Though the market size is small, online advertising can pose a serious challenge to more traditional forms of advertising, experts say.
They say online ads will be the first choice for businesses aiming at digital marketing given the steadily increasing Internet coverage and use in the country.
Market research company Cimigo says the size of the online advertising market in Vietnam increased by 71 percent to VND278 billion (US$15.5 million) last year.
"The Internet plays a significant role in Vietnamese lives both personally and in business, and it is becoming an increasingly important channel for advertisers to reach their target audience," said Cimigo's online director Lukas Mira.
Mira said more than half of the 25.4-million-strong urban population in Vietnam is online, and users spend more than two hours on the Internet every day.
Despite the increasing importance of the Internet, the market still represents only a small percentage of the total advertising spending in Vietnam and is lower in the country compared to other Southeast Asian nations.
Mira said Vietnam's online advertising market is still small despite the rapid Internet growth in the country as advertisers were skeptical about the web's effectiveness in reaching their target audience.
He said it was difficult to figure out which audience was being reached through displays or searches.
Brian Petz, co-founder of Vinagame, said just 50 cents per year is spent on online advertising per Internet user in Vietnam while China spends 15 times that amount.
Vu Minh Tri, general director of Yahoo! Vietnam, was confident that businesses would find it easier to know who their target customers were for digital marketing as they had quicker feedback than in TV commercials or in the print media.
Tri said marketing personnel played an important role in online advertising, but they lacked knowledge of online marketing, resulting in the small market size that accounts for about 2 percent of Vietnam's total advertising revenues of US$600-700 million a year.
"They should receive online marketing education," Tri said.
Yahoo! has conducted many campaigns in Vietnam to promote Internet users and online advertising. These include online services like chat and search in the Vietnamese version, and training courses on online marketing for marketers, agencies, advertisers and media owners.
"Yahoo! has seen benefits from the campaigns as revenues have doubled," said Tri.
Doubled in five years
With 23 million users, Vietnam is the fastest Internet growing country in Asia, according to Cimigo. The company said the ratio of Vietnamese Internet users grew by 100 times in 2000-2009, while second-placed China grew 15 times.
With the rapid growth, Vietnam's online advertising market would double its size in the next five years, said Cimigo managing director Richard Burrage.
Nguyen Phuong Dung, director of Malaysia-based Innity in Vietnam, said businesses were paying more attention to digital marketing through cell phones, websites and online newspapers than traditional channels like TV and the print media.
Dung said the online marketing company has many clients including online ads in their marketing campaigns. One of the clients was Samsung. The Korean electronics giant set up a fixed budget for online marketing a year ago. Earlier the giant spent money on online ads only if it had a surplus left over from its marketing budget for other traditional channels.
The fixed budget of Samsung was four to five times higher than the surplus, said Dung.
Dung said advertising and marketing agencies which were loyal to traditional channels have expanded into digital marketing business to meet the needs of their clients, and more foreign digital marketing firms are setting up offices or seeking affiliates to explore opportunities in Vietnam.
The director estimated the online advertising market would account for 10 to 15 percent of the country's total advertising revenue in the next ten years.