Is there hope in the Net Cafe Business?

Abe Olandres Editor-in-chief March 25, 2009 · 3 min read

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About a year ago, I wrote about the state of the internet cafe business in the Philippines and why it’s a seemingly losing battle. A couple of days ago, I mentioned that I started venturing into the Internet Cafe with a friend. I got emails asking why I thought the net cafe is still a viable business and here’s my take.

internet cafe business Again, I’ll refer you to the points I highlighted in my previous entry — location. If you believe that you have the right location then you’ll have a higher probability to succeed or even just getting back your investment in a short time.

Your goal here is to be able to recover enough of the initial capital in order to re-invest in upgrading your workstations in 2 or 3 years. Otherwise, you get left behind with older and slower PCs that you’ll lose customers (esp. gamers) to nearby competitors that offer better ones for the same rates.

The major driving force with my decision to going into the internet cafe business is different though. What I am looking into are parallel businesses that I can put on top of the net cafe business without incurring additional or too much overhead.

That way, all I need is for the revenues of the net cafe to at least cover rent, bills and wages. Whatever profits I am expecting will come from other side businesses.

What are possible side businesses that one can add on top of an internet cafe? Well, some of them are already being offered in most shops:

Gaming cards for pay-for-play games (Level-Up, e-Games).
Cellphone reloading for Smart, Globe and Sun Cellular.
Photocopying, printing, scanning and CD/DVD burning services.
Food and drinks.
Photo-ID and photo printing.
Custom cellphone uploads (ringtones, wallpapers, games, apps).

You can also offer outsourced services:

Computer sales and repair services.
Encoding/typing services.
Digital Photo services (better than webcam quality Friendster photos).
Card Design/Printing (calling cards, invites, certificates, custom greeting cards, etc.)
Video conversion/authoring.
Cellphone and electronics repair services.

If you add revenues from all these sources, they could be a significant amount on the returns. Of course, you only select the ones that your manpower can handle and your location. The rest can be outsourced. The ideas here are more applicable if you’re located in subdivisions or villages. You can look into totally unrelated combinations too — like a laundry shop and a net cafe, a video rental, a used book store, a car wash service or a 24-hour grocery.

The idea is to share the burden on the rent and bills which usually takes up majority of the operational costs.

What is the key factor for success in the net cafe business according to the article?

Location is the key factor for a higher probability of success or recovering investment quickly.

Why is it important to upgrade workstations every 2-3 years?

Upgrading prevents losing customers to competitors with faster PCs at the same rates.

What is the author's main reason for entering the net cafe business?

The author plans to add parallel side businesses on top of the net cafe without extra overhead.

React to this article:

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Abe Olandres

Editor-in-chief

Abe is the founder and Editor-in-Chief of YugaTech with over 20 years of experience in the technology industry. He is one of the pioneers of blogging in the country and is considered by many as the Father of Tech Blogging in the Philippines.

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118 Comments

Joe Palala · 16 years ago

Microsoft has started an icafe program wherein all the software will be cheaper if licensed for a net cafe http://www.microsoft.com/philippines/icafe/

Thanks/Best Regards

Joel · 16 years ago

Hello po advice naman po. We are planning mag put a ng 6-8 PC sa house namin. And me na rin ang mag manage overall ang problem is kapos ng budget if bibili kami ng license software. Marami bang nahuhuli sa mga internet shop kahit sa kalooblooban pa ng barangay? Thanks

chocoluvr · 16 years ago

Anybody here with an existing internet cafe in the U-belt area with at least 20 stations and who is looking for more capital for upgrade or expansion? May extra funds ako at naghahanap ako ng investment for extra income. Mukhang OK lahat ng sinasabi dito – kahit anong business naman will succeed or fail depending on a lot of factors. Interested pa din ako sa internet cafe kaya lang may full-time job ako so hanap ko partner na nag-ma-manage na talaga ng internet cafe nya at gustong ituloy yun pero syempre, kelangan willing na magka-partner na bago.

If interested, please email me at l8****@gmail.com.

blessedsinner · 16 years ago

hay…help pow
upgrade sana ko pcs…san ba may mga mura na videocard at memory card na pwede swap…thnak you…. all your messages about internet shops sobrang true

blessedsinner · 16 years ago

hay…i own an internet shop for 3 years na…upgrade sana ko pcs…san ba may mga mura na videocard at memory card na pwede swap…thnak you…. all your messages about internet shops sobrang true

hazel honra · 16 years ago

hi guys, just want to offer those who already have internet cafe to avail our FREE installation of QUICK ADS- online advertisment, this will help you earn EXTRA INCOME for your internet cafe’s, if you have any question, feel free to contact me at 0927******* or 0933*******.

thank you…

IC DeaDPiPoL · 16 years ago

IMO better go with the restaurant/cafe with internet kiosks as long as you can get a good location.

If you decide to opt for gaming pc setup you will need Windows licenses and game license (Warcraft III/DOTA) which will add cost.
Pros:
-tend to generate higher amount of customer (regular customer, gamer, casual surfer)
Cons:
-higher cost due to…
==software licenses
==requires higher spec’d pc parts for gaming
==higher electrical cost. Usually consumes 400~650 watts per kiosk

Opting for a pure websurfing only kiosk you can opt to use GNU/Linux based distribution since all you will need is a web browser(unfortunately Yahoo Messenger is not available under linux).
pros:
-cheaper to implement
==using GNU/Linux as an OS with Chrome or Firefox for browsing
==lower power consumption (especially when using Intel Atom based CPU). Usually consumes around 65~125watts for a single kiosk
==lower cost to build the pc since you can opt for a motherboard with integrated parts.

cons:
-limited patrons (casual surfers and non-gaming regulars only)

sheryl · 16 years ago

good day,filipina ako at nakapangasawa ako ng greek,and2 ako sa cyprus ngayon,dme nagwowork dahil my 3 yrs old baby ako..plan ko umuwi to put up this internet cafe business…sarili kong pwesto at starting ng 6 units ng pc…location ko ay residential area..wala pa kme internet shop kz malapit dun kaya mejo maganda para dna pumunta sa downtown ang mga costumer..maganda ba tlga tumayo ng business na ito,plan ko din is internet cafe and restaurant…merienda foods lang or mga coffee drinks..pls advice me more…thanks..

Leo · 16 years ago

Yuo don’t have to buy Microsoft Windows license to have an internet cafe, use “Ubuntu” it’s better OS and its free.

MalikAburama · 16 years ago

internet cafe industry today is weak. Mababa na masyado ang rate 10/12 per hour/ ung iba pa nga 8 pesos pa. And if u are located sa downtown , masmalaki renta mo. hindi kakayanin ng rate mo. Sa renting of property pa lng patay ka na. then plus the utilities especially electricty. and also ung DSL. Our’s we pay 4k a month. average electric bill namin is 11k. monthly rentals is 19k.

The worst of all?. Expensive MS software. before you put up a business one of your first priorty must be ur software licenses. Another problem- those in the BIR office, their agents are usually boastful.

honey · 16 years ago

hello sa lahat. i am just new here magpa advice lang sana ako kasi i am planning to open an internet cafe with 10 units ang question ko ok lang ba walang license ang mga computers? kasi mahal ng license po.

is it ok ba nowadays to put up an internet cafe without a license sa mga program?

hope to have an answers soon…

IC DeaDPiPoL · 16 years ago

Was pondering if a low energy consuming rig + proper software could be beneficial to reducing operating costs:

Scenario A: ITX-based Atom mobo with IGP running on a 65watt power brick and an LCD monitor for web surfing and specific duties. GNU/Linux variants for even lower licensing cost.

Scenario B: Same as above except using an ITX mobo with NVidia ION chipset for gaming duties.

Scenario C: Same as A except using a 2+ cores and hopefully the upcoming ION2 for gaming

rick · 17 years ago

to larry:

rates here is very cheap dahil kagagawan din ng mga net cafe owner, kanya-kanya pababaan rates para humakut customer hangagang sa bumagsak! thats why!

kala nila kita na sila dahil bigla buhos customer ng magbaba un pala ilan araw lang dahil ung kalaban mas bumaba hangagang sa magkaroon pricewar ayun pare-pareho sila patay!

rick · 17 years ago

my two cents!

the answer is yes and no.

yes if you have this:
1. sarili mo ung place(hindi ka nagre-rent)
2. kaw din nagbabantay
3. marunong kasa computer

no if you dont have this:
1. sarili mo ung place(hindi ka nagre-rent)
2. kaw din nagbabantay
3. marunong kasa computer

why…
the tricks kc is how could you able to sustain the pricewar, dahil eventually darating un kahit sabhin na konti pa lang kayo ay dadami din yan at darating ung point na magkakaroon ng price war at kung sino ang mababa ang operational cost ay sya mananalo at ung 3 points na sinabi ko sa taas at meron ka nun im sure ur da winner.

marami nalugi sa bisnes na to, kc dati ok pa ala masyado competition at mahal ang rates 30-40 pesos per hr kaya kahit magbayad ka ng rent at magpasweldo ng tao at technician ay ok lang malaki parin kita, pro ngaun ala na, marami na kalaban at mababa na rates 15/hr meron pa dyan 10-12/hr kaya hindi ka mabubuhay nun kng puro k gastos, i mean bayad sa rent, attendant at technician. marami ko kilala nag invest half million at hindi nabawi as in lugi, kasi nga nung una maganda pa malaki rates at ala masyado kalaban kaya malaki kita at nasilaw sa laki ng kita kaya ayun nagbagsak kagad ng malaki amount para lalo lumaki kita, ng magtagal dumami kalaban at nagkaroon ng pricewar hindi nakayanan at nagsara kasi sa laki ng gastos at lumiit bigla kita, so my advice is kung magveventure kasa bisnes na to dapat ay sideline lng(additional income) at wag mo asahan hanapbuhay dahil short term lang to at wala security, at kung meron kang 3points na sinasabi ko pwede maging long term.

yung location na sinasabi nila? im not sure! dahil kung saan ung maganda location andun stiff ang competition at kung meron kang 3points ko tyak panalo, so it goes down pa rin dun sa 3points! ung side bisnes na sinasabi nila is given na un kc kung ano pakulo mo ganun din maging pakulo ng kalaban mo later on

i hope this helps…

JackRIP · 17 years ago

My question is, how many internet cafes actually run pirated software and what (if anything) are authorities doing about it?

Are most i-cafes getting away with running pirated software? Paying for software licenses is an expensive endeavor. You are looking at a price range from P4,230 – P6,580 and higher depending on the OS you chose, and that’s just for a single license. Honestly, the alternative is to use open-source OS like Linux. But then you run into the problem that most games won’t play on that OS.

This brings us to the other software piracy problem. Are most of the games pirated too? My guess is yes. Yes yes, many of the online games are Free-to-Play. But for some of the “twitch” gamers out there, they want to play the offline LAN based games with their friends. Games like Left for Dead cost money.

So I wonder, for all those who said on here that they are planning on starting an internet cafe, is piracy part of your business plan?

dinah · 17 years ago

i’m in an internet cafe business for almost two years…sa july 18 na pala anni namin. maganda ang kita kaso lang if lahat ng daily expenses sa kita ng cafe kukunin mahihirapan ka talaga to survive and pay the bills.

we rent the space for 4,200 and 10 units lang kami. i added typing, printing, scanning, edting, CD/DVD burning and making wedding invitations para additional kita. i’m happy to read this post hahanap ako ng paraan to add those other services para pandagdag kita.

comtech-4 year course natapos ko last 2008 so advantage na rin kasi ako na bahala sa mga unit na may sira.

problema ko every month ang lahat ng bills lalo na ngayon may kakompetensiya kaming bagong cafe, mas marami ang units nila…

may awa ang Diyos :) kakayanin ko ‘to but i guess i need to look for a job nalang para may backup kami to pay bills and maintenance… koloka!

add ko blog mo sa blog list ko huh? salamat
:) God bless everyone

Chang · 17 years ago

…i want to believe that net cafe business will stay longer. but, part of me is tellin’ that promoting online/lan games which is the main services of an i-cafe nowadays, makes me feel guilty that students may spend time and money for games and disregard some important stuff at school and at home. sad lang…

ara · 17 years ago

me and my husband are planning to put up a net cafe this year. but im not sure with the plan. thinking that there’s so many competitors around, im so confused. but maybe, we’ll try. thanks to all of u guys. your suggestions really a big help. godbless!

kenshinflyer · 17 years ago

Sa tingin ko, basta may online games, mabubuhay ang internet cafe.

Pero ayos naman yung kakilala kong may internet cafe na patok pa rin. Basta may magpapaencode, pascan, surfing, at paprint, mabubuhay sila. Siksikan pa nga sa cafe nila eh.

larry · 17 years ago

Net cafes suffer from the same problem all Filipino biz endure: lack of purchasing power of the Filipino consumer. P15 per hour? P30? remember all computers in the Philippines have the same price or more than in the US or Taiwan or Singapore. (We import these computers).

Yet, the selling price of services (internet hourly rental) is not the same as in the countries mentioned above. That is why, the Net cafe industry as a whole is suffering and only a few exceptions are making money.

Do you take into account the opportunity cost of your labor as cafe owners (You dont give yourself a salary, do you? as a cafe owner?)

All businesses in the Philippines will improve if the purchasing power is increased (high salaries for parents, high allowance for students).

This is what I learned from reading the book Hyperwage Theory. Google it. it is very revealing. and if you are smart enough, you can get a free PDF copy of the book off the web.

treyarch · 17 years ago

i also own a small gaming-cafe,dhil s subrang adik s pc gaming e2 ang pinasok kng business after college grad..i started 4units(20k Php each) only at ngaun i already got 8units on 6 months operation, aq kc ndi ngrrent kc i own the place at lcd monitors ang gmit ko for low power consuptions at computer technician at mhrap kpag nd k mgaling s technical side s business n to dhil wlang ksawaang update at maintenance ang ggwin u, just always keep 120php minimum day income per unit sure mkakasurvive k.. basta aq kmkita n at enjoy ko p business ko.

treyarch · 17 years ago

@leo martin
some comtuper retailers got pricelist on their web, kya pwede u compare at mga prices f knno mas mura.

joedwebguy · 17 years ago

when i was in college, i was thinking of linux-based (so no costs in getting windows, etcetera) small-time computer shops (no more than 5 computers) – however sponsored.. by ads..to pay the bills :)

although there is no market for it (esp. coz of gamers)

i also though perhaps, an added service might be something as simple as friendly customer service.. or whatever :)

however i don’t have the cash to start one. :(

Nash · 17 years ago

It’s how you manage the business. Especially the gaming freaks out there who doesn’t own any PC at home. (talking about taking advantage of the situation)

It’s a matter of marketing strategies, wit, and strategic location :0 cheers

ronz · 17 years ago

been in the business for 2 yrs…yup it’s true upgrades and parallel businesses are definitely needed…”LOCATION”, students are the no.1 market for me….Couldn’t disagree more…..

Abe Olandres Editor-in-chief · 17 years ago

@Leo Martin – VirraMall in GreenHills would be one good place to start.

@DTA – you are right, although it will depend on the demographics of the customers in your location — what they do when they rent a net cafe. It could be for gaming, video chatting or something else. It pays to be able to cater to all of them.

@Selboy – most net cafes are actually SOHO

Selboy · 17 years ago

like a home and a cafe…..

DTA · 17 years ago

Am interested in starting up a new net cafe, but with a different twist — one that actually caters to the customers’ needs.

In being involved in net cafe operations, one must remember how much labor and thinking restaurateurs in France go through before earning the Michelin (because there’s so many restaurants), as it takes much research and understanding what your target customer base really wants apart from using your computers.

Of course, those customers are really picky on what you have in there: if you have the best machines available, with the best internet connection, the best equipment and most importantly the best service (but not necessarily to spend too much!), they’ll love you but remember you have to continually update and improve services, learn new techniques, tune up your workstations to speed, get to know your customer base and make them your allies… or lose ’em to the next net cafe.

william · 17 years ago

i think vick “statistical data” is a little over emphasized.
there is piracy, but i really doubt 99% are pirated software.

Victor · 17 years ago

Vick: “99 percent of software in the Philippines are pirated. How do you explain that Filipinos?”

are you sure? :-) prove it with statistical tools and analysis.

information · 17 years ago

The best location for internet business is in the U-belt.. Most of the internet shops there are full.. Most of them had 100+ pcs.. Anyway, good luck to your business.

calvin · 17 years ago

sa amin may net cafe/water refilling station

maganda sana net cafe/vulcanizing shop. hahaha. or net cafe/barber shop or parlor. hehehe.

Leo Martin · 17 years ago

I’m opening Internet Cafe in Caloocan by May 1st, anybody out there have a suggestion where to buy computer parts.

Filipino · 17 years ago

I myself own a computer shop before. I closed it because I am always thinking that my business is not different from selling illegal items (pirated softwares).

Vick · 17 years ago

99 percent of software in the Philippines are pirated. How do you explain that Filipinos?

pabsj · 17 years ago

It is still a good business, mine is now on its 3rd year and it has not slowed down. You just need a lot of patience to learn new things so that you wont have to rely solely on your technician when your computer breaks down.

Victor · 17 years ago

On Topic: “Is there hope in the Net Cafe Business?”

The answer is definitely YES.

In the near future, Net Cafe biz will not be slowing down.

It only takes a good business plan and a heart of a true entrepreneur to put aside all foreseen “problems” and “complex” things with regards to this type of business.

Fred Hill · 17 years ago

thanks for the message. now i know that lcd’s consume less electricity if im not mistaken right? actually i’ve just started a small internet cafe and i think its a good news.

God bless!

olive tenido canete · 17 years ago

SIR,

I’m on this kind of business and you’re right.. added income tlg ang typing jobs..load (lod central) eloads, printing and scanning…
can you pls help me to find seminars para matuto ng pag print ng photos,editing( ung mga naka higlights ng yellow) …at sources n rin kung san nkkbili ng mga materials…

maraming salamat sa info ha…mas lalao ko nga naisip n ituloy ang pg photo printings dhil email mo….it reallly help me…..t5hank You again And God bless you always….

Gwapito · 17 years ago

I used to be in internet cafe biz. I and my friends started it in 1998 in Iligan, i left the partnership a year later. Then my friends closed it in around 2001.

CC Lozano · 17 years ago

My friend and I are planning to put up a 5-desktop Internet cafe near a significantly populated university. This helps. Thanks Yuga!

rogerd · 17 years ago

offer DIY courses. I have one in mind but I don’t have the fund to set up this business.

Rusty Squire · 17 years ago

my comment is caught by anti spam plugin. please take a look at it.

Rusty Squire · 17 years ago

i don’t like this news, it is like a bad news i am not sure. well, hope that this business won’t die.
by the way, i will be honest with you. i am here to promote the seo contest on my blog. if you have comments and suggestion, negative or positive, i will highly appreciate it. Thank you.

Val · 17 years ago

For me, it’s nice if you have the right location and you own the place because you can save up on rent.

If you live in a subdivision or a village, and there is no internet cafe nearby, you can put up one so that the people there won’t go out of their way just to use the internet.

Darren · 17 years ago

In Taiwan, only teenagers go to net cafe and they’re playing on-line game, that’s all. Adults tend to use internet at places like starbucks although it’s payable but people think this makes them more “elegant” lol~

madzman23 · 17 years ago

whaha…
LOLZ @ BrianB..
what a brilliant idea, private rooms can also be a big plus.
:D

But anyways, thanks for the suggestions Yuga, my GF’s net cafe is struggling right now because of the rising competition and she’s asking me what to do. So Ill suggest these as options.

Well, I think the best will be is to offer what are not available in your competitor that will give you the edge.

Good luck to your new venture, Sir Yuga.

herbert · 17 years ago

^ naughty, naughty. what about a specialized service catering to students, addressing their needs on how to do research, how to do reports, etc.

BrianB · 17 years ago

You forgot massage. A net cafe with a spa above it would do just nicely. A lot of girls “use” netcafes to “stay in touch” with their foreign honeys. And some of them wouldn’t be satisfied with chatting, if you know what I mean (wink, wink) :)

Paul · 17 years ago

I have been thinking of doing almost exactly like this. I wanted to start my own desktop publishing/editorial services company but I realized it is not that easy to get big and regular clients. Internet cafes, on the other hand, are like sure success if –as what Yuga said up there — you have the right location. I am still seriously considering venturing into this kind of setup.

Good luck to your new business, Yuga.