About this Blog

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.

Sunday, February 15, 2009

What did Netease’s CEO really said?

My last article on this particular subject can be found here:

In it, a local newspaper where Netease resides had a short article. In that article, Ntes’s CEO said there is 30% reduction on the number of players that plays in Internet Cafes. As a result, price of all China’s game company crashed. Price of Ntes crashed from $22.78 down to as low as $16.61.

Now, there is another newspaper article that shed more light on this story.

Ntes’s CEO gave another interview to the local newspaper. In it, he mostly talks about the effect of global financial crisis have on the Quangdong province. But he did mentioned about what he said regards 30% less players in Internet Café.

He did said that according to Ntes’s internal survey, there are 30% less players in the Internet Café in some localities due to global financial crisis. But he also said that those players, rather than playing in the internet café, they now play at home.

Therefore, what he said is that the global financial crisis has some effects. It might have some negative affect on the internet café. Rather than spending money to go to the neighborhood internet café to play games, players play at home. Therefore, it does save some money to the players. But its net effect to Ntes is negligible.

He said the reporter report the first part of what he said (30% decrease in internet café), but the reporter chose to ignore the second part of what he said (those players play at home instead).

He also said global financial crisis has very little affect on internet gaming. He thinks internet gaming industry is resistant to the cyclical nature of the economy.

If one follows Chinese news reporting (like I am), one will know Chinese reporters not just report news, many times they manufacture news. Reporters are under tremendous pressure to come out with as much sensational news as possible. Thus, a lot of them manipulate the interview so as to get a much more exciting story, even though they have to resort to deceit.

By now, I think we can put this story to pasture. There was never anything news worthy in this story.

Thursday, February 12, 2009

Sohu’s surprise new game, DJ2

Barely one week ago, I made a compilation of Sohu's new games development. That article can be found here:


Just like Ntes comes out with a surprise Transformer game as their next major game, Sohu comes out with a completely new game as its next major game development. That development was completely secret.

The 4th quarter earning conference was just a couple of days ago, they definitely didn't talk about this game.

Now, the news is out. This is all over all the gaming portals in China right now. One can find representative news about this game below:


This game is going to be called DJ2 (刀劍英雄Ⅱ). Its web site is as follows:


The game is just announced and the in-game graphics have been very few. The following is one of them:

It really shall be called BO2 because, in Chinese, its literal translation is Blade Online 2.

Sohu is still going to operate the original BO. There will still be a major expansion pact for BO in the 2nd quarter of 2009.

BO was a licensed game. But DJ2 (BO2) is not. It is completely developed in-house inside Sohu. According to BO's original developer, http://www.pixelgame.net/ , they have nothing to do with DJ2. I guess Sohu purchased the naming right from Pixelgame.

Let me do a recap on Sohu's game division. They currently have two games in operation. The major game is the self developed TLBB. It is being complemented by a licensed game BO (Blade Online). TLBB made $53.5 millions in 4th quarter 2008 while BO made $4.9 millions in 4th quarter 2008.

They have four games under development.

LDJ (The Duke of Mountain Deer) is going to be a self-developed major game. It is planned to be commercialized in 4th quarter 2009.

JianXian (Immortal Faith) is a licensed game. I don't think Sohu is going to spend a lot of resource on this game. It is scheduled to be out in the middle of 2009.

Legend of Ancient War is another licensed game. I doubt Sohu will spend a lot of resource on this game. It is scheduled to be commercialized in early 2010.

DJ2 (Blade Online 2) is another self-developed major game. Sohu claim this will be the first major game out in 2009.

If I have to guess, DJ2 will be commercialized in 3rd quarter 2009. It gives 6 or 7 months of closed beta time for Sohu to hash out all the bugs. If this becomes the case, then I will also predict Sohu will delay LDJ and LDJ won't be commercialized until 1st quarter 2010.

Sohu plans to have both DJ2 and LDJ as major hits and be as successful as TLBB. There shall be at least two quarters of time differences between releasing its two major titles.


A little more information about Netease's next major game development (BB) can be found in the following article:


From the above article, my prediction was correct, it is confirmed by Netease game developers that they hope to conduct a major marketing campaign as well as open beta to coincide with the opening of the movie 「Transformer 2」 in June 2009.

BB will start closed beta on 2/15/2009.


I noticed that Chinese game developers start to keep their major game development under great secrecy. I understand that they are doing that so as not to tip off their competitors. Nobody had absolutely any clues of the existence of Ntes's BB and Sohu's DJ2 until now, a few months before their commercial release. Thus, it gives no time for smaller game studios to develop cheap knockoffs to steal their thunders.

But this will definitely make it more difficult for people to keep track of their game development.

DCCI survey on Chinese search market

I has just written a survey article on China』s search market. That article is based on a survey conducted by Analysys International. It can be found here:


On 2/5/2009, DCCI published another survey on China』s search market. It can be found here:


I will copy their survey plot below:

From the above plot, one can see the year over year (YoY) growth rate for 2008 is 86.2%. They also published their prediction for the next 3 years. I don't really care about their prediction.

But their survey result for 2008 might be of use. Since Bidu hasn't published their 4th quarter 2008 revenue number yet. Their survey result might give us some insight about the 4th quarter performance for Bidu.

If we compare that with Bidu's analyst survey on Yahoo finance site:


From Yahoo, the YoY revenue is estimated to be 98.8% based on 19 analysts. The analysts are predicting full year revenue much better than the survey result from DCCI.

DCCI's results are based on the whole search industry in China. So unless Bidu were grabbing significant market shares from other search companies, DCCI's results seem to suggest Bidu's full year revenue won't be as good as what the Wall Street were expecting.

Now, we are in an impasse. The survey results conducted by Analysys International suggest Bidu's 4Q revenue will blow away Wall Street estimates.

On the other hand, survey results published by DCCI suggest Bidu's 2008 revenue will fall short of Wall Street estimates.

We will have to wait until after Bidu's 4th quarter earning conference to find out which survey is more correct.

Tuesday, February 10, 2009

A new major Netease game

You can find my last article on the development of NTES's new games here:


Wow, this is a surprise. This really comes from nowhere. Obviously, NTES is going to have another new game. More information about this game can be find here:


The name of this game is called Transformer. I will call this game BB from now on.

There already is an official forum for this game already and it can be find here:


Some graphics for the in-game transformer characters can be found here:

There is very little information about this new game. But I think this is going to be a major MMORPG. But it is clear that this game's emphasis is on fighting. There will be many features for fighting, both individual fighting and group fighting.

This game will represent a complete break from other NTES's games. All other NTES games (except FF2) are based on ancient Chinese characters. FF2 was the lone exception. FF2 is based on western characters. So is BB. This game will be based on the western cartoon characters of Transformers. BB will have much more emphasis on fighting.

BB will be a 3D game. TX2 was the first 3D game for NTES. But TX2』s 3D game engine is not developed in house. It uses the Big World engine developed by an Australian company. FF2 is a 3D game also. Its game engine is developed in-house. But there is no comparison on the complexity level between the two games.

It will be interesting to know if BB's game engine is in-house developed or not. If BB's 3D game engine is developed in-house, it would mean NTES had a technology breakthrough. But at this point, we just don't know.

Another interesting thing about this game is that NTES will synchronize the release of this game with the movie Transformer 2. It probably means NTES already had a marketing deal with Di Bonaventura Pictures (the maker of Transformer 2).

NTES almost never market their game. It will be very rare for them to go through all the trouble of doing co-marketing with a popular movie. At this point, we just don't have enough information to know if this is the case. But if this implication is correct and NTES will do a major co-marketing with the movie, it would indicate that NTES is placing great hope, money, and effort on this new game.

Transformer 2 the movie is scheduled to be premiered on 6/26/2009. As announced in the above article, the game BB will be synchronized to operate at the same time.

That will mean BB will start commercial operation by the end of June, 2009. That is pretty fast. That means maximum of 5 months for closed beta. That is pretty aggressive scheduling. That will be tough to do.

At this early time, there is no video information on this game. But if one really paid attention, one can probably guess about the existence of this game one and half year ago.

A video was posted on 10/16/2007. It was a promotional video made by Netease for them to recruit college graduates. One can find the video below:


The whole video has 15:08 minutes. From the above video, on the 1:53 mark, a Netease employee talked about a new game 「創世西遊」. The direct translation for that game is call 「New World Westward Journey」. It implied a XYQ or XY2 type of game.

But pay attention to the above video from the time 10:30 to 11:10, and from 13:30 to 14:30, one can see clearly a brand new game that is completely different from any game Netease ever made.

It is pretty certain that game is this new Transformer game. For competitive reason, Netease has to keep this major game as top secret. Ntes had to conduct a disinformation campaign and to make its competitors think its next major game is going to be a XYQ or XY2 type of game while it is really a completely different type of game.

From all the secrecy and possible major marketing promotions, this is probably the game Ntes put the most hope and resource in the past two years.

Friday, February 6, 2009

Status of new game development by Sohu

The last article on Sohu’s game can be found here:

JianXian (Legend of Ancient War) is a third party game. It is developed by another company but was licensed to Sohu. It is getting closed to the market. It will have the final closed beta on 2/17/2009.

During this stage of beta, the players’ account will not be removed after this stage of close beta. It means the game is almost ready. This stage of closed beta shall not be long. For a free to play game, open beta means the start of monetization. Therefore, I predict monetization of this game will be only 2 or 3 months away.

LDJ (The Duke of Mount Deer)
It is still in closed beta. On 12/28/2008, it went into second stages of closed beta. I also found an in-game video. It can be found here:

From the above video, it is clear the game is a very cute, cartoon styled game similar to NTES’s XYQ.

If SOHU is going to have another blockbuster, this may be the one.

SOHU will unveil another game on 2/12/2009. It already has a web site:
and has a blog:

More information about this game can be found here:

During the third quarter 2008 earning conference, SOHU call this new game “Immortal Faith”. There are really no new information on this game until February 12, 2009. It will be interesting to hear more about this game.

Wednesday, February 4, 2009

China’s video and music web site survey

My previous article on video can be found here:


On 1/21/2009, Analysys International published a survey on the most popular video and audio web sites for China』s internet café users. The article can be found here:


The following plot list the market share of all the major video web sites for China』s internet café:

From the above plot, one can find the market share number for all the major web sites:

Todou: 46.8%

Youku: 44.3%

56: 10.2%

Ku6: 9.0%

QQ Video: 7.5%

Tencent Broadband: 5.1%

6: 4.2%

Youtube: 3.3%

Sina: 3.2%

Sohu: 2.1%

Analysys Internation also performed the survey for the most popular music web site frequented by China Internet Café users:

From the above chart, one can get the market share data for the major music web sites:

Bidu Music: 57.4%

QQ 163: 16.6%

Sogou Music: 12.8%

Gougou Music: 11.8%

From the above survey results, one can make some observations. For videos, it is basically a 2 horses race. Todou and Youko dominates. Tencent is coming on fast. Its two services (QQ video and Tencent broadband) together accounts for 12.6%. Since it is being pushed by its powerful QQ internet messaging service, there is no doubt its market share will keep on climbing.

Youtube is a non factor in China. China』s other portals, Sina and Sohu, are also non factors.

But I don't think China』s video war is over by any means. Running a video sharing web site is very costly business. At this point, no video web sites are making money. Given the global financial crisis, those non portal players are vulnerable for bleeding cash too fast. It will be interesting to see how this battle play out.

For the music business, Bidu dominate because it is the dominant search engine in China. Tencent is doing well because its can use its powerful QQ internet messaging service to push any services it wants. Sogou music search is strong because it has very good reputation among Chinese users.

Sunday, February 1, 2009

China’s 2008 Internet advertising market survey

My last article related to the advertising market in China can be found below:


I don't know much about Analysys International. I had seen quite a few survey results from Analysys on various subjects on China』s Internet industry recently. I would like follow their surveys to see if their surveys are accurate.

The following is the survey result from Analysys International:


One can find the revenue and year over year growth rate in the following plot:

From the above plot, the revenue and YoY growth rate for 2008 can be listed:

1Q2008: 2.11084 billion and 54.5% growth rate

2Q2008: 2.80750 and 73.5%

3Q2008: 3.343 and 72.4%

4Q2008: 3.543 and 67.3%

If their survey is correct, we shall be seeing an incredibly strong 4Q2008 advertising revenue for SINA, SOHU, NTES, FMCN and BIDU.

Note that we have Olympics for the 2Q and 3Q. The 4Q2008 survey results are almost on the same level as those Olympics quarters. Even assuming 4Q2008 is a normal quarter, it is an amazing survey result. Now, considering that 4Q2008 is when the global financial crisis occurs, this result is a little hard to believe.

We will see how this survey results stack up when China』s internet companies report their 4Q2008 results.


A test for now