HO CHI MINH CITY -- It is a hazy afternoon in Ho Chi Minh City, and Vuong Quang Khai has just pulled up in a compact SUV to introduce Nikkei Asia to Kiki, his company's artificial-intelligent voice assistant.
Khai is senior executive vice president at VNG, a gaming startup-turned-tech conglomerate that has become Vietnam's first unicorn. The Columbia-educated computer scientist also heads Zalo AI, the VNG division that developed Kiki, which he was keen to showcase.
"Play Taylor Swift music," he said in Vietnamese, driving past a planned community that is home to millionaires on the way to the company's sprawling headquarters. The dashboard lights up. A melody starts to play. ("Nice to meet you / Where you been....")
Kiki is up on current events, too. When asked who is Vietnam's prime minister, it replies with news just announced that week: "Pham Minh Chinh."
The virtual assistant is part of VNG's push into AI, a move that Khai says is essential for the company's future.
"If we don't keep up with the next wave, we could become irrelevant," he said.
Over the past decade and a half, VNG has diversified into cloud computing, ads, digital payments and media, and built up one of the biggest digital user bases in the country.
Its Zalo chat app has 62 million users, putting it behind only Facebook and YouTube in terms of popularity in the country, according to We Are Social. This makes it a rare example of a local player that has bested foreign rivals -- in the rest of Southeast Asia, the most popular messaging apps are imports, such as Line or WhatsApp.
The messenger is held up as Vietnam's most likely contender for "superapp" status, like those of Grab and Gojek, whose ride-hailing apps now offer a full suite of services to users across Southeast Asia.
When asked about the superapp hype, Khai -- locally known as the father of Zalo -- said he did not intend for the chat app to be a "gatekeeper" that determines who can enter Vietnam's vast market.
Khai said Zalo should only become a superapp if that is what is best for users, and that adding too many functions could make it unwieldy.
"If you want to be everything, then you may be nothing," he said, sitting on a grassy terrace at VNG's headquarters as the sun set.
He argued that, outside China, there is not really a place where one app has become truly dominant.
Still, if there is one technology that has become a part of daily life in Vietnam, it is Zalo. It boasts 39 functions (when combined with the pay feature) that allow users to do everything from make in-store purchases and buy flight tickets to pay school fees and access government services. The app is also a gateway for numerous brands to connect with customers. VNG struck a deal to allot one button to South Korea's food delivery company Baemin, for example.
While Khai may be ambivalent about Zalo becoming a supperapp, he is adamant about one thing: "The next wave is AI. And we should invest."
Vuong Quang Khai, executive vice president at VNG, a tech corporation and Vietnam's first unicorn, at headquarters in Ho Chi Minh City, Vietnam in April 2021.
© Lien HoangIn December, Zalo AI introduced Kiki for smart speakers, saying it was built on technology similar to Amazon's Alexa and Apple's Siri, but in Vietnamese.
Zalo is in talks with a leading dashboard company, which Khai declined to name, to unveil Kiki for the mass car market by the third quarter of 2021.
His team's AI work ranges from facial recognition, used by Viet Capital Bank to verify clients, to Kiki's playlist, which was trained via the massive song library of another VNG business, Zing Music. The team also is beta testing a service to transcribe audio messages on Zalo chat.
Zalo's reach has helped VNG attract international backers, including two Singapore state funds, Temasek and GIC, Goldman Sachs, and two funds believed to be owned by China's Tencent Holdings, valuing it north of $2 billion.
Tencent, the world's biggest game publisher and the creator of WeChat, has other ties to VNG. Until June, its President Martin Lau sat on the board of VNG, which also pays the Chinese company for software and technical services.
VNG has also flirted with listing its shares on the Nasdaq, though an IPO has yet to materialize. The company signed a memorandum with the stock exchange operator to prepare for an initial public offering in 2017. That year VNG founder Le Hong Minh flew to New York, timing his trip to coincide with the U.S. visit of Vietnam's prime minister, who attended the signing ceremony. It has been mostly crickets ever since, though Minh has attributed the delay to Vietnamese regulatory issues.
But while VNG is not lacking in ambition, Bristol University finance lecturer Tuan Ho says current and future investors will want to see if VNG's own investments will pay off. The internet company poured millions into e-payments and e-commerce, which have operated at a loss for years.
"The question is whether they can tap into areas that can be hugely profitable," Ho said.
Since its founding, VNG has become a tangle of more than 20 disparate services, loosely grouped as fintech, cloud, games and platforms like the flagship chat app. Some of its platforms gained little traction, such as its own e-commerce site, social network, and search engine. Others did not get off the ground, as VNG has not been able to obtain a banking license to offer loans or other financial products.
The company's heft, Ho added, also exposes it to antimonopoly scrutiny of the type dogging Big Tech in Europe and the U.S.
VNG's businesses overlap in three ways. First, there are the 39 features on Zalo and ZaloPay, which also link to Zalo Shop for third-party sellers, its site Zing News, and Tiki, the e-commerce site in which it holds a 22% stake.
Second, its divisions intersect. Early on, the video games required data servers, which later turned into a revenue stream in their own right.
Third, the AI unit draws on other units, such as conducting research through ZaloPay before unveiling client verification services for banks.
It is somewhat like Google feeding its machine-learning research with data from an existing service, Google Photos.
A customer uses VNG's Zalo Pay to make a purchase at a shop. (Photo by Tomoya Onishi)
And while Vietnam could wait for the U.S. company to roll out other AI-based services, Khai said better ideas come from competition, especially in areas where VNG may have an edge. Catering to the Vietnamese language, for example, powered the dominance of its anchor app and underpins Kiki's speech recognition.
"The beauty of life is people have different opinions and try to do different things," Khai said. "If everyone does the same thing or makes the same thing, it's very boring."
He added, "It's the same with technology."
But even as the company looks to future technologies, it has yet to find another profit engine like gaming. The division contributed 79.2% of the 6 trillion dong ($262 million) in revenue recorded in VNG's 2020 financial report. It plans to add to its mobile lineups in India, Russia, Latin America, and Southeast Asia, moves that may put VNG in closer competition with Singapore-based Sea Group, which owns game maker Garena, and Tencent.
VNG's other paths to profit are the business-to-business services. Posing a threat to offshore rivals Amazon and Alibaba, its data centers stand to benefit if the Vietnamese government increasingly forces companies to store data locally. And its second-biggest source of income, advertising, increased to 16.3% of the company's top line in 2020, up from 10.6% in 2015. Overall VNG reported after-tax profit of $8.3 million last year.
In some ways, VNG has evolved in parallel with its home country. In 2004 it was Vinagame, a small startup capitalizing on the rise of computer games and internet cafes. Back then Vietnam, which had not yet joined the World Trade Organization, was known less for trade and more as a small nation that had somehow defeated French and U.S. invaders.
In the interim the company became VNG and added a host of services vital to Vietnam's modern economy -- payments, streaming, cloud computing -- while the speed, stability and stickers of its chat app won over locals.
In the same period, the country signed a bevy of trade deals and its factories moved from shirts and purses to phones and chips. Minh hopes that someday Vietnam will be associated more with tech than war.
"Twenty-five years passed and my generation has not been able to change that impression yet," he said last August at an event to mark a quarter-century of postwar ties with the U.S.
Charting the next stage of growth for a company so firmly rooted in gaming promises to be a challenge. Khai tries to convey a message about such challenges by taking the staff on treks from Borneo to Siberia.
"Building internet products is similar to climbing a mountain," Khai said. "It's usually not very fun [at first] and you are very tired. Sometimes you hate yourself."
But at the end, "When we look back, we feel very happy."
