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.
Just like any other brick and mortar businesses, there are so many extraneous factors that’ll affect your likelihood of success in the internet cafe industry:
- Location. Pick a good spot and you’ll hit a gold mine. Pick the wrong one and kiss your money goodbye.
- Competition. Most business-minded people think of competition as a race to charge the lowest prices in order to win customers. While it’s good for the customers, exceeding the lower boundaries can drive you and your competitors to bankruptcy. 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 if your only source of connectivity conks out more frequently than you get brown-outs in your area. A backup DSL might be a good solution but many consider the extra cost to be not worth it.
- Software Licensing. Many people who go into the net cafe business don’t factor in the cost of software licensing in their capital. Either they think they can get away with a few pirated copies or go open-source full-time. Still, there’s the class of ever-popular network games like Starcraft, WoW and CS which cost an arm and a leg to get a per-PC license. Maybe that’s why MMPORG pay-to-play model is more popular in this side of the globe.
- Expected ROI. While previous half-decade old records saw a return-of-investment in just over a year, lower rentals due to fierce competition and over-saturation of net cafes have driven the ROI further back to as long as 3 years (that’s if you’re lucky enough). To sustain a business that long and derive your income from that sole business could easily drain you of energy and personal savings.
There’s also the question of how many PC units should a net cafe operate in order to realize profit. A friend, who runs a net cafe for about 3 years now, says you need at least 15 units to survive and get decent income. Does that mean others operating below that number are doomed to fail in the long run?
However, the growth and expansion of Netopia’s franchise around the country says there’s still good money to be made from the internet cafe business. Does that mean people wanting to venture into that industry should look into franchising? What do you think — given the opportunity and capital, do you feel a net cafe business in the Philippines is still a lucrative one?
Lots of great info here. Thanks for sharing
mga tsuy, may alam po ba kayo abot anti piracy team na nagre-raid sa mga cafe at sa anti-piracy law? ano po ba ginagawa nila sa cafe na pirata ang OS at mga games? kinukuha po ba nila ang mga cpu at may multa ba sa cafe? matanong ko lang kasi pirata OS ko sa cafe eh..takot ako sa magiging mangyari.
Hi Michael,
Back when I was still operating an internet cafe (2005) this news of BSA and Anti-piracy of the Philippines came out and made a lot of noise in the internet cafe industry. Though, there are news that NBI and local authorities don’t raid internet cafes, there were still rumors that some unscrupulous group are doing so. You can check http://www.bsa.org for more info.
But one of my goal right now is to upgrade the internet cafe industry in terms of uniting the icafes in order to better negotiate lower prices or better terms of such licenses (group deal. We all know how costly the licenses are, and if you haven’t really planned out this expense in your over-all business plan… chances are you will not be able to impose higher or profitable rental fee to your customers because of factors like competitions and the suicidal mentality (price war) of icafes prevalent here in our country. But if you have considered this, I assume that your rental fee is not 15 pesos in a very competitive location… you’ll be more like Netopia. You can visit my http://www.icafeproject.com for mor info (shameless advertising
Thanks Abe)
- Chazper
PayMyCafe Internet Management Software for FREE. Packed with valuable features. Plus, you get paid by using the software through ad revenue sharing. For more info, visit and download at http://www.paymycafe.com . Available only for Philippine Internet Cafes.
Hi to all internet cafe owners, 10-08-2011
im planning to have my own internet cafe “40 units PC and 15 units PS3″ i already have my own place Location Cavite City i just need some advice from Experienced Owners..
correct me if im wrong
my idea is like this i have 55 units all together with ps3 and PC on AC Internet Cafe
Lets say 40 units are used for 1 DAY =
15 Pesos per/UNIT x 40 UNIT = “600 Pesos”
“600 Pesos” x 8 HOURS only = “4,800″
BUT im Planning to Operate my Internet Cafe 24/7
so 4,800 x 23 days = “110,400″
BUT im Planning to Operate my Internet Cafe 30 days a month…
“110,400″ is that Right or wrong?… REPLY asap PLS thank You…
Hi, in my own experience that computation is not going to happened, only 50% average is my income based in overall operation.
Honestly, your computation is way off. You have 40 units, how many of those units will be use in an expand of 24 hours?
Do you think there is a market between 9PM and 8AM in your area? Will someone be really using your internet cafe between 9PM to 8AM? Not to mention all 40 of them.
[...] Several months ago, we finally closed our little internet cafe business. I wrote about the viability of the net cafe business many years ago and actually started one about 2 years ago. Despite its eventual failure, I learned [...]
I am already planning to start a computer/internet shop in my own house as a starter. My only problem is the connection, we are in the province. However, I see many laptop owners in our town who have connections. Would it be difference for those in the cafe? The reason I want to start in our house is because I do not have enough to rent on the urban. But since I am just starting, do you think this is possible? Thanks!!
@jun0865.
Sir thanks for your help sa ating mga kababayan wu r planning to put up that business .. 1st time ko magbasa ng comment sa site nato and i found out na ung mga comments mo ang very informative.. im planning also to put up one but still studying all the options tsaka do’s and dont’s.. keep up the good work. i may also seek your help in the near future.. mabuheyyy…
year 2004, at that time i put my internet cafe and did not take time to close.
Now 2011, I am still convince that it is not a good business if you will only do the same strategy & thinking..isn’t it that we have the highest electricity rate in Asia & computer prices, including internet connection is getting cheaper n cheaper.
But there is still hope…ummm..that I can not share here,if you like email me at pilengr_tw@yahoo.com, I can tell you the secret. You will be surprised you did not taught of that..always think out of the box..bye bye..
would be better to just franchise an internet cafe?
in our time now internet cafe business is not advisable for the reason that many internet cafes existing to our area and anytime you can log in using phone or home/residential. the internet ay sobrang abot kaya na ngayon. i am a owner also of a internet cafe. base to my experience 1months to 6 months or up to 1 year your cafe have many customers coz its new and the material is very new. but afterward ang mga tao ay mg magnenet sa mga cafe na bago. at isa pa kung makikita ka ng kapitbahay mo na malakas ang cafe mo they also put up a cafe na mas marami pang pc kaysa saiyo. and the price is very low. dito sa davao ng P10/hr kami pero ang new open cafe is P5/hr or P10=3hrs. kung dadalawin mo ang davao mostly ang rate ng internet dito is P5/hour.