PhilFAQS

I note it’s time for an update on a perpetually popular subject here in the Philippines … the Internet Cafe business.  Possibly because many westerners first meet Filipino sweethearts via I-cafes, or because people see them on nearly every street corner, they often come to mind as a way for a Westerner to come to the Philippines and make a living … or for an investment one might make in family members living here so they can have an independent business and earn their own income.

Are Internet Cafe’s still a viable investment here in the Philippines?  I did some articles here on PhilFAQS over the past year, some with the capable help of my neighbor Arvin, who was in the "computer shop" business himself and shared his real world experiences. … hey Arvin, where have you been guy?  Come back and join in here.

You can check this series on running an Internet cafe or review the top five problems in the business.

A friend of mine who has been here in the Philippines for a lot of years once about me about his venture into the Internet cafe business.  He was located in a pretty remote provincial city and noted that the cafes in town were all very limited in scope and frequently had only a dial-up connection.  The general view is, Filipinos are mired in the "pwede na" outlook on life … "That’ll Do" … and thus won’t pay extra for a quality product.  So my friend bucked that trend and equipped his cafe with high speed satellite connectivity … mahal … and he proved it wrong for a time, making good money offering service that was substantially better, and more expensive than the competition.  But then the revolution in wireless Internet service came along, offering connectivity to the home all over the Philippines at very reasonable prices (I pay less than P 1,000 per month for service that’s workable, if not great).  The folks who will pay a few pesos extra for fast connections are also the ones who will invest P 1,000 a month in their own connectivity.  Thus ended the high speed, premium price cafe idea.

Another friend and mentor, Yuga,  just published a really good article on this subject, Are Internet Cafes still a Good Business?  Read it and be sure to take the time to read the comments on Yuga’s blog, he had some very informative ones made to this post…

… 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….

• Location. Pick a good spot and you’ll hit a gold mine. Pick the wrong one and kiss your money goodbye.
• Competition. … 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 …
• Software Licensing. Many people who go into the net cafe business don’t factor in the cost of software licensing … (Editor’s note:  To me, this is a very big issue … I see that police regularly raid cafe’s along with other businesses noted for piracy problems … could you own personal PC stand an audit?  What if you have 50 PC’s in a shop?  Even if a customer put something illegal on the machine without you’re knowledge, you are going to get charged if it is found there)
• Expected ROI. …. driven the ROI further back to as long as 3 years (that’s if you’re lucky enough)…

So what do you think?  Any other questions or ideas circulating out there?  leave a comment, or email me direct via the "Contact" page … there’s a lot more questions out there, and perhaps a few answers.

Related posts:

1. Can an Internet Cafe Make Money in the Philippines?
2. More Internet Cafe Thoughts
3. Real World Business — Running An Internet Cafe — Part 2
4. Real World Business — Running An Internet Cafe — Part 5
5. Real World Business — Running An Internet Cafe — Part 3

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