Saturday, August 8, 2009

Understanding the Internet Cafe Industry in the Philippines - Part II

By: Gener Morada

In the previous discussions we have tried to take a look at on the profile of an average internet café owner in the Philippines.  Sad to say that most of them are not really professional businessman who came into the industry that is armed with sufficient information in order to run their business establishment effectively.  Most of the internet café operators are copy cats in which they saw that it was a very lucrative business and they went into it with out even making an assessment of the market in which they would cater to.  Most of them are in gaming since this is the framework which started the internet café industry in the Philippines.

If we look closely, we would find out that the internet café industry in the Philippines is rooted in the video game arcades of the 1980’s. Unlike in other countries wherein internet cafes offered first internet related services, the internet cafes in the country can trace it roots to the lan based computer shops in the 1980’s that offered gaming as their primary product.  Even with the introduction of a fast internet service this business model has not been updated and up to now I would say a majority of the internet cafes in the country is set up for gaming purposes. Now with the proliferation of internet cafes in a particular area this is becoming to be a problem since the market could not sustain their operations.

Is there really a market for internet cafes in the Philippines?  Luckily a study was made by Yahoo and Nielsen on the Internet Habits of Urban Users in the Philippines.  This study which was released in March 26, 2009 though it is not really comprehensive since it limits itself in studying the internet habits in major urban center in the country can provide us with enough data that we need to come up with a reasonable conclusion.

According to previous studies conducted by the Commission on Information and Communication Technology the Philippines has one of the lowest computer penetration rates in Asia.  Compared to its neighboring country, only 14% of the total population in the Philippines has a computer at home.  What is fascinating about the Yahoo-Nielsen report is that they found out that 28 percent of Filipinos in national urban centers access the internet in the given month and 5 percent access it on a daily basis.  

You would have to remember is that the poll that they conducted took only 1,200 samples in 22 highly urbanized areas including Metro Manila.  If you would add those belonging to the provinces the number of Filipinos accessing the internet would surely be greater.  Another interesting fact is that they found out that there is a growing demand for internet access outside of Metro Manila in fact 35% of Filipinos in Cagayan de Oro access the internet in the given time.

The study also showed that internet usage is particularly higher amongst the younger segment of the population. With 50 percent of the total surveyed belongs to the 10 to 19 years age bracket.  There is a slow decline of users as the age bracket increases till it reaches the 50 and above bracket wherein it seems that internet usage is not very popular.

Another fascinating information that you can get from the study is what the internet users are doing while they are in the internet.  Yahoo-Nielsen found out the following:

Activity                                               Monthly Percentage

Used Email                                                   63

Used Instant Messaging                               63

Used Search                                                 58

Played online games                                    53

Visited Social Networking Site                      51

Read Blogs                                                   42

Digital Photos Upload/download                  33

Worked on their personal blog                     28

Listen to Internet Radio                                28

Download Music                                           25

Read News online                                        24

Internet SMS                                                23

Internet Banking                                            3

Purchased Goods online                              3

Basing on the above information, you can see that the internet café owner, in choosing to cater only to the gaming market, is losing a much wider market of internet only activities.  Particularly  so because they are only catering to 53% of internet users belonging to the male gender and belonging to the under 20 age bracket.

The most important information that the study pointed out is that since the country has a low penetration rate of computers, they found out that 71 percent of the respondents in the given three months period accessed the internet through the internet cafes.  47% of the total time spent in the net is accessed through the internet cafes   Internet Cafes are also a dominant access point for users from the lower socio-economic levels.  This study clearly reveals the customer base of an internet café in the Philippines.

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