Company Overview

Company Description

We are Vietnam’s leading, homegrown digital ecosystem, with diverse and competitive product offerings across games, communications and media, fintech and other opportunities. We are the number one mobile games publisher in Vietnam, with our 2022 mobile game gross revenues representing 39.2% of Newzoo’s estimate for Vietnam’s mobile games market for 2022. Our Zalo, Zing MP3 and Bao Moi applications are the number one messaging, music streaming and online news applications, respectively, in Vietnam based on MAU in 2022, according to F&S.

Founded in 2004 as a five-person start up, we have grown and evolved into a national technology champion with a large user base and high engagement in Vietnam. Our strong online game publishing capabilities have allowed us to extend our reach to countless users beyond Vietnam. Since the inception of our company, our mission has been to “Build technologies and grow people. From Vietnam to the world.” By adhering to our mission, we have become a Vietnamese technology unicorn.

We believe that we have achieved many “firsts” throughout our corporate journey. We pioneered the era of hardcore RPGs in Vietnam by publishing Legend of Swordsman on personal computer (“PC”) in 2005. We launched the first widely adopted communication application developed by a Southeast Asian technology company in 2012. We were the first Vietnamese company to successfully publish online games in a foreign market. We have strategically expanded into new business lines, including mobile payments in 2017 and cloud services in 2018.

Today, our business comprises four segments: Games, Communications and Media, Fintech and Long-Term Opportunities, which together form a powerful platform to serve users’ and businesses’ daily needs. Our services are supported by our proprietary digital infrastructure and technology platform, a unified advertising network and large amounts of data insights accumulated through years of operations.

Games

Our Games business commenced operations in 2004, and consists of both game publishing and development.

We publish hardcore and casual online games that are developed by third-party game developers, such as Tencent Games, Kingsoft, NetEase, Perfect World, Riot Games and Take-Two Interactive, in Vietnam, other countries across Southeast Asia, Taiwan, Hong Kong and Macau. Over time we have vertically integrated into game development. Through our ZingPlay platform, we develop and publish popular mobile card and board games for casual gamers across Vietnam, Southeast Asia and LatAm, among others. We also self-develop games targeted at the global hardcore gamer market, which will be a core focus for us going forward.

As an early mover in game genres such as RPGs and Battle Royale, we have introduced and published many of the most popular global titles in Vietnam and helped grow their popularity within Vietnam and elsewhere. Our most popular mobile games in Vietnam include JX1M, licensed from a Kingsoft affiliate, and PUBG Mobile, developed by Tencent. JX1M, which made its debut as the second ranked app in Vietnam on both the Apple App Store and Google Play Store when it was launched in 2021, is part of the long-standing and popular JX Mobile RPG franchise that was launched in 2016. PUBG Mobile ranked as the second most popular Battle Royale game by MAU in Vietnam in 2021, according to Newzoo. In January 2023, we obtained publishing rights for League of Legends, a popular MOBA game, in Vietnam. Leveraging our strong publishing and marketing capabilities, as well as our unrivaled local market knowledge and technical know-how, we have successfully built strong and long-standing relationships with global game developers.

Leveraging our experience working with global developers, we have also established in-house game development capabilities. This has allowed us to diversify the types of games we offer and enhance the strength and resilience of our Games business. We have self-developed and published over 60 different mobile card and board games targeted at casual gamers through ZingPlay, which is the mobile casual game market leader in Vietnam and ranked first in the mobile card games genre by MAU in LatAm in 2021, according to Newzoo. More recently, we have been developing our own games targeted at the hardcore gamer market. We anticipate these games will be comparable in complexity and storyline to the games that we have historically published for third-party game developers, and that they will increase awareness of our brand outside Vietnam and diversify our Games business.

To supplement organic growth in our Games business and further improve our IP library, game development expertise and geographic reach, we have made strategic investments in independent game studios such as Dorocat and Haegin, located in Hong Kong and South Korea, respectively. We have also established Galaxy Game Studio, an in-house game studio located in Beijing, China, and Mad Poly Games Studio, an in-house game studio located in Vietnam.

Our Games business has a strong track record of delivering steady growth and generating profit. We attribute this to our diversified game portfolio across multiple genres and markets and the long-standing popularity of our key titles. Our Games business contributed 80.0% and 81.7% of our revenues in 2022 and the six months ended June 30, 2023, respectively, and forms the bedrock of our ecosystem due to its profitability. We have used the cash generated from our Games business to organically grow our other businesses. We believe our established and diversified user base, the long-standing popularity of our key titles and strength in game publishing and development will continue to support the growth in our Games business, and provide a strong foundation for our ecosystem as we move forward.

Communications and Media

Leveraging our strong branding and deep understanding of Vietnamese internet users, we developed the Zalo application in 2012. Zalo started off as a peer-to-peer communication focused application. It has evolved into a multi-featured platform that provides users with functionality to connect and interact through a variety of different means, including chat, audio and video calls, user timelines and stories. Zalo’s DAU/MAU ratio increased from 67.7% in Q1 2020 to 77.7% in Q2 2023, demonstrating high user engagement as well as robust growth in recent years.

In addition to Zalo, we also provide media streaming and news aggregation services through standalone applications such as Zing MP3 and Bao Moi. Zing MP3 is a music streaming application we developed in 2007, attracting users across all age groups, with Gen Z and Millennials being highly engaged on the platform. In the second quarter of 2023, Zing MP3 had 28.7 million MAU and included songs from Sony and Universal’s music libraries. Bao Moi aggregates and curates news for readers from over 100 different sources, providing one-stop access to over 4,000 Vietnamese language news and entertainment articles a day. In 2021, 2022 and the six months ended June 30, 2023, we had a total of approximately 48.2 million, 49.7 million and 47.2 million daily content views, respectively. Our Communications and Media platforms aim to address a unique daily need of our users, and have significant cross-selling potential with each other and other platforms in our digital ecosystem.

We monetize our Communications and Media business primarily through online advertising. Our advertising platform enables advertisers to place ads under different formats across the various platforms we operate and reach targeted groups of users based on customized attributes. We are able to deliver relevant advertisements and content recommendations to our users based on data insights without sacrificing their user experience. In June 2022, we began implementing paid service packages for Zalo official accounts operated by businesses.

We also offer digital creative content agency services, built upon our innovative culture and deep understanding of our users accumulated over the years. Adtima, our creative advertisement agency, was number one among local advertising firms in Vietnam, based on revenue in 2022, according to F&S. We believe our advertising services allow advertisers to effectively increase brand awareness at scale, improve lead generation and conversion and provide promoted content that resonates with our users. In addition to advertisements, we also offer value-added services for business customers, including lead generation, customer acquisition and notification services. We may explore further monetization opportunities in the future.

To supplement the user experience of our Communication and Media applications we have developed Kiki, a voice-controlled assistant. In 2020, Kiki, through the Zalo application, was successfully integrated into a car for the first time. We believe that Kiki, as a Vietnamese-speaking virtual assistant, is one of the first for the Vietnamese market and we expect it to increase stickiness to Zalo as users rely upon it for an increasing number of their daily online needs.

Our Communications and Media business generated operating segment profit/loss of VND51.6 billion in 2020, VND110.8 billion in 2021, VND279.9 billion (US$11.8 million) in 2022 and VND(153.0) billion (US$(6.4) million) in the six months ended June 30, 2023. Our Communications and Media business contributed 21.4% and 15.0% of our revenues in 2022 and the six months ended June 30, 2023, respectively.

Fintech

ZaloPay, our Fintech application, commenced operations in 2017 and is the fastest growing of the top-five mobile payment applications in Vietnam and ranked among the top-three locally-developed payment applications in Vietnam in terms of MTU in 2022, according to F&S. Between the first quarter of 2020 and the second quarter of 2023, ZaloPay’s average three month MTU and TPV multiplied by 3.1 times and 6.9 times, respectively. ZaloPay’s functionality includes digital wallet services that allow consumers and businesses to make and receive electronic payments through the ZaloPay application. We also operate the ZaloPay payment gateway for clearing online and offline transactions using traditional payment networks such as Visa and MasterCard. In addition, we have partnered with VietQR to allow our customers to transfer money between bank accounts associated with VietQR through ZaloPay by scanning a QR code.

ZaloPay has been integrated with a variety of online and offline merchants and has increased the number of use cases, including entertainment, food and beverage, transportation, e-commerce, mobile telecommunications and bill payment. ZaloPay is connected to most domestic banks and is fully integrated with our Zalo application, allowing Zalo users to make peer-to-peer payments in Zalo chat, and so ZaloPay provides an online sales channel for merchants. Recently, ZaloPay partnered with Grab to make ZaloPay’s digital wallet available for Grab Vietnam’s services, including transportation, food, grocery and parcel delivery. We have also partnered with TikTok to support payments for transactions made within the TikTok application. In June 2023, we became the first Vietnamese digital wallet provider to partner with Shopify to allow businesses using Shopify to use ZaloPay as a direct payment gateway.

With the ZaloPay platform, we aim to reduce the friction of cash transactions and address the needs of Vietnam’s large underbanked population, serving as a gateway to accelerate financial inclusion, and further empowering our user and merchant base. We are also collaborating with banks and other financial institutions. We have collaborated with financial institutions to support a flexible term savings account and micro revolving credit product. We have also collaborated with DNSE Securities in Vietnam to support a securities trading account on ZaloPay. We intend to collaborate with banks and other financial institutions to explore providing products such as additional fintech services, including wealth management products as well as lending and insurance as the regulatory environment permits.

Long-Term Opportunities

VNG Cloud is our newest business, which commenced commercial operations in 2018. VNG Cloud is a cloud-based platform that enables organizations of all sizes to digitally transform. VNG Cloud combines powerful, elegant and easy-to-use functionality that is designed with the security, scalability and administrative controls required by information technology departments. We developed VNG Cloud to enable corporate users to leverage our cloud infrastructure regardless of their file format, application environment, operating system, device or location. We have recently constructed a new data center that commenced operations in November 2022 to support the expansion of our business and VNG Cloud.

In the past, we have grown our business through minority investments in other technology companies that we believe have the potential to become leaders in their industry or could grow to have synergies with our operations. Our investees are selected to provide services complementary to our core businesses, additional R&D capabilities or capture potential market opportunities in the future. In the current economic climate, we have reassessed our strategic plan and at this stage do not plan to actively pursue additional minority and strategic investments, although we may in the future pursue potential acquisitions or investments which align with our strategic criteria.

We have self-developed AI products in addition to Kiki. One of them, TrueID, is an eKYC product suite for customer identification and verification that uses biometrics and AI technologies. We have also developed Prism, an internet of things controller for commercial settings which enables users to control multiple devices from one platform.

Value Proposition of Our Ecosystem

We strive to benefit all participants in our ecosystem. For users, we provide a plethora of products and services that bring about convenience, fun and quality content to help transform their lives. For our partners, we help them achieve effective user acquisition, engagement and retention, innovative content curation and efficient operations.

We offer a suite of diverse and comprehensive offerings and services to our ecosystem participants, which we believe supports our market position and provides a strong foundation for continued growth while creating barriers to entry for our competitors.

For Users

We are transforming and connecting our users’ lives by providing them with digital empowerment, including platforms for games, communication, music, news and more. We are at the forefront of publishing and localizing internationally acclaimed games in Vietnam and across Southeast Asia. Zalo was the most popular messaging application in Vietnam by MAU in 2022, according to F&S. Zalo provides functionality for personal, commercial and public sector users to connect, interact and build relationships. Zing MP3 was the number one music streaming platform and Bao Moi was the number one online news platform in Vietnam based on MAU in 2022, according to F&S. Zing MP3 delivers a differentiated and premium user experience by leveraging our vast, licensed music library. Bao Moi offers cultural enrichment to users by providing quality and customized news content. ZaloPay provides a convenient, reliable and efficient payment infrastructure in Vietnam where there is a large underbanked population who lack access to financial services. We believe that our ecosystem has become deeply ingrained in users’ daily lives as we address their online needs. We serve our users with an unwavering dedication to product innovation and improvement, a core strength enabling us to continue driving user engagement, retention and growth.

For Partners

We create value for businesses and see them as our partners for success. Our partners include game developers, merchants and government agencies using Zalo’s official and verified accounts, payment partners, cloud’s corporate customers, advertisers and content creators. For game publishing, we work closely with global game developers to provide them with insights and the technical support needed to successfully develop and localize a game’s content for the markets in which the game is to be published. Advertisers leverage Zalo’s advertising solutions and data insights to effectively target users within our ecosystem. Merchants use ZaloPay to reduce transaction friction and improve operational efficiency. ZaloPay has recently partnered with Grab to make ZaloPay’s digital wallet available for certain of Grab Vietnam’s services. We have also partnered with TikTok and Shopify to expand access to our payment services. Enterprises and organizations have adopted VNG Cloud to digitize their business and upgrade their digital infrastructure. Content creators publish their works on our communications and media platforms to generate traffic and make a living. We strive to empower our partners across multiple segments of our ecosystem, while the success of our partners in turn accelerates our ecosystem’s growth and user base expansion, which then helps attract more partners to our ecosystem, forming a self-reinforcing growth engine.

Our principal executive offices are located at Lot Z06, Street 13, Tan Thuan Dong Ward, District 7, Ho Chi Minh City, Vietnam. Our telephone number at this address is +84 28 3962 3888. Our registered office in the Cayman Islands is located at the offices of Walkers Corporate Limited, 190 Elgin Avenue, George Town, Grand Cayman KY1-9008, Cayman Islands.

Our main website is www.vng.com.vn. Our agent for service of process in the United States is Cogency Global Inc., located at 122 East 42nd Street, 18th Floor, New York, NY, 10168.