Thursday, July 30, 2009

052908: Can an Internet Cafe Make Money in the Philippines?

Can an Internet Cafe Make Money in the Philippines?

May 29th, 2008 | By Philly | Category: Phils BusinessA perennial favorite topic.  I see frequent searches on this topic and I have written a number of previous articles on Internet Cafes (or "computer shops",a so many people call them).  See here and here andhere for a few examples.

My friend Yuga recently wrote a widely read article on his GMA TV blog and I decided to take a couple points of Abe's and expand on them a little.

The question should not be phrased "can an Internet cafe make money in the Philippines'?  In my view it should be phrased, 'can you or can you not make money'?  (location and even the precise business model are not important).

If you want to make money, then focus on that.  If you want excuses not to make money, then fine, there are a million excuses you can use.

Let me take a few of Yuga's points and add-on or contrast with my views:

Capitalization. Many aspiring entrepreneurs think running a net café is not that expensive but a solid capital will dictate your operating capacity. Putting up 3 or 5 PC stations will not cut it anymore. A friend of mine who's been running a net café for over 3 years now tells me you will need more than 10 stations in order to get good returns. You capital should also consider depreciation, repairs and maintenance.

True, so far as it goes.  But why set an arbitrary limit at 10 stations to "get good returns", (whatever that means).  You will succeed with 10 stations and fail with 9?  Why not borrow big and have 100 stations then?  Setting arbitrary limits and adding up the figures to pay for them is the biggest problem I see in building the foundation for every business.  If you are really broke, but have a real desire, then you can start with just a few … and 'bootstrap' expansion from your initial kernel of machines.  I only found out just a few weeks ago that there is a successful cafe just a few doors from me on our tiny residential street.  Been running for more than 3 years now.  Only a couple workstations in the owner's front room.  Small-time.  In consequential.  Indeed.  But think this through.  If the guy is paying his bills and making a profit without even a sign or a visit to his neighbors to let them know about the business, where could he be today if he had plowed back the (tiny) profits, incrementally over the past three years?  You don't have to approach the business like a huge dot com company suckering in venture capital and then 'burning it' before you even have a profit.

Technology: This is something I have been watching for a long time and actually find hard to believe.  An internet cafe is going to have about 4 major uses for customers.  Games, Online chat/social networking, school or job-related research and free phone calling (VOIP).  Every one of these applications is an ideal candidate for what is called "thin client" applications … a technology many years old but almost taken used outside some corporate IT departments.

Everyone who gives advice on how to set up a cafe starts out, or works in, their favorite formula for how many stations are needed and then comes the inevitable budget of 10 times the basic cost of a customer station … or 5 or 50 or whatever size seems best.  The prospective business operator has two main choices.  Buy 'x' number of used/refurbished older machines (which will certainly not be popular with the gamers … who tend to be the biggest spenders.  Just for an illustration let's say you want to set up a 10 person facility.  Then you can figure $400 or $500 USD per station, or $4,000 to 5,000 for hardware and then a software license and other ancillaries per customer 'seat.

The better alternative, for those who have the money, is to buy new, well equipped machines.  This will cost as much as double the used machine route, but will, in particular make the gamers happy.  But as much as $10,000 US is going to be a hefty investment for the average new business person.

The 'thin client' model is the key, I think.  You spend a couple thousand to buy one very high-end server, in particular with tons of memory and multiple LAN cards.  Then you shop for bargain PC's with very minimal specs .. a tiny hard drive and minimal memory is all that is needed.  The server will do the 'work', the client work stations are really little more than dumb terminals.

High speed and flexibility for the customers, only one expensive machine to take care of, one machine to license for 'in demand games, etc.  All the software is readily available via open source … legal and free … and to the average user it will feel exactly as if they are on a high-end, top quality work station, especially if you set the network up to share the server via a priority scheme with different specs for game stations and 'chat' or schoolwork stations.  Worth looking into.

Competition. It always amazes me whenever I see rows and rows of net cafes lined in a certain area. It's a sign that of impending failure … It's all about the price-wars….

Sorry, Abe, I don't really agree.  or, I don't agree price is everything.  While it is certainly a bit risky to open a computer shop next door to an existing one, there is often a good reason that existing shops are 'clustered'.  In many6 cases that is where the customers are.

Yes, it is true that there will be some customers who will only go to the shop with the cheapest hourly rates, but if price were the only criteria for business, everyone reading this article would only be driving a smoke-belching "owner jeep" or a bicycle with a rusty chain and would buy their clothes at a "schlock shop" in Quiapo.  There would be no movie theaters filled with people (you can always use Torrent) and you could take a nap lying in the middle of the road on the NLEX because who would waste PhP 180 from Balintawak to Dau when you can drive there on MacArthur highway for free?

When, for example, I go to a cafe I almost always go to one of the two Netopia franchises in my local SM mall.  I probably pass 8 or 10 cafe's along the way, likely all of which are cheaper.  And I have never been in either of the two franchises that I haven't seen a very decent customer population … sometimes I've had one of the very last stations available.  Of course some of my Filipino friends are going to say, "well, of course, it's a rich Kano talking, what does he know about the real Philippines'?  True.  But I have never seen another Kano in the two Netopias I frequent … everyone else in there looks distinctly Filipino to me … they could certainly go cheaper … and some of them could, no doubt, teach me a thing or two about being tipid … although I am a Scotsman which means I am at worst a very close second to the average Filipino at being tipid and making simot ;-)

Frankly, I have a number of business ideas I think would have a higher probability of profit than a "conventional" Internet cafe … more on some of them very soon … but based on what I see every single day I don't think the time for the Internet cafe business has gone at all … but I do think there is a lot of opportunity for doing in better and providing a better experience for the customer.

http://philfaqs.com/phils-business/can-an-internet-cafe-make-money-in-the-philippines/

Can You Still Make Money With An Internet Cafe?

I note it's time for an update on a perpetually popular subject here in the Philippines … the Internet Cafe business.  Possibly because many westerners first meet Filipino sweethearts via I-cafes, or because people see them on nearly every street corner, they often come to mind as a way for a Westerner to come to the Philippines and make a living … or for an investment one might make in family members living here so they can have an independent business and earn their own income.

Are Internet Cafe's still a viable investment here in the Philippines?  I did some articles here on PhilFAQS over the past year, some with the capable help of my neighbor Arvin, who was in the "computer shop" business himself and shared his real world experiences. … hey Arvin, where have you been guy?  Come back and join in here.

You can check this series on running an Internet cafe or review the top five problems in the business.

A friend of mine who has been here in the Philippines for a lot of years once about me about his venture into the Internet cafe business.  He was located in a pretty remote provincial city and noted that the cafes in town were all very limited in scope and frequently had only a dial-up connection.  The general view is, Filipinos are mired in the "pwede na" outlook on life … "That'll Do" … and thus won't pay extra for a quality product.  So my friend bucked that trend and equipped his cafe with high speed satellite connectivity … mahal … and he proved it wrong for a time, making good money offering service that was substantially better, and more expensive than the competition.  But then the revolution in wireless Internet service came along, offering connectivity to the home all over the Philippines at very reasonable prices (I pay less than P 1,000 per month for service that's workable, if not great).  The folks who will pay a few pesos extra for fast connections are also the ones who will invest P 1,000 a month in their own connectivity.  Thus ended the high speed, premium price cafe idea.

Another friend and mentor, Yuga,  just published a really good article on this subject, Are Internet Cafes still a Good Business?  Read it and be sure to take the time to read the comments on Yuga's blog, he had some very informative ones made to this post…

Net Cafe

… Been receiving a couple of emails lately (mostly from OFWs but there's one from a Chinese/Taiwanese company) asking if there's still some good business to be made with internet cafes in the Philippines. From accounts of friends and people who've been into the net cafe business as well as what we're seeing in every mall and street alley, there's some mixed reaction.

Five years ago, the prospects were better; way better. I myself was thinking of opening up one back then. My excitement was immediately doused after doing the math….

  • Location. Pick a good spot and you'll hit a gold mine. Pick the wrong one and kiss your money goodbye.
  • Competition. … One cannot expect to recover a Php500,000 investment if hourly rentals go down to as low as Php10. It goes without saying that in this industry, there are no customer loyalty; just cheaper rentals.
  • Quality/Consistency of Broadband Connectivity. For places that don't have many options for bandwidth providers, this could spell trouble …
  • Software Licensing. Many people who go into the net cafe business don't factor in the cost of software licensing … (Editor's note:  To me, this is a very big issue … I see that police regularly raid cafe's along with other businesses noted for piracy problems … could you own personal PC stand an audit?  What if you have 50 PC's in a shop?  Even if a customer put something illegal on the machine without you're knowledge, you are going to get charged if it is found there)
  • Expected ROI. …. driven the ROI further back to as long as 3 years (that's if you're lucky enough)…

So what do you think?  Any other questions or ideas circulating out there?  leave a comment, or email me direct via the "Contact" page … there's a lot more questions out there, and perhaps a few answers.

 
Real World Business — Running An Internet Cafe — Part 1

Nice treat coming up this week, folks.  One of my neighbors, Arvin, is an experienced Filipino businessman.  He has real-world experience setting up and running an Internet Cafe, or as it's also commonly called in many areas of the Philippines, a Computer Shop. I've been studying the subject of living in the Philippines for nearly 8 years now … and living in Marilao, Bulacan for more than 7 months.  "How do I open an Internet Cafe" is one of the most frequent questions I have heard from my non-Filipino friends and readers, so this subject should be quite useful.

Arvin was kind enough to write quite a bit on his experiences.  I'm going to break it up into five daily posts with a few of my comments added.

TOP 5 THINGS TO CONSIDER WHEN STARTING YOUR OWN INTERNET CAFÉ:

1. CAPITAL:

First and foremost, if you wanna venture into this kind of business, money should be your first priority. If you don't have enough capital to start it with then forget about it. Unless, of course, you're lucky enough to find a computer shop who'd allow you to make partial payments. Canvass for the lowest prices, as much as possible, through every computer shop that you would see, without sacrificing quality of course. Planning is very important. The risks are high when going for this kind of business so you should only allot the right amount of money needed. Be sure you won't be touching any of your family savings. Also, spare some money for your future expenses, just to be safe.

My additional thoughts on this are:

  • Avoid bank credit, especially Philippine banks.  Interest rates are high and they'll eat up your profit
  • DO NOT put the investment for you new business on your credit card(s)  Those "zero percent" sort of deals look so promising but there are a thousand and one reasons your rate can go up, way up, and you'll be paying out everything you can clear, and more to make ends meet
  • Patience is never a popular subject, nor is saving up money in advance.  But there is a great advantage to your future success in making the move with no debt and without the hassles of a business and in learning your new environment first.  It's a key factor in making any business a success.

The next 4 parts of this series will follow on succeeding days.  Arvin is just starting out in the world of blogging, perhaps he'll start his own blog soon.  If you like this series (or hate it) leave a comment.

http://philfaqs.com/phils-business/real-world-business-running-an-internet-cafe-part-1/

Real World Business — Running An Internet Cafe — Part 2

Jun 26th, 2007 | By Philly | Category: Phils Business

TOP 5 THINGS TO CONSIDER WHEN STARTING YOUR OWN INTERNET CAFÉ:

2. Study your niche/market

See to it that there is a great demand for an Internet café in your area. Obviously, the urbanized areas are the ones you would target. Well, the not so urban areas will do, just like in the provinces, as long as the place is busy with people and they will have a need for the services you're offering.

As a foreigner, one thing I have noticed is that Filipinos absolutely love contests, promosd and "gimmicks".  If I had my eye on a certain area here are a few of the steps I would take to decide if it was worth an investment or not:

  • Competition:  If there are a lot of cafe's in the area it proves there is a market.  Stop in at each one you find, use a computer, evaluate how decently run the shop is, prices, connection speeds, etc.  This will tell you right away if the existing shop is really competition, or if it is a place you can attract customersfrom by doing a better job.
  • Talk to the owners of existing shops.  You probably shouldn't tell them you are planning to open a competing cafe' ;-).  But business owners like to talk about their business.  Find out how long they have been in business, what they think about doing business in their current barangy, etc.  You'll learn a lot and you might make a friend or two.
  • If you have a spot that now looks halfway decent I would have a thousand little half or quarter page fliers printed.  You can get either amateur or professional flyer distributors to stick them in people's mailboxes or gates for a peso each or so.The fliers should say something like "Coming soon the latest and greatest Internet cafe , sales copy, sales cop, sales copy, and then close with a teaser like "text your name and email to (your cell phone) for a free 10 hour introductory special".  If you get a lot of texts you know you have a ready market (plus emails to market to), if you get very poor response, you'll find the the couple thousand peso market survey was a lot less expansive than opening a shop that won't succeed.
 

Real World Business — Running An Internet Cafe — Part 3

Jun 27th, 2007 | By Philly | Category: Phils Business

3. Location

–Here you have different options to choose from as long as your market is available. Some go for the residential areas, which I believe would best suit businessmen-wannabes with limited funds. You could even start your Internet shop at the expense of your own backyard. Just see to it that there is enough space for your shop, not to mention your own home.

If your area is situated near a school then that would be a big plus. Just observe the law regarding how many meters away, your Internet café should be, from any schools or colleges. Some are not following it but the law is the law.

If your home won't be able to accommodate your Internet café then you could always rent a place. Commercial zones within residential areas are also advisable.

If your capital is limitless then you could go for the big commercial establishments, like malls. People of all walks of life go to those kinds of establishments one time or another, so you could be confidently sure that the place would be busy with people. The expenses would be high but you could always charge higher rates for your services.

As an outsider looking in on this I can see two distinct paths, depending on the level of effort you want to put into making money.  Before I came to live in the Philippines I thought only of renting a storefront to host anInternet Cafe.  Now that I'm living here and starting to "learn the ropes" I realize how many people's desire for an Internet business could be satisfied right in their own home.  It's easy to have a room added on the front or back of most houses and surprisingly cheap.  If I were to go into the Cafe' business I'd definitely be looking into this strongly rather than paying rent or a commercial location month after month, year after year.

There are some big and successful Internet Cafe' Franchise operations in the Philippines such as NetOpia. Typically the costs will be in the $20,000 to $40,000 USD range for the establishment of a location, a monthly franchise fee of 5 to 8% of revenue and renewals at the end of the first three years.  But, for those who have used these franchises it's comparable to ordering a hamburger at a McDonalds … the quality is there, the brand recognition, quality control and so on.  Worth looking into if you want a "real" free-standing business with management training and support.

As always, if you like this post (or hate it ;-)), leave a comment.

http://philfaqs.com/phils-business/real-world-business-running-an-internet-cafe-part-3/

Real World Business — Running An Internet Cafe — Part 4

Jun 28th, 2007 | By Philly | Category: Phils Business

Top 5 things to consider when starting your own Internet café:

Hardware, software and other utilities:

– Consider first what services you're going to offer. For example:

  • If you would only provide Internet services such as web surfing, chatting, etc., then you could go for the low-end or the average specifications for your computers. The Internet doesn't demand much from your hardware. Just apply for a relatively fast Internet connection (DSL, Broadband, Cable) with a high bandwidth. Then install operating systems and other programs needed. Headsets with microphones are often used when chatting.
  • If you would consider adding gaming then the best specs, as much as possible or whichever the games require, should be your priority. There are the offline and online games which require Internet connection. Your clients, especially the gamers, are very demanding when it comes to the speed and reliability of both your PCs and Internet connection. You would often hear complaints about logging, hanging, or slow Internet connection. So make sure that your clients are satisfied to avoid all of those. Buy the best performance PCs and avail a faster Internet connection.
  • There are other services that you may offer your customers. You could do printing (b&w or colored), typing services, CD/DVD burning, some even have fax machines or photocopiers. You could even sell food if you want.

To amplify Arvin's suggestions a bit, many Internet Cafe's are divided into on-line and off-line areas.  This isolates the gamers from the on-line chat, research and "surf" crowd and allows you to better manage your bandwidth needs.  It's well worth considering.

I've also noticed a few cafe's with small private booths for quiet chatting.  These, of course rent for a premium over the standard elbow-to-elbow computer stations and would be a big profit-maker for the owner, because the chatters use little bandwidth and the extra fee for the booth is all clear profit.

Selling food has a lot of issues to consider.  It's going to cause problems with cleanliness, potential damage to machines, extra space required and even the potential cluttering of your shop with non-Internet customers.  On the other hand, there is a tremendous profit potential in merienda  (snack foods), coffee and soft drinks.  You don't see sari-sari (variety) stores tacked on the front of every fourth or fifth house on many residential streets for no reason … there is the potential for really nice markups on food and drink, if you attract the sort of customers who spend hour after hour at the keyboard.

As always, if you like this post (or hate it ;-)), leave us a comment.

http://philfaqs.com/phils-business/real-world-business-running-an-internet-cafe-part-4/

Real World Business — Running An Internet Cafe — Part 5

Jun 29th, 2007 | By Philly | Category: Phils Business

TOP 5 THINGS TO CONSIDER WHEN STARTING YOUR OWN INTERNET CAFÉ:

Pricing and promotions:

Know how much you'll charge for your services. Studying the market will play a great role here. If the price is right then people will avail of your services. Some owners often use pricing as a tool to have an edge over other competitors. They lower their rates, especially when their expenses won't be that much, to attract more clients. In some areas, however, they have the so-called "Internet café owners' association" who implements rules and regulations regarding different concerns of the Internet café industry. Some have rules regarding pricing, what price floor would be set, what punishments would be imposed to those who wouldn't follow, etc. Their main objective is to promote a healthy competition among Internet shops.

Now, let's say there's a price floor that has to be observed. Smart owners would now think of ways of how to be ahead of the competition. That's where Promotions come in. People love promos. This is a great way of having your own following, having your "mga suki" or your frequent customers. Promos come in different forms. For example:

  • For every 3 hours another hour would be free
  • Or P50 for every 3 hours
  • Discounts for frequent users
  • Giveaways
  • Even have contests for gamers with cash prizes…something like that.

*Be sure to apply for the necessary documents needed if you wanna start your own Internet café, such as Barangay Clearance, Mayor's Permit, DTI permit, etc. Just so your business would be legalized.

That wind's up this weeks Internet cafe' series.  If you want more articles like this, or you would like us to cover a different topic, be sure to leave a comment.  And thanks and a big "tip of the blog hat" to Arvin for his work on making this series a success.

http://philfaqs.com/phils-business/real-world-business-running-an-internet-cafe-part-5/

Top 5 Problems in the Internet Café Business:

Jul 14th, 2007 | By Philly | Category: Phils Business

This great post was contributed by my friend Arvin Santiago.  This is Arvin's second guest appearance, he contributed the Philippine Internet Businessseries earlier.  Arvin is exploring blogging for himself now, you can read his latest at:http://just4kicks.wordpress.com/

1. Competition – You start your own internet café and you're earning good money from it. When people notice your business and see you're progressing, they feel some kind of envy and something urges them to jump on your bandwagon. The next thing you know, 10 computer shops pop up in your area like mushrooms. From there, competition becomes tighter, sometimes it even becomes ruthless. Different promos, different gigs, different ways to attract clients' attention. You can definitely lose because of this. As a conclusion, when there are more internet cafés near your shop that means there's indeed a market for your products and services. However, there is also bigger the probability that the number of people going in your shop will be drastically reduced, likewise your profit.

2. Expenses – Computers evolve into something better and faster every few months, thus upgrading your shop computers is often necessary to accommodate new and exciting programs. But this is just part of your expenses, and it is even considered optional. You still have to pay regularly for your electricity, internet connection, sometimes for your rent and water bill, etc. And even though you have carefully planned everything, including the allocation of money for your expenses, for some unseen circumstances it becomes a big problem. Competition generally has something to do with this. Somewhere along the way, you'll lose some of your clients whether you like it or not, especially when competition becomes intense. And that will greatly affect your earnings. When you start to lose clients, you start to lose money, and you'll have a hard time paying for those expenses. Let me elaborate on that. Let's say one of your expenses is rent. Sometimes it becomes a disadvantage when you don't own your own place. For example, if one of your competitors sets-up his internet café in his home, that means less expense for him. He gains the advantage of running whatever promo he wants. Let's say he sets his rates at a lower price, way lower than yours. As much as you want to compete with his rates you are unable to because you cannot afford to lower yours and still pay your rent.

3. Owner's work attitude – Most owners, have the mindset that when you own a business you work at your own pace. This is a privilege business owners have but that doesn't mean they can abuse it. For instance, during the first few weeks of operation of the internet café, most owners are the only ones running the show. Imagine if the owner is too lazy to open the shop on time. Your would-be clients, instead of going to your shop, will find other internet cafés that open earlier than you. The early bird catches the worm. Sooner or later you'll take on help to man the shop. So now the owner really has control of his time. He leaves the entire shop to another person's hand. If that's the case then the internet cafe doesn't need the owner anymore. This attitude often leads to disaster. You should be hands-on as much as possible. The owner should be the one responsible to watch over the business, not other people. He should be present most of the time so he can see what's really going on and how the internet café is doing. That way he can implement changes or start promos when necessary.

4. Internet connection and other computer problems – Another beautiful day has come. And just when you ready your internet café for business, you turn on your server but alas, you can't connect to the internet. There are times when your internet connection is down. Sometimes it's only out a few minutes But. worse case, it takes a day…even days to return. You call your ISP's hotline number but all they tell you is they're upgrading their system or they're doing some maintenance. This is one problem that you can't do a thing about except wait. Your internet café loses income and you don't even get any refunds from your provider. Your saving grace, rely on your off-line programs to do the job and hopefully still earn you some money. If you have no internet outage plan, you have no business plan.

Another cause of problems will be your pc's. If one breaks, you will have to wait 'til you find a new replacement and, therefore, won't be able to use that computer for the meantime. Thus, profit for the day becomes less. Let's say you only have 10 computers, and there's a new network game you can only play 5 on 5. If one pc breaks, that means there's also another pc that has to suffer 'coz your clients won't play 4 against 5. There should be an even number of players for both sides.

Lastly, problems on the software side such as viruses, spyware and key-loggers that can destroy the programs installed on your computers, even the operating system itself. These can be prevented or if you have proper program tools such as anti-virus and anti-spyware programs. But these take time and money to run and look after. The sad thing about this a is that sometimes these programs were put on your computers intentionally by other people. Many times the culprits are your neighbor computer shops … your competitors. It's a dog-eat-dog world out there. Sadly, some just don't know what a healthy competition is all about. They'll do anything to destroy you for their own gain.

5. Allowing "utang" in your internet café – The concept of "pautang" is very common in the Filipino society. Being close to your clients isn't bad, but not too close, to the extent that you're earnings get affected. There should be limitations as to how close you should be to your clients. Outside your internet café you can be as close to them as you want, but inside the premises that shouldn't always be the case. Sometimes you have to consider being strict when it comes to this sort of thing. Do not allow "pautang" or the "use now, pay later" scheme. Always remember that business is business, and that you're running one. Delay of clients' payments may also cause you delays in your payments of expenses. That is not good for the business. Payments for every product or service you sell should be received accordingly and on time so that money will always be readily available for your needs.

http://philfaqs.com/phils-business/top-5-problems-in-the-internet-caf-business/

More Internet Cafe Thoughts

Jun 6th, 2008 | By Philly | Category: Phils Business

It's really pretty funny in a way … only a small percentage of comments and email I get regarding this blog have to do about business in the Philippines. 

But so many of them do center on the Internet cafe business that I thought I ought to offer up some more thoughts on the subject … especially because many of the questions and comments I see indicate that people are looking at the Internet Cafe business with a very, very narrow focus … perhaps leaving tons of money on the table without even realizing it.

I have often been on record for saying it's very hard to make money in the Philippines … especially for foreigners.  Now that I have lived here full time for nearly two years, I won't actually retract that statement … but I certainly want to modify it a bit.

Let me say this … it's not nearly as hard as many make it out to be if you step back and explore all the ways \you have available to make money … not just what might be the stream of income most people thing of first when they look at a given business.

Let's look directly at the Internet cafe business … or, as it is so commonly called here a "computer shop".  In simple form this is a room or two that you rent from a commercial provider or use in your own home.  In that room or rooms you have computers in workstations and perhaps a few printers,CD-ROM and DVD burners and other common computer peripherals.

The standard business plan is that people with no computer or Internet access at home will drop buy and pay you an hourly fee to use your machines and Internet access.

What else could this facility be?  Wow, the possibilities are going to be more than I can list reasonably here in one post.  Talk about a small gold mine …. here's just a few quick ideas:

  • Cafe: Sounds obvious, doesn't it?  But very few Internet cafes actually serve food and drink.  Folks, I shop locally.  I know how much you can buy small packages of potato chips and snacks at SM Hypermarket for.  I know how cheap a local cook who wants to get started in the food business can make simple merienda for.  I know how little you can pay for soft drinks by the case.  People get tired and hungry.  Feed them.  There's a lot of profit there.
  • Classroom: let's see … you have anywhere from a couple to a couple dozen computers, all with a chair in front of them, an Internet connection … remind you of anything?  Well, one thing it reminds me of is a classroom … the kind most schools even in the US, let alone the Philippines, only wish they had.  What can you teach?  Internet skills, computer software applications, language, skills coaching for people seeking call center jobs, sales training for businesses getting ready to start an on-line presence, people who want to learn to blog or build web sites … the list is endless.  Run the classes yourself, hire an instructor, or rent the facility out to others who need a place to teach people.  I would also consider this … especially since a large percentage of your customers are likely to be students … and schools and Internet cafe proprietors often share a love-hate relationship.  Go to  a local school and offer them the sue of the facility during school hours to upgrade the training they provide … schools, especially public schools are likely to have no budget, but providing them instructional space for free is likely the best advertising you can spend … and you do something good for the community as well.
  • Call Center: I have written before about thinking small instead of big .. start your own mini-call center or customer service facility.  medical transcription is big but there are dozens of call center opportunities for businesses who aren't large enough to get on the "big guy's" radar screens.
  • Computer Shop: Hmm, didn't I say earlier this was one of the common names for an Internet cafe?  let's see, you have computers, people who know how to use them, probably a source for more computers … new or refurbed at a good price … why aren't you selling computers to go?  Once people see the way they can use the 'net to help their business or personal lives, why not have some simple package deals that will set up in people's own houses or offices?  Sell the packages outright or lease them out at a per hour rate as if they were in your shop?  (You do use cafe management software, don't you?  No reason you can manage computers in a different location as if they were in the same room.)  I actually see a whole new line of business here .. putting computer systems in businesses and actually being responsible to see they keep operating, rather than just being the on-call repair man who gets around to fixing things when he can.  One price, flat rate, computers that work 'by the hour'.

If those aren't enough business outside the box ideas, just let me know\, I have a few more ideas I can write up.

I also want to take a moment to announce something really good that will be available any day now.  My good friend and blogging colleague Bob martin is putting the finishing touches on a book that will blow wide open the idea that you can't make money in the Philippines.  I'll be announcing how you can get yours real soon now, stay tuned.


071908: Netopia chain to close shops on weakening patronage

July 19th, 2008

Netopia chain to close shops on weakening patronage

Manila Times

THE operator of the Netopia chain of Internet cafes will close more branches in the second half of this year on weak consumer spending due to soaring inflation.

"We will close three more branches in Bicol in the remaining part of this year," George Tan, Digital Paradise Inc. (CDPI) president told The Manila Times on the sidelines of the Entrepreneur Franchisee Award Tuesday evening.

Since last year, the company shut down 12 shops, including four stores in Thailand, the executive said. The Internet café chain entered the Thai market four years ago with four branches as a "pilot project" for its planned overseas expansion.

DPI is 75-percent owned by ePLDT, the information communication and technology arm of Philippine Long Distance Telephone Co.

At present, Netopia has 161 branches nationwide, of which 81 stores are company owned and the remaining operated by franchisees.

"With the price of oil, everybody is not spending," Tan said, adding customers, most of whom are students and relatives of overseas Filipino workers, dropped by 5 percent.

In the first six months this year, the company incurred a lower net loss of between P7 million and P9 million compared with P15 million in the same period last year, he said.

Tan said the company's first half revenues reached more than P300 million from last year's P150 million. "Our losses [have] gone down. We expect to post profit by next year," he said.

The bulk of the company's revenues comes from Internet surfing, communications, training and educational research at 55 percent. This is followed by value-added services such as desktop publishing, photo printing and retail sales of prepaid cards, game cards and storage media at 30 percent, and on-line and LAN games at 15 percent.

Last year, the company incurred a net loss of P29 million from P114 million in 2006.

–Darwin G. Amojelar

121703: The Business of Online Gaming

THE BUSINESS OF ONLINE GAMING

MANILA, December 17, 2003 (STAR) By Lisa Gokongwei- Cheng - Kevin Go, 13, hasn't been to the mall in ages. The honor student from Xavier School would rather spend his weekends at home in front of his PC playing Ragnarok, a computer game that is very popular with his classmates.

Outside Jose Rizal University, Ragnarok-playing students pack the row of Internet cafes. Café owner Jet Lorenzo, 26, says that her 40-seater café, the Blue Orb, has a bunch of students waiting for their turn to play. They are there from 8 a.m. to 3 a.m. every day. "Whole day, hindi sila pumapasok," she says. "Wala nang nag-aaral."

On MTV and MYX, one of the hottest music videos features the popular local band Slapshock paying tribute to Ragnarok.

In the Ateneo de Manila University, an enterprising student is selling pirated versions of the Poring doll based on a popular character in Ragnarok. He is hawking them for P200 more than the originals and they're selling like hotcakes.

For those living under a rock the past six months, Ragnarok is the massively multiplayer online game or MMOG that has taken our youth by storm. While not yet as big as Meteor Garden, it is changing the way many young Filipinos are spending their leisure (and school) time. It is also single-handedly reviving the dying Internet café industry. Finally, it is connected to the story of how a young entrepreneur, Ben Colayco, 30, is making a fortune for himself and his investors by turning the geeky interest of gaming into a mainstream sport.

But first, definitions are in order for us older folk.

What is Ragnarok?

Ragnarok is a role-playing online game where players take on roles (thief, acolyte, merchant, etc.) and then interact with other players in real time. Unlike games such as CounterStrike, the world of Ragnarok is persistent. This means that even if you log off, the world continues to turn, and when you log on again, real time has elapsed.

It is massive because of the game's ability to accommodate a huge number of players at any one time. In the Philippines, during peak times, there are 25,000 players playing concurrently. In Thailand, where it is also the biggest MMOG, Ragnarok registers 80,000 players at peak time.

Just like in the real world, players can converse, court, cooperate, and trade. But unlike in the real world, they can hunt and fight monsters for prizes. The goal? To get to level 99 from level 0. But really, it's more than that. Read on.

To those in their 30s and 40s, I can only describe it as like Dungeons & Dragons with more hormones. For those in their 20s, the best way to describe it is…

"It's a more high-tech chat," says Ed Geronia Jr., editor in chief of Games Master, a local gaming magazine.

Ragnarok was created in Korea, the mecca of MMOGs, by a company called Gravity Corporation. It is now among the dominant, if not the dominant, MMOG in Japan, Thailand, Indonesia, Korea and China.

In Thailand, at least five publications and a whole slew of merchandise (like lollipops and phone cards) are devoted to the game. In the Philippines, where fans have created at least 50 Ragnarok websites, the game has grown from zero to 60,000 players in six months. That's about 10,000 new players a month and counting.

A player can download the game from the Web or through a CD distributed for free in Internet cafes, through magazines, and during events. Level Up, the company that brought Ragnarok to our shores, makes money by selling pre-paid Internet cards in three denominations: P50 for eight hours, P100 for a week of unlimited play, and P350 for a month of unlimited play.

Merchandising is the next step. Colayco brings out Ragnarok shirts, Ragnarok dolls, and Ragnarok magazines. "I see a complete immersion in the Ragnarok lifestyle," says Colayco. "When the player turns off his computer and turns on the TV, he sees Ragnarok on MTV, Ragnarok on the cell phone, Ragnarok T-shirts and dolls."

Colayco just signed a deal with Sterling to come out with Ragnarok notebooks.

The game is so popular that Level Up employs 50 games masters to police the players and that's still not enough. Think about it – 60,000 players is as big a community as Pateros. The job of a games master is to make sure that the members are behaving well. If a member flouts the rules, he is banned from the game.

Why It's So Popular

The world of Ragnarok is a microcosm of Filipino society. That's one reason it has crossed over from the domain of gaming fanatics to the mainstream. Thirteen-year-old Go explains: "I like it 'cause it has a Filipino flavor. You don't see many games where players speak in Tagalog."

For example, says Level Up founder Colayco, a merchant character calls himself "Henry Sy" as a tribute to the legendary entrepreneur. There are stores in the Ragnarok universe called SM Morroc and SM Prontera. (Morroc and Prontera are towns in Rune-Midgard – the Ragnarok world.) Then, says Colayco, there's the thief character who goes by the name "Thief Ako."

Pinoy humor is all over the place in Ragnarok. Characters pretend to be the members of the F4 or the Sexbomb Dancers. "When a character dies," says Colayco, "the other players make lamay, kneel down, and throw flowers."

But Ragnarok also showcases the dark side of the Pinoy.

Grade 7 student Go says that he was once taken for 60,000 zenny (that's Ragnarok currency) by a player who never delivered the promised goods – a set of thief's clothes. The player logged off once Go handed over his zenny. Luckily, Go "screen shotted" the transaction and used this as evidence to have the cyber-thief banned. Unfortunately, players can return as other characters so effectively, banning is a band-aid solution.

Scams can take place in the real world as well. Geronia says that in Internet cafes, thieves program computers to steal user names and passwords, allowing them to steal another player's virtual items. Accessories like "skirt of virgin" and "poopoo hat" (yes, it is a hat shaped as feces!) are very much in demand in this virtual world. So, a weird sort of crossover crime is being invented, where real-life crime is committed to steal objects that don't exist except online.

Another crossover crime that will get a character is selling virtual items for real money. One player was so desperate for a Ragnarok item that he bartered his brand new Nokia 7650 for it. In the United States, selling MMOG characters is common on e-Bay, the big auctions website.

Being a games master is no easy task. Believe it or not, it's a position of power. Colayco says games masters regularly refuse bribes from players who ask to be "leveled up." Sometimes, the games masters are even offered hard cash.

Colayco wants to keep the Ragnarok community clean. "Everyone gets equal treatment," he says. "We don't want to create a negative environment."

The games master position is rather popular and Colayco receives hundreds of e-mails from games master-wannabes. Unfortunately, games masters are like federal agents; they are not allowed to reveal what they do to anyone for safety reasons. They get death threats from players whom they ban or punish. "We have players storming into the office," says Colayco. "That's why our security's so tight downstairs. Being a games master is both a blessing and a curse."

Besides its unique Pinoy flavor, Ragnarok has become so popular so fast because it's a place where players can be themselves. Geronia explains, "There's an infinite combination of accessories for you to be able to express your personality online."

It's also a very democratic game where who you are in real life doesn't matter at all. "It breaks social barriers," says Colayco. "A cousin of mine who studies in IS (International School) met a friend from Tondo in the game. My cousin said that this kid from Tondo saved his life a couple of times. There's no other situation where kids have a lot in common."

Also, Ragnarok is attracting girls, not your typical gaming demographic. Suddenly, says Colayco, boys and girls have something to talk about. Girls comprise 30 percent of Ragnarok players and populate one of its more powerful clans, the Shadow Maidens.

How Ragnarok Saved The Internet CafÉ Industry

"Ragnarok pulled us out of our misery," says Mark Reyes, 25, the owner of Computer Center, a 24-seater Internet café located beside the Lyceum and Northwestern University.

Reyes claims that it has increased his revenues by more than 75 percent. "From 8 a.m. to 5 p.m., all are playing Ragnarok," he says. "I have no more network games. I consider Ragnarok my bread and butter."

Before Ragnarok, violent network games like CounterStrike and WarCraft, brought in the moolah. But these games do not have the organic quality of Ragnarok, and thus the public lost interest, and many Internet cafes saw their businesses take a nosedive.

"Halos one customer a day," says Jet Lorenzo owner of Blue Orb Internet café to describe the days before Ragnarok. "When we tried Ragnarok after a week, nag-boom ang sales. Waiting list pa ngayon."

Lorenzo claims that they sell P60,000 worth of Ragnarok cards a month. But this doesn't even include the P25 an hour she charges for computer usage.

Ragnarok is a boon for Internet café owners because they make money on both computer usage and selling of cards. They do not only benefit from the increased traffic brought about by the game's popularity but also from the double revenue stream inherent the game's business model.

Raymond Ricafort, 37, president of 68-store Netopia, the largest Internet cafe chain in the country, says that the sale of Ragnarok cards accounts for 12 percent of their business. That's worth about P2 million a month for Netopia alone. Ricafort is also happy about the fact that Netopia does not have to shell out money for gaming software anymore. In the past, they had to pay a P900 licensing fee for games like CounterStrike and NBA Live. For Ricafort, whose 100-seater cafes are average-sized, that's a lot of saved overhead.

Both Reyes and Lorenzo have plans to put up new branches because they do not see the sudden demise of Ragnarok. "'Yung CounterStrike, pag napatay ka, patay ka na," says Lorenzo. "Sa Ragnarok, pataas nang pataas ang level."

Colayco is also very optimistic about the life span of Ragnarok. Level Up plans to introduce new patches and innovations every three months to prolong the life of the game. A patch, like the Comodo version being introduced this weekend at the 2nd Annual Comicbook, Gaming and Anime Convention, contains enough new characters, accessories, and maps to keep gamers interested.

Unorthodox Management Style

All, dark, and handsome, Ben Colayco claims to be a geek at heart. But he is also the first to tell you that he wants to take the geek out of gaming and make it mainstream. His 1 1/2-year old company seems to have struck gold with Ragnarok. "It is easy to get into and is deceptively simple, but is one of the deepest experiences you can have. It is designed to have people interact."

But even a good product is a tough sell without the right marketing moves. Colayco has used guerilla marketing and won. He chose to give away Ragnarok-loading CDs for free instead of selling them, lowering the barriers to entry for the user. He gives the game free to Internet cafes instead of charging them a licensing fee, earning their support. For the first three months, Ragnarok was free for all users, thus getting the market addicted to the game.

"There's no front-end cost for the customer," says Netopia's Ricafort. "It's essentially sachet marketing. It's the correct marketing approach, now it's just a matter of the product."

Colayco is also present in events like anime and gaming conferences, venues that other youth marketers dismiss because they are considered too fringe. This ability to go where the market goes is particularly important when you're dealing with skeptical youth who know when they're being sold to. Key to getting the youth is through schools.

Normally schools would be the last organizations to support a gaming company, but Colayco is trying to get schools on his side. He builds relationships with schools by accepting every invitation to speak or be on a thesis panel. He also has internship programs with universities. Best of all, he just started a new program that awards Ragnarok points to students who get A's and bans students who flunk exams from playing. This way, he gets the support of teachers who would have been the first to blame Ragnarok for kids flunking.

Colayco is also unorthodox in the way he manages his people. He practices an open-door policy. "People can just come in and tell me 'Ben, you suck,'" he says. "I give them a long rope but they have to show they can do the job. If you can't run with the pack, you're out."

The loose management policy seems to work in this company where the average age is 24. Internet café partners like Reyes and Lorenzo are full of praises for Level Up's support team. "They give CDs, they supply us with marketing materials, wala silang pagkukulang and that's why we support them in return," says Reyes.

But the management policy might just be too loose. Level Up has 150 employees and still has no HR manager!

The Future

Now that Ragnarok has paved the way for MMOGs, expect many competitors to join the fray. Level Up is looking for new games to bring in but won't say what they are.

But Colayco believes that gullible competitors who think the MMOG industry is easy money will be in for a surprise. "It took me two years to make the business plan. Look at me – I think I had a clue, but didn't. It's not just about getting a game from Korea and selling prepaid cards. We've been doing a lot of work with just one title." Is Level Up making money? Colayco will only say, "We're doing okay."

Meantime, Colayco needs to focus on keeping Ragnarok interesting. Go, the Grade 7 student from Xavier, says that some of his friends have stopped playing. "They've got to speed up the new patch, the new second-class jobs, or else people will get tired," says Go, before going back to his PC to spend another couple hours in Rune-Midgard.

* * *

Tip for youth marketers and parents: If you want to know what the youth are up to, go to the Second Philippine Comic book, Gaming & Anime Convention 2003 this weekend at SM Megatrade Hall 2. Organized by Culture Crash Comics and Level Up, this trade show is expected to attract at least 10,000 kids.

http://www.newsflash.org/2003/05/si/si001725.htm