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.

Monday, March 30, 2009

China's Internet advertising market survey for January and February 2009

My last article on the survey on China』s internet advertising market can be found here:


On 3/26/2009, Nielsen and ChinaRank together published a survey on China』s internet advertising market for the months of January and February 2009. Their survey can be found below:


The main data from their survey can be found in the following plot:

The above plot indicated that advertisers spend $850 million in January 2009 and $710 million in February 2009 for China. It represents a 2.6% year over year increase from January 2008 to January 2009 and 19.2% year over year increase from February 2008 to February 2009.

This survey indicated a decrease from January to February 2009 due to seasonal factor. But excluding seasonality, the rate of increase has increased from 2.6% in January to 19.2% in February.

Nielsen also surveys the internet advertising by sectors. I will provide their data below:

% of total advertising by sectors in February, 2008:

Auto – 20.8%

Electronics – 16.1%

Entertainment – 9.8%

Fashion – 9.1%

Fast Moving Consuming Goods – 7.1%

Finance – 6.6%

Media – 5.3%

Service – 4.7%

Sales – 3.3%

Real Estate – 3.3%

Others – 14%

% of total advertising by sectors in February 2009:

Auto – 16.4%

Fashion – 14.3%

Friendships – 11% (this could be dating, community, etc.)

Real Estate – 8.7%

Finance – 8.2%

Entertainment – 7.7%

Electronics – 7.1%

Fast Moving Consuming Goods – 5.2%

Jobs recruitment – 5.1%

Media – 3.8%

Others – 12.5%

From the company's quarterly earning call conference, we can find out the top advertising sectors. They are as follow:

Sina's top advertising sectors: Auto, Finance, Real Estate, Telecom Service and FMCG

Sohu's top advertising sectors: Auto, Online Games, Real Estate, FMCG

Ntes's top advertising sectors: Auto, IT, Internet

For Sina, there is a little decrease in Auto and FMCG. There are also some increases in Finance and Real Estate. But telecom service is a big problem. According to the survey, electronics sector had a severe decrease from 16.1% to 7.1%. One would expect Sina would suffer due to its exposure to the Telecom service sector.

For Sohu, there are some decreases in the Auto and FMCG sector. There is increase in Real Estate. I don't know where I shall classify Online Games.

For Ntes, there is decrease in the Auto sector. IT sector might be troublesome. IT is probably part of Electronics sector and there is significant degradation in the Electronics sector. The internet sector however is growing very well. I believe both the recruitment and friendship sectors probably count as internet sector. Both those sectors improve greatly.

Finally, for the overall internet advertising market in China, the survey has YoY (year over year) increase of 2.6% in January and 19.2% in February. One would think the YoY increase shall accelerate in March.

If we assume March would have a YoY increase of 25% (your guess is as good as mine), we shall have a year over year of (2.6+19.2+25)/3 = 15.6% increase for the 1st quarter of 2009.

For Sina, its 1st quarter increase is probably below 15.6% due to its reliance on Telecom service.

For Sohu, its 1st quarter increase is probably around 15.6%. For Ntes, its 1st quarter increase is probably a little above 15.6%.

Sunday, March 29, 2009

CSXY – Another major game developed by NTES

In February, NTES announced they will have a new major game called Transformer, (I called it BB). I wrote an article about it here:


In the above article, I suspected that they will try to get the game out by June 2009 to coincide with the release of the movie 「Transformer 2」.

I was right, from the following article:


BB's developer say June 2009 is current planned date for the open beta for the game. Because BB is going to be an item-based game (free to play), open beta is the same as commercial operation.

On 4/3/2009, NTES planned to have the 2nd technical closed beta for BB.

Now, I just found out that there is another major game that is ready to go.

On 4/3/2009 (4/3 is going to be a busy day for NTES), there is going to be another new game developed by NTES that will go into Alpha testing. The name of the game is called Genesis: Journey to the West (「Chuang Shi Xi You Online」, 創世西遊). I will call it CSXY from now on. It is an in-house developed 3D MMORPG game. The game engine the same 「Big World」 engine used for TX2. That game engine is licensed from an Australian company. It is going to be a turn-based game. At this point, it is not known whether this game will be item-based (free to play) or paying game (time-based).

NTES started the development of this game in 2005. Therefore, this is a major game that NTES had already spent a lot of resource on.

The game's web site is http://csxy.163.com/

The following are some in-game graphics:

As can be seen from the graphics, this is a very beautiful game. Even though CSXY is another branch of the 「Journey to the West」 series of games (XY2, XY3, XYW, XYQ), it is clear that CSXY looks nothing like other Westward Journey games.

NTES uses the popularity of XY2 (the 3rd most popular game in China) to give XYQ a push at the beginning (XYQ was an offshoot of XY2). Eventually, XYQ is able to stand alone and grows to be the most popular game in China.

Similarly, NTES is going to do the same thing as CSXY. CSXY is going to be the 3rd leg of the 「Westward Journey」 series of games. Hopefully, CSXY can be as popular as XY2 or XYQ.

Saturday, March 28, 2009

NTES 4Q2008 Revenue Prediction Error

Based on my weekly tracking of NTES's game servers, I made a prediction of NTES's game revenue. You can find it here:


Boy, was it a horrible prediction, talking about completely off the mark. I tabulate my prediction, compared with the actual result, in the following table:


Predicted Game Revenue (M)


Actual Game Revenue (M)


% Error


Predicted XY2 ACU (k)


Actual XY2 ACU (k)


% Error


Predicted XYQ ACU (k)


Actual XYQ ACU (k)


% Error


Note: 62 of 65 days of summer holiday occured in 3Q08.

The above table shows that my prediction was absolutely horrible.

Every week, for 2 to 3 days a week, I got up early in the morning and late at night to track NTES's game server and obtain its statistics. It is an extremely time consuming work. It is very depressing that my final result is so far from the real data.

Going back, I think I understand the reason. The way I calculate the 4Q ACU (Average Concurrent User) is by comparing my measured statistics with the actual ACU from the 3Q. But by doing that, I no longer am able to take account the seasonal factor.

I can make year over year comparison, but that would introduce other problems. NTES increase its game server capacity from time to time. Therefore, the server statistics means different from that of a year ago.

There is a seasonal factor I need to account for. I need to figure out a factor to account for the summer holiday.

But for the mean time, I will no longer provide revenue predictions.


A test for now