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.

Saturday, May 30, 2009

NTES will get WOW players statistics

One can find my previous article on this subject here:

Just a quick short article before I start to write a player review for the new hot game, SNDA’s AION.

From the following article:

It is an official news release from the NTES’s WOW team that Blizzard and NCTY had reached a formal agreement for NCTY to provide all WOW players’ statistics and game data to Blizzard.

On 6/7/2009, right before WOW shut down on NCTY’s game servers, Blizzard will take a snapshot of all players’ data. Therefore, all WOW players game data (including the left over un-used game card value at that point in time) will all to saved and transferred to NTES.

Even up to a short time ago, a lot of Chinese articles assume that Blizzard can’t get players data. But just like what I had expected all these time, no matter how badly NCTY wants to cling onto WOW, Blizzard would have make sure this is stated in the contract. I never thought this will be much of an issue (contractually).

Anyway, it seems the last unknown is answered and the last troublesome spot has been avoided.

But unlike almost everybody in Wall Street, I am much more excited with NTES’s staples of upcoming new games.

Yes, NTES will make a bundle in WOW, but I think the money from WOW will pale in significance compare to that of these new upcoming games (starting with the new FF). Hopefully, I will have some free time to write about these new games.

Wednesday, May 27, 2009

NTES to operate WOW starting at end of June

One can find my previous article on this subject here:

There are quite a few recent developments regards this subject; I will go through them here.

First, there are reports of mass migration of Chinese WOW players to Taiwan. One can see the following link:

I heard some analysts thought that it is bad news for NTES. Do any of them even play games besides doing finance?

The reason some Chinese players play WOW in Taiwan is because Taiwan already has the new expansion pact. Let’s take an average Chinese WOW player. He played for 2 years and had achieved level 100 in WOW. There is temptation for him to play in Taiwan to get accessed to the new expansion pact. But there is zero reason for him to stay after China has the new expansion pact.

He is not going to re-do the last two years for him to get back to level 100. All his friends are in China. If anything, this is good for NTES. It means these players are not playing other games (such as SNDA’s Aion). These players are going to be back to China the second NTES get the new expansion pact for WOW.

Another story is that NCTY had filed two court cases against Blizzard. The two cases are going to be heard in courts in Shanghai on 6/18 and 7/8. See the following for more details:

This is potentially bad news for NTES. It will not benefit NCTY in any way, but it is going to do it anyway.

This is potentially bad news. But for two reasons, I don’t think this is going to be a big deal. First, the cases have no merit. NCTY had a contract with Blizzard. The contract expired and Blizzard has the right to pick another company.

But the most important reason these two cases are not going to amount to much is who is NTES’s CEO. In case people don’t know, NTES’s CEO is also a powerful politician. He is a representative in National People’s Congress. In the United States, we call them House Representatives or Senators.

To see how powerful he is, in the following article, he browbeats the minister of Culture of Guandong when the minister questions the addictive nature of PC games:

If he can do that to a department head, do you think a little court judge will dare to do anything to him?

Finally, the CEO of Netease and CEO of Blizzard published an open letter to Chinese WOW players today:

In the above open letter, it said that the first server group for WOW will open at the end of June. All WOW servers will start to operate a few weeks after that. All servers are brand new and of the latest and best variety.

Some Wall Street analysts had predicted that WOW will restart in August or September. Now we are going to be a full two months ahead of estimated schedule.

After this article, I am going to talk about two new potential blockbusters in China. I hope I can write a player review of SNDA’s AION. Then I will write about the next major hit for NTES that could eventually be more significant than WOW. Yes, I am talking about the new FF.

Wednesday, May 20, 2009

Sohu's new integrated multimedia Platform

I prepared this article about one month ago. But I miss placed this article until now.

One can find my last article on Sohu’s marketing campaign here:

From the above article, Sohu is conducting a major marketing push to inform average Chinese of Sohu’s new integrated multimedia platform.

But what is this platform. Mr. Charles Zhang, the CEO of Sohu talked about it in the following article:

It is an integrated platform consists of many components. Sohu is no longer just a portal. Sohu has many multimedia products that would entice the users.

It has the portal and blogs that can draw the users. By May of this year, Sohu will have its SNS (Social Network Service) product. All of them will be integrated.

In addition, Sohu had recently developed the HD (high definition) video channel. It includes the HD TV channel and movies. Sohu had purchased the IP right to those video contents.

Sohu’s biggest push is in the area of software applications. A major push will be in the area of Sogou Search, Sogou Pinyin Input Method, and Sogou browser.

Thus, Sohu is no longer just a portal. A portal is more like a channel. Sohu has many channels. Portal, blog, SNS, video, search, Pinyin method, browsers are all channels that an average user can use to access Sohu.

One can think of this as a spider with many legs. The portal is only one of its legs. A user can get to Sohu’s integrated platform through any of its legs (blog, video, PC applications, etc.).

It is going to be exciting time for Sohu.

Monday, May 18, 2009

New FF had a great Open Beta despite horrible marketing effort

One can find my last post on the new FF here:

As I mentioned in the above article, new FF had an Open Beta on 5/15/2009. But before I get to its status, let me answer one question.

A lot of you had asked for my comments on the upcoming 1st Quarter 2009 numbers. First, I am horrible at predicting any short term price movement. Second, I no longer feel comfortable in providing server statistics. My last prediction (4Q2008) based on the server statistics had proved badly. I need to work out the seasonality factor and having more clarity in NTES’s games monetization schedule before I can provide any good prediction. For example, both of NTES’s two new games (TX2 and XYW) had already started monetization. But both of these games are only in closed beta. Therefore, they are not really in commercialization stage yet. One can buy in-game items in the online store. But these items have very little power. Thus, NTES is just testing out the in-game mechanism of the online store. They are not really in the stage to make much money yet.

But as I mentioned before, my server statistics had show weakness in existing game in XYQ. XY2 is still growing nicely but is unlikely to compensate for the weakness of XYQ. From Yahoo’s analysts estimate, NTES is estimated to have 1Q2009 revenue of $116.29 million. I really don’t think NTES will meet that estimate.

But there are two unknowns. First, I just don’t know when NTES is going to really start to commercialize TX2 and XYW. If it starts to develop powerful in-game items, both of these games will start to contribute major money. Its first quarter will easily exceed that of analysts estimate. I don’t think so. I think they will only start to commercialize when both these games go into Open Beta. But you never know with NTES.

Another unknown is the up-front cost of operating WOW. NTES is probably going to announce a one-time charge for manpower and material to support its upcoming WOW operation. Are they going to do it in the 1Q09, 2Q09 or 3Q09?

Therefore, I think NTES will have weak near term numbers. But on the other hand, NTES is at the start of a major 2 years run. It has 3 new major licensed games (WOW, Startcraft 2, and maybe Diablo 3). It will have 8 new major games out in the next one to two years.

In addition, NTES is undergoing major efforts in its portal business and 3G wireless MVAS (Mobile Value Added Services). Yahoo’s FY2010 estimate is only $666 million. That is way too low. The analysts are not taking into its 8 new games and its effort in 3G and portal.

In a nutshell, I am concerned about its 1Q2009 number but is wildly optimistic in its prospects starting in 2Q2009 and through 2010.

Now, going back to the subject of this article, new FF had Open Beta on 5/15/2009. Despite a horrible marketing campaign, new FF had a great Open Beta.

For most other companies, marketing campaign started a year before Open Beta. Major marketing starts to pick up one or two months before the Open Beta.

But NTES is famous for underwhelming marketing effort. I think NTES’s CEO has some psychological aversion to marketing and money pinching.

For new FF, the marketing effort starts about 1 week before the Open Beta. It put some very minor marketing on 4 or 5 2nd tiers game verticals. That is the extent of marketing effort for new FF.

In addition, there are virtually no new contents specifically for the Open Beta. One major complains for the closed beta players is “Where is the beef?”

Even with such lack of marketing and content, the response had been nothing short of amazing. Within two days of Open Beta, new FF already had 37 game servers. All other secondary measures had also shown that new FF is a major hit with Chinese game players.

It is ranked number 14 in Baidu’s game ranking based on its search statistics. More than 270000 players had signed up with new FF/QQ joint promotional effort to play new FF, see the following web site:

So far, the playing experience had got high mark. It may still be a little too early to tell, but this game has all the hallmark of major hit written all over it.

It is late and I am tired. When I have more time in the next few days, I will write updated status of this game.

Thursday, May 14, 2009

Sina next great new frontiers – e-commerce and 3G

One can find my last article talking about WVAS (Wireless Value Added Service) here:

Whenever there is a new revolution, people usually fixated their view on the thing they can see. But in most cases, it is the companies that deals with the content and information that comes out ahead.

During the PC revolution, people talks about Gateway, Dell, HPs, but it is Microsoft that become the symbol of that era.

During the internet revolution, people can see what Cisco is doing. But it is Google that symbolize that era of technology development.

Today, as we going into 3G, everybody talks about the carriers such as China Mobile or the hardware maker such as Nokia, but most likely, the real winner is the content providers. In this case, the real winner might be some WVAS player.

In the following article, the CEO of SINA talks about what areas will SINA emphasize in the next 10 years:

First, he talks about the state of 3G in China. Before, China Mobile was a virtual monopoly. But now, there are three big carriers. As more and more Chinese uses 3G and its contents, SINA, as a WVAS provider, will greatly benefit.

Second area of great potential growth is in the area of ecommerce. Right now, no portals make money in ecommerce. Sina’s online store is not doing great either.

But ecommerce is the wave of the future. Right now, Sina is busying develop infrastructure. There will be explosive growth in ecommerce.

As far as I know, Sina is the only portal that openly talks about the potential of ecommerce. It does make it natural for Sina to become the amazon.com of China.

Sina correctly selected its two great growth areas. But it also makes its recent purchase of FMCN so confusing. Situation in China are changing so fast that 3G and ecommerce has arrived. They are waiting for the right company to take advantage of. But none of them have much to do with outdoor advertising.

Gobbling up FMCN take attention away from Sina. Sina shall be concentrating on the next two great potential growth areas.

Wednesday, May 13, 2009

NTES’s other new game, MF

My previous article on this subject can be found here:

At the beginning of May, NTES announced a new game. But it won’t tell people what game it is. It wants people to guess. It created a web site: http://xyx.163.com to provide hints of new game.

(By the way, if one goes to the above web site now, it is showing another new mystery game from NTES. This is an indication of the tremendous activities of NTES’s gaming division.)

While everybody else in China was guessing some kind of major licensed games made by NTES’s partner, Blizzard, I believe it would be an advanced casual game, MF.

It turns out I was right. But a few hours after I published the above article, a lot of other game verticals in China also guessed the same thing. So I was not ahead by much.

As it turns out, I was right. That new game is the advanced causal game, MF.

The following is a promotional video of the game:

From the above video, one can tell this game is a side-scrolling game, or a platform game. For those too young to know what those games are, these are the old (and I mean OLD) style games such as Super Mario Bros, a game all the way back to 1985.

I guess one would have the logical conclusion that why would anybody play such an old styled game. Well, it turns out that those advanced casual games are all the rage in China right now. SNDA has a big presence in this area. Tencent is king in this area.

Tencent just made $155.2M in the 1st quarter 2009 selling users playing these types of games (in comparison, NTES only made $98.6M in its latest quarter, 4Q08, from gamers).

Its most advanced and popular game, Dungeon and Fighter, DnF just had a Peak Concurrent Users of 1.8M on 5/4/2009.

One can see what the game looks like in the following video:

As one can see, the graphics and gameplays of this game is not much better than the Super Mario Bros. of 1985. Yet, games like those makes Tencents $155M in the latest quarter.

So, does that mean the release of MF indicated that NTES is going to dominate the area of advanced casual gaming? I don’t think so.

Tencent’s games are not exactly ground breaking or even good to play. The biggest reason those games are popular is because they are tied to Tencent’s core Internet Messaging product, QQ.

Tencent offers its core product, QQ, for free. But it ties so many other products to it. Now, it becomes the number 2 player in games, a top player in MVAS, and the number 3 portals, all of that thanks to the tie up to the QQ IM product.

So, in a nutshell, while Tencent can make any 2nd rated advanced casual games popular by simply tie them up to QQ, other companies have to come out with truly ground breaking great games to compete.

Of course, the above market phenomenon only applies to advanced casual games. For MMORPG games that NTES excel in, this doesn’t apply. For NTES’s major games such as XYQ and XY2, they are like self sustaining living communities. Most people are playing these games because their friends are playing in these games. Therefore, they are immune to the threat of Tencent.

But for an advanced casual game such as MF, it will be difficult to compete. One can find more information about MF in the following links:

You can download three videos of MF from the following 3 links:

An interview with the head designer of MF:

Saturday, May 9, 2009

NTES's Portal business's rebirth – part 3 – Targeted ads

This is the 3rd part of a 3 part series on what NTES is doing to rejuvenate its portal business. Part 2 of this article can be found here:


Netease just start a new service that will allows for precision targeted advertising. That service can be found here:


This service can potentially cause major upheaval in the internet advertising field. Two biggest areas in internet advertising is search and portal. They targeted two different kinds of clients. The portal targets brand ads. Its clients are big cooperation. Search on the hand, because it can target very specific sector, is catered to small and medium companies.

NTES provides blogs, photo album, and email services to its users. These services are free to the users. But they do provide their personal information to NTES. Information such as their ages, their locations, their sex, their hobby, their likes and dislikes, are very useful information. That information can therefore be used for highly segmented targeted advertising. Therefore, this is great for small and medium companies.

Therefore, NTES just come out with a way for the portals to grab businesses away from the search engines.

At this point, NTES is targeting this service for SME (small and medium enterprises). NTES has 300 million email accounts, 80 million blog accounts, and 23 million photo album accounts. Therefore, it represents a very attractive target for advertising to the millions of small businesses in China.

NTES just start this service, to avoid too much inconvenience to their users, the ads will be put in a few places at the beginning.

At this point, I don’t think NTES will get a lot of new revenue at the beginning. But if other portals start to follow suit and start to do this, it would allow all the portals to put more ads in more easily observable locations. By then, it would really become a threat to the search engines.

Friday, May 8, 2009

NTES’s Portal business’s rebirth – part 2 – Cooperate Email

This is the second part of a 3 part series on what NTES is doing to rejuvenate its portal business. Part 1 of this article can be found here:

From the following article :

The 2nd thing NTES will do is to monetize its email business. NTES has virtually monopolized the email service in China. But they had never really trying to monetize this service. On 3/25/2009, they are starting a new service for companies. They will provide enterprise email account. They will guarantee the email in this service.

This service will also try to intercept spam emails. Any company that uses Netease’s service will be compensated if there are any lost emails or in-sufficient spam blocking. NTES will set aside $10M rmb this year for compensation.

Companies signed up with NTES will also receive other services including bigger email capacity, email virus protection, and email monitoring.

In a separate article indicating the dominating position of NTES in emails, Netease’s Email users exceeds 300 million

From the following article,

Only 10% of China’s cooperation has its own email system (compare with 60% outside of China). Therefore, this can potentially be a lucrative business.

Thursday, May 7, 2009

NTES's Portal business's rebirth – part 1 – Relocation

This is the first part of a 3 part series on what NTES is doing to rejuvenate its portal business.

My previous article on China’s portal business can be found here:


In the past few years, NTES had been concentrating on web gaming. Its portal business had been neglected. Therefore, Tencent’s portal had leapfrogged NTES. NTES’s portal is only the 4th most popular portal in China.

This year, NTES is going to put major effort to rejuvenate its portal business. In the next 3 articles, I am going to detail what NTES had done in this regards:

First, they are relocating part of its portal business from Guangdong to Beijing. From the following article:


NTES’s CEO said that they are going to put major effort in its portal business this year. Its news department will be relocated to Beijing. About 100 of its employee in the news department will be involved. Beijing, being the center of China, is where all the news occurs.

To me it makes perfect sense that you put reporter where the news are. I wonder why it takes so long for NTES to do this. But this is definitely a right move.

Tuesday, May 5, 2009

CYOU – Why does Sohu have to set CYOU free?

This is my first post on CYOU. My last post on Cyou’s game can be found here:

I wrote this article a while ago. For some reason, I never got the chance to put into my blog. It may be a little late. But here it is.

After Sohu decided to split up its game division and having an IPO for its gaming division, its stock had been under great pressure. All of the Wall Street analysts hated it.

Why are they so short-sighted?

Many years ago, Charles Zhang, the CEO of Sohu knew of a young and talent engineer named Robin Li. He wanted very much to hire Robin to take charge of Sohu’s search engine business. He did everything he could to convince the young Robin Li. But eventually, Robin wants to be his own boss and starts a company called Bidu.

If the Mr. Charles Zhang had offered Robin Li the same deal that he offered to Mr. Tao Wang, the CEO of Cyou, Robin would probably agree to work for Sohu. If that was the case, today Sohu would own 70% of Bidu. How much would Sohu worth now if that is the case?

From the following articles,

Charles Zhang talked about the decision to split off Sohu’s gaming division.

Even way back in 2002, Charles knew of the importance of MMORPG gaming in China. He license games and develops in-house games, but Sohu’s gaming business continues to flounder. Mr. Charles Zhang was so desperate, he went to Great Wall, puts on a ancient knight costume and hop on a horse. It made some nice PR on the news in China. But the game sucks and people still don’t want to play.

Each MMOPG game is heavily influenced by its chief game designer. Just like a director for a movie, the chief game designer determines the overall feel and the general direction of the game. Just like movie directors, those hot shot chief game designers have ego the size of Texas.

By 2004, Mr. Charles Zhang finally find a hot shot named Mr. Tao Wang. Mr. Wang had a great resume. He developed PC games as a software developer. He was the chief game designer for internet games. He then become vice President of a company who is responsible for game operation and distribution. Then he became the top guy in Sina responsible for gaming operation and development.

In 2004, Sina is number 1 and Sohu is number 2. To a guy like Mr. Tao Wang, to become the top game guy for Sohu would equate as a demotion.

Mr. Charles Zhang can see the future in the gaming business in China. But he just can’t find the right guy to do it. Finally he found Mr. Tao Wang. Eventually, they worked out the agreement. Mr. Tao Wang basically guaranteed the success of Sohu’s gaming business and Charles allows Mr. Wang to be his own boss through the IPO of Cyou.

In addition, with the IPO of Cyou, it also allows Cyou to attract more top level chief gaming designers. By providing more share based compensation, it allows these finicky game designers the monetary rewards they can’t refuse.

Today, more than 50% of the revenue for Sohu comes from its gaming division. Without Mr. Tao Wang, these revenue would not have been there. I for one am extremely happy of the decision that Charles had made.

Impact of Aion on WOW and vice versa

One can find my last article on Aion here:


It is pretty certain that SNDA got a winner in Aion, at least for the short term. I need more observation to make any judgement on how well it would do say 5 years from now. But one thing is certain, at least for the next 6 months, this game is going to make tons of money for SNDA.

If I have time, I could write my impression of the game playing features of Aion. But I might not have the time.

Anyway, I came across a pretty neat information that might be useful to the shareholders of NTES and NCTY.

The following has the players distribution across different provinces in China. The article is below:


In the above article, there are 3 graphics of players geographical distribution for the three different games. The first graph is for Aion:

The second graph is for WOW:

The third graphic is for Lineage 2:

From the above three plots, SNDA’s Aion is popular in the Southern Guandong province and Eastern province.

On the other hand, the strength of WOW comes from central Eastern provinces.

From the third graphics, the strength of Lineage 2 is very similar to that of Aion. That made sense because both Aion and Lineage 2 are developed by the same company, NCSoft of Korea.

Lineage 2 was licensed to Sina, but Sina no longer run the game.

People always thought that these two games are direct competitor of each other. I think there are a lot of overlaps. Some WOW players will be going to Aion. Many Aion players will return to WOW when WOW’s next expansion pact comes out.

But the above three graphics showed that it is possible for both games to co-exist because there are differences where the players come from.


A test for now