    The inflation is being caused by amateurish behavior in large SOEs (and pretty much every company) into sectors that they know nothing about, but can access only because of connections or by speculation.

    Vietnam has such a high population but such poor marketing exposure. I hope that changes soon.

  4. Hey hey, JJ. Dinosaurs die slowly. I saw this silly business in Korea in 95, right before the financial meltdown. Sometimes you need a fire to clear the deadwood. This crap will pass, and then we'll have a bunch of new corporations doing still silly, but somewhat better shit. Progress. It's a bitch.


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