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?
Does station 168 even make money? I mean looking at all its equipment and fast internet, looks like massive investment even beyond Netopia (who is filled with advertisers and banners). OR maybe they are fine as long as a competitor doesnt open up, or noone can probably afford to compete.
Hmmm good idea there yuga! and along with it is a coffee and snack bar. :)
kuya abe, turuan mo na lang kami mag blog, mas maganda pa siguro income kesa mag invest sa internet cafe…hehe
@marghil and orgl – why not combine both? put up a net cafe and hire bloggers?
Now I am earning more than before with just 1 pc. :)
I’m a former net cafe owner and so so so proud quitting the business. It’s so so so so so so horrible experience for me caused by lagggggggggy dsl business plan, stiffffff competition, unfairrrrrrrr competition (for using counterfeit softwares). Blogging is farrrrrrrrrrrrr away better than having a computer shop. :)
Kuya Kevin, Ubelt area: Bill’s Gate used to be swarmed with customers 7 years ago, it’s now almost empty. Or are they still there?
I would say yes! But not in Metro Manila, It will be a great business if you locate it the province where only few can afford DSL connection at home.
Maganda magtayo ng internet shop sa mga campus kaso pag bakasyon walang kita.
I used to have an internet cafe but gave it up three years ago. Now I hear rentals are at P15/hour ? Don’t see how one can make money at that rate, you have to find ways to supplement it. Rentals alone won’t cut it…
That was in 2006. We sold it na though because of all the internal conflict. Never be business partners with your friends, hehe.
i agree with Kuya Kevin
It’s about location but as of the moment, the busiest places are also the most hard-fought (too many competitors).
Second criterion for success would be the quality of experience (Gaming Cafes).
Third would be “other services.” I have a friend who only has 8 units but he has 10 printers and offers the sought after “Piso Print” service. His printing earnings far exceeds the PC rentals.
Location, location, location.
I live in the Ubelt area of the Philippines, and I see a internet cafes all over the place. They are definitely making money in this section of town.
@wauks, when was this?
I and my barkada used to have an internet cafe back in 1998. It was good in the first few months.
To make it short, i don’t want to have this type of business again. Maybe i will, but just a side income, making money online is much more profitable.
mas magaling pang magblog na lang tungkol sa internet cafe kesa magtayo ng internet cafe, mas malakas ang kita, di ba? hehehe.
on a serious note, plano ko rin yan dati sa barangay namin sa batangas. malapit sa school. kaso, may nauna sa akin, and i don’t want to compete with his price. malulugi lang ako.
@gen, I think meron ng gumagawa ng ganun dito sa Market Market.
@calvin, uy! sama nyo naman ako!
patok yung 168 and its sister company ihook. i think it’s because of gaming and not internet. abe nagdodota pa rin kami, pero ngayon sa labas na para pwedeng mag-ingay kahit 40 pesos per hour.
IMO, Internet / Small scale BPO – that’s a good combination.
Internet Cafe in the morning then Call center at night. :)
I think cafes will go down on their ‘internet’ side of business because internet and computers here in the Philippines are getting cheaper and cheaper, unless you are located near a school, sobrang patok for research, typing and printing, lalo na yung mahileg sa cramming.
I guess there are still growth in the gaming side because I think gamers prefer group playing than playing solo.