3 reasons why Zalo failed to become the WeChat of Vietnam

Zalo is one of the most popular chatting app in Vietnam. With such a meteoric rise, they were destined to become the WeChat of Vietnam where every single Vietnamese user would open the app and do everything everyday. They were supposed to be the so called super app.

That didn’t happen.

What happened to Zalo and its potential to become a unicorn singlehandedly?

This article will share 3 reasons why Zalo failed to become the super app it was supposed to be.

1 Wrong business strategy

That’s wrong on so many levels but let’s just talk about 2 aspects. Supply & Demand and the fact that VNG decided to launch Zalo Pay as a separate app.

Supply

With millions of users, Zalo could have approached merchants and pitch about the millions of users they already have on the platform.

The cost to list merchants would have been much lower since the brand doesn’t need to be built anymore. That would have put the feature ahead when competing against Momo and the rest of the players in the payment space.

Instead, it seems that the decision was to look at Zalo Pay as a different business unit with a separate P&L…

Demand

That led to force people to download a different app to pay. The user acquisition cost ( for that use case ) would have been so much lower if they just launched the pay feature within Zalo.

When I’m looking at Tik Tok Shop, the move is so smooth and elegant. With millions of users on the platform that daily active users, the move into e-commerce is so powerful and is already generating billions of dollars in GMV at a global scale.

Zalo missed that move and could have won the payment war. Instead it lost time and competitors have taken advantage to grab the market share and became market leaders.

To make an analogy, VNG had already an existing user base they could have leveraged to win the payment feature but instead decided to go the slow route.

It’s like picking a knife to go to war instead of pressing the button for a nuclear strike….

2 Offline is not VNG strength

The company excels at pure online activities though. Games have been a key success factor in their business. News with Zing has been quite recognized as one of the leading news outlet in Vietnam and eventually Zalo with millions of daily active users.

VNG is a large company but fails consistently to understand offline. It’s not in their DNA.

In the past, VNG used the brand Zing to launch Zing Deal to compete in the group buy business and eventually decided to close the business, despite having the media platform it has to spread some deals to their users, they’ve decided it wasn’t worth the fight.

That’s now a leadership and management problem. Picking the right people with the right skills and drive to go at it.

VNG doesn’t lack resources but doesn’t simply get offline. Other large real estate empires faced the problem earlier in the past like Vingroup or Novaland. They tried online or /and offline retail leading to several shutdowns.

Sometimes, being large with a lot of capital doesn’t guarantee success. Most of the time, it’ll lead to misallocation of capital.

Whoever is leading Zalo Pay definitely has a lot of work to do with competition… and internal alignment to get full support of the leadership to win the war.

3 Competition to become a super app has been brutal

Among the players trying to win the payment and everything app, you can see that Zalo could have been a great company payment app but the giant Momo and VNPay didn’t waste time and acquired users over the past few years and became the major players in this market. It might already be too late for Zalo to win the major player in the payment space as Momo and VNPay don’t seem to slow down anytime soon.

Grab and Gojek have also plans to become super apps across South East Asia and with billions in the bank, competing against them make it really hard. For the Vietnamese market, we can see that Grab has already launched GrabPay. Even though it may suck right now, Grab is big enough with millions of users and capital to play the long game to drive up the usage in the coming 5 years and win the South East Asian payment market.

SEA is another company that is quite interesting as they’ve managed to become profitable recently as a group ( source : Nasdaq ). They happened to rebrand everything around Shopee ( Shopee Pay, Shopee Food ). Currently, SEA competes against the Momo, VNPay for payments and Grab & Gojek for food. They may need to have another side they need to focus a lot as Tik Tok Shop will likely eat some market share.

We don’t really think or mention Zalo when we think payment in Vietnam. There’s a bunch of QR code presented in front of the consumers and they’ll have to choose a QR to scan instead.

Will Zalo be able to catch up and become a major player in the coming years?

I don’t think so and it’s sad when you see a company with such great potential to waste it.