by Steven Jacob, Foreign Associate

While I have written largely about Fintech issues in this blog, the scope of my responsibilities extends to other areas involving technology and media. This week, therefore, I am going to write on a subject that has caused a bit of a stir in Vietnam regarding the regulations that just went into force governing online advertising in Vietnam.

At the end of March, the Government issued a decree amending administrative penalties for organizations involved in media business activities including advertising. The decree covers things from newspapers and films to the theater and online advertising. But there are three provisions that have created a disturbance among businesses involved in online advertising in Vietnam.

The first is not terribly controversial. It requires that users of a webpage must be able to voluntarily close or open any advertising that is not in a fixed area of the page. This seems to be simply a prohibition against floating advertisements that may cover content on a webpage. And as it requires that users be able to “open” such advertising it may prevent the now ubiquitous second-generation pop-up advertising that now plagues almost every webpage. It is unclear exactly what this provision requires and the decree is still too new–as it only came into force last week–to know the intent of the authorities.

The second is more problematic. It requires that there be no advertising interspersed within the content of the news or articles on a webpage. As Dat Nguyen in an article for VN Express International pointed out:

Global newspapers allow ads to appear in the middle of articles for free users, and this should also be the case in Vietnam, because users have the choice to click on the ad or ignore it and continue reading, the association argued.

The new regulation will create unfair competition between Vietnamese companies and global advertising giants like Facebook and Google, which account for over 80 percent of total ad revenues in Vietnam.

They won’t have to abide by Vietnamese laws and therefore won’t make changes to their ads format, the association pointed out.

By preventing in-content advertising, Vietnamese advertisers will be unable to offer high-quality placement for online advertising. According to Le Quoc Vinh, a businessman working in the advertising industry in Vietnam, in an editorial for VN Express International,

As a rule, advertisers are willing to put their money where they believe has a certain audience in the segment they want to reach. They would pay even more if they are guaranteed to appear on pages with important, attractive content that the readers never skip, like page 3, page 5 or the first page of important sections. … Luxury brands used to compete with each other for the best spots that they believed readers, those that could potentially pay for their products, would see first. If not, at the very least, they would want their ads to appear to the right of the top articles in the first half of the magazine.

Websites that offer content free of charge to users and that operate to make a profit rely on advertising income to pay the bills. Without the option of presenting advertising in the middle of content where readers are most likely to see it, Vietnamese websites will be unable to offer prime advertising locations and thus must take a hit on their bottom line. Not only will this prevent them from providing the same quality content that they might otherwise have done, but it will serve to reduce their competitiveness with cross-border advertisers and content providers. With reduced original content quality or quantity Vietnamese websites will lose any edge they may have had by their Vietnamese-ness.

The third is equally, if not more, problematic. The time limit to close online advertising which is not fixed is now limited to 1.5 seconds. This seems to apply to video and audio ads in particular. This effectively eliminates them as an option. For one and a half seconds–end of advertisement.

As an example, Youtube allows five seconds before a user can skip an ad. This is long enough to provide the identity of the advertiser and an idea of what the product is and to decide whether to continue watching the ad or to skip it. It has proven rather effective for Youtube as they had revenues of $19.7 billion last year and their primary source of income is from these video advertisements.

By limiting the allowed time for video advertising to one and a half seconds, the government of Vietnam has created a situation wherein video advertising loses its attractiveness. It is too short a period to give enough information to the viewer to even know the identity of the advertiser let alone the product they are trying to sell. This will have the same chilling effect on competition in the video space of online content creation in Vietnam.

In Vietnam, very few people actually pay for online content. They frequently feel it is a right to enjoy content free of charge and thus the primary and sometimes only means for making a profit for content creators in Vietnam is through online advertising. By limiting the ability of domestic content creators from capitalizing on their content to leverage advertising dollars the government is discouraging content creation that might be targeted to Vietnamese users. While this may actually be their goal, it is seen as “unfair” to Vietnamese businesses who must abide by the new decree.