NTES – CEO predicted PCU of more than 1 million players in 1 year for TX2

My last story on TX2 can be found here:

http://chinese-net-gaming-stock.blogspot.com/2008/07/ntes-two-new-games-went-into-closed.html

First, the CEO of NTES thinks that TX2 is doing great. He predicted that it will be the next block-buster and will have a Peak Concurrent Users of more than 1 million one year from now. See the following story:

http://news.duowan.com/0807/80152940636.html

I always appreciate comments and emails. Some of the comments I had received recently had not been friendly. I was accused that I was way too harsh on TX2’s prospect.

I think there is a misconception. I think TX2 is a great game. In terms of technology and game design, it is probably the single best game in China right now. In terms of playability, it is still weak. But that is purely because of its young age. NTES is busying adding features to it right now. I have no doubt that it will have tremendous amount of playability features in one to two years.

My problem is in NTES’s aversion to marketing.

I think there is some kind of bunker mentality within NTES.

Both XY2 and XYQ had a rough start in their life. NTES had to slowly working on both games before both games caught on 6 to 12 months from the start of commercial operation. More recently, DT1 was heavily promoted, but it was a commercial failure.

XY2 and XYQ happened 4 to 6 years ago. The competition landscapes had completely changed. Whatever works at that time might not work now. Just because DT1 was a failure doesn’t mean NTES shouldn’t do marketing. (I think DT1 just got caught in a time when China’s game environment was changing from paying game to free-to-play game and DT1 is a paying game).

More importantly, all the recent successful games by all other game companies was achieved with the help of heavy marketing campaign.

For example, Sohu has the largest game portal in China, 17173.com. Sohu also has two major games (the existing TL and a new game). Sohu is not just marketing on its own game portal, it also heavily markets its games on other major game portals.

All other major game companies also do heavy marketing campaign for all their games.

Most of these heavily marketed games failed. But on the other hand, in recent years, ALL successful games were promoted heavily.

I think NTES is living in a cocoon and can see only what it wants to see.

As a long term NTES investor, I hope NTES can break out of it. NTES is going to have 4 or 5 major games coming up. Please maximize their chance to success. Don’t kill off their chance of success just because NTES wants to pinch pennies by saving marketing dollars.