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The purpose of this blog is for my personal use. It serves as my personal diary as I investigate Chinese internet/gaming companies for investment purpose. If you have any comments or disagreement, please give me feedbacks.

Tuesday, March 18, 2008

XYQ Server Update

My last update on XYQ can be found here:

http://chinese-net-gaming-stock.blogspot.com/2007/09/quick-update-on-xy3-and-xyq.html

NTES had been very good at publishing new Peak Concurrent User (PCU) records whenever one occurs. In 2006, XYQ had 9 PCU records. In 2007, it only has two. The first PCU record in 2007 occurs on 3/4/2007 and it had a PCU = 1500k. It takes another 9 months to have another record. On 12/2/2007 it had a PCU = 1520k. This new record is only 20k more than the one happened 9 months ago.

From the above data, I started to think that this game had peaked and we will start to see the long term slow decline for XYQ. But it looks like I was wrong.

On 3/2/2008, XYQ not just get a new record, they absolutely crashed the old record. Its new PCU record is an amazing 1660k (an increase of 9.2%)!

But is this new PCU indicates that there is something fundamentally changed? Let’s see how the server count says.

The following is the server count table:

Month

Saturday/Sunday

4Q2007

1Q2008

1

1

2

1254

1385

3

1318

1340

4

2

1

1498

1469

2

3

1338

1397

4

1383

1489

3

1

1519*

1561**

2

1325

1443

Holiday

5

978

1117

6

965

1268

Total

11578

12469

* On 12/2/2007, Official PCU = 1520k while my calculated PCU (based on my server count) = 1519k

** On 3/2/2008, Official PCU = 1660k while my calculated PCU (based on my server count) = 1561k

The first column is the month. There are three months in each quarter. In addition, there is a one week national holiday in both 4Q 2007 and 1Q 2008. I used 2 days out of the 7 day national holiday.

The second column is the order of weekends. There are usually 4 weekends per month. The number in the third and fourth column represents the PCU for that particular weekend.

From the last row, one can see ACU increased from 4Q07 to 1Q08 by (12469 – 11578)/11578 = +7.7%

Note that on 3/3/2008, I used my calculated PCU of 1561 instead of the real official PCU of 1660. If you want to use the real number of 1660, then the accumulated total will be 12566 instead of 12469. In that case, the increase from quarter to quarter will be (12566 – 11578)/11578 = +8.5%

The strength of the growth is very impressive.

Now, lets try to relate ACU with the revenue. Let me use the following table:

4Q2006

1Q2007

2Q2007

3Q2007

4Q2007

PCU

1335

1500

1470

1440

1520

PCU %

12.3%

-2%

-2%

5.6%

ACU

444

510

491

517

515

ACU %

14.9%

-3.7%

5.3%

-0.3%

Revenue

40.5

45.3

46.2

48.8

50.7

Rev. %

11.9%

2%

5.6%

3.9%

The second row of the table is the Peak Concurrent User number. The third row is the quarter to quarter increase/decrease for the PCU. The fourth row is the Average Concurrent User. The fifth row is the QoQ increase/decrease for the ACU. The sixth row is the revenue from XYQ. The seventh row is the QoQ increase/decrease for the XYQ revenue.

For 1Q 2008, my server count suggested an increase of 7.7% for the ACU. My guess for the revenue will be an increase of 8%. This will give me a revenue of 50.7 * 1.08 = 54.8 millions for 1Q2008.

This result surprises me. An over-the-hill title is not supposed to have a QoQ ACU increase of 7.7% and PCU increase of 9.2%

It is possible that XYQ may still have one or two more years of growth to go. But whether this indicates a fundamental shift or just a blip, we will have to see how 2Q2008 come out.

Market in China keeps on surprising me. A six year old title like XY2 is still growing. A four years old title like XYQ explodes like a new title. Yet a new title like XY3, even with a pretty good head start, is showing signs of aging. If the 1Q2008 earning conference call confirmed my server count estimates, I would certainly eager to hear Ntes’s management’s explanations.

Finally, Ntes had stopped most of its marketing campaign for all its games during the first quarter. I just can’t say enough about how disappointed in Ntes’s management in pinching pennies. There are so many good titles out there in China. A new title like XY3 got to have marketing help. XY3 can still achieve very popular status if Ntes is willing to spend some money to market it.

1 comment:

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