The Internet Café Business in the Philippines

A lot of people have been asking me whether the Internet Café business is still a good investment in the Philippines. It was a lucrative business back in the early 2000 when broadband connectivity was scarce and unlimited dial-up service still costs Php5,000 a month. Today, the net café business has even expanded to online gaming to which most net café owners admit rakes in the bigger share of their monthly revenues. Then, there’s the local chain of net cafes like Netopia and Station 168 that’s been mushrooming all over the country. So it looks like putting up an internet café is still a viable business. But, and that’s a big BUT, take into consideration several factors that will spell the success or failure of your business venture. Let me point out some of them here: Location. Just like in any other kind of business, location is one of the key ingredients. It determines how much foot traffic your business will get. Areas like schools and universities will have a constant flow potential customers. Same goes with malls, open markets, and junctions that are virtually swarming with people 24/7. There are some that have had relative success operating in closed communities but others eventually suffer from the laws of supply and demand. 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. Competition. It always amazes me whenever I see rows and rows of net cafes lined in a certain street. It’s a sure sign of impending failure. I’d bet half of them will shut down in less than a year. I think the biggest challenge in the net café industry is rabid competition. It’s all about the price-wars. Rates used to be in the 40’s to 50 pesos. Now, you can even find net café shops offering as low as Php8 per hour. In Davao City, they go as low as Php4/hour during off peak. With the rising power rates (close to Php10 per KWHr), there’s no way your business will survive the price battle. Choose a location or area where there are net café associations that will regulate the pricing. Otherwise, new players will just eat up the fixed market share. More supply, fixed demand – go figure. The three points I mentioned above are the most important factors to consider if you’re considering in putting up a net café shop in your area. There are other lesser things to worry about like the speed and quality of your PCs or the consistency of broadband connectivity in your area but these can be remedied as long as you have enough capitalization or operating funds. Five years ago, a successful net café business can get their return of investment (ROI) in 6 to 12 months. Today, you’d be lucky if you could recuperate all your capital in less than 2 years. But if you play your cards right, you might still make a killing -- that's until a couple more players come around. - Abe Olandres / YugaTech