TLBB Status Update

My last TLBB specific post is here:

http://chinese-net-gaming-stock.blogspot.com/2008/02/tlbb-expands-oversea.html

The server counts for the TLBB can be found in the following table:

Month	Saturday	4Q2007	1Q2008
1	1
	2
	3	447	545
	4	450	496
2	1	481	461
	2
	3	502	499
	4	500	526
3	1	500	480
	2	510	482
Holiday	4	395	431
	5	401	436
Total		4186	4356

The first column is the month. There are three months in each quarter. Both 4Q2007 and 1Q2008 have a one-week long national holiday. I compare the holiday between the two quarters also.

The second column is the Saturday in each month. Most month has 4 Saturdays. I also compare the 4^th and 5^th day of the 1-week long national holiday. The third column and fourth column are the peak concurrent user number for that particular Saturday (or holiday).

The last row is the total (or the sum of all the rows).

You may ask why are so many days missing. Well, I can no longer stay up during the wee-hours every day to keep track of the server counts.

From the last row of the table, you can see the average concurrent user has increase by about (4356-4186)/4186 = 4%

But how can we use this estimate (+4% in ACU) to give us an estimate for the game revenue for Sohu? The answer is we need to do a lot of guess work.

Note that since I only have a few data point in calculating ACU, this ACU estimate won’t have any relevance when compare with ACU that were developed using more data points. But it is ok to use it for this particular case.

The following is a table for Giant Online’s (ZhengTu) game statistics

	3Q2006	4Q2006	1Q2007	2Q2007	3Q2007	4Q2007
APA	.698			1.248	1.318	1.405
APA (%)					5.6%	6.6%
ARPU	220		320	295	305	309
ACU	271			515	481	512
ACU (%)					-6.6%	6.4%
PCU	558			1072	880	983
PCU (%)					-18%	12%
Revenue	23.7			48.9	54.1	59.6
Rev (%)					10.6%	10.2%

The second row is APA or Active Paying Account in unit of millions. The third row is the quarter over quarter (QoQ) growth of the APA. The fourth row is ARPU, or Average revenue per active paying customers. The fifth row is ACU (Average Concurrent Users) in unit of thousands. The sixth row the QoQ growth of ACU. The seventh row is PCU (Peak Concurrent Users) in unit of thousands. The eighth row is the QoQ growth rate for PCU. The ninth row is the monthly revenue in millions. Since Giant Online only have one game of significance (ZhengTu), they also represent the revenue generated from this one game. The final row is the QoQ revenue growth.

One thing interesting can be found on 3Q2007 estimate. On 3Q2007, the ACU decreased by 6.6% and PCU decreased by 18%, yet the APA increased by 5.6% and the revenue increased by 10.6%.

This shows that both PCU and ACU are not very reliable estimate for free-to-play games. APA and ARPU are much more reliable. I think since ZhengTu is a relatively new game, both APA and ARPU tend to trend up from quarter to quarter. While increase in ACU tend to for-tell increase in APA, the reverse might not be true.

The following table has the statistics for TLBB.

	2Q2007	3Q2007	4Q2007
PCU	400k	400k	500k
PCU (%)			25%
APA	209k	690k	1100k
APA (%)			59%
ARPU	82	118	147
ARPU (%)			25%
Game Revenue	3.8	12.7	24
TLBB Revenue	2.3	10.9	22
TLBB Rev. (%)			102%

This table is pretty self explanatory. Compare this table with the table for ZhengTu, we can see several points. Compare TLBB’s PCU of 500k and ZhengTu’s PCU of 1072k, TLBB may still have a way to go. Not saying TLBB will eventually has as many users as ZhengTu, but considering how young TLBB is, the odds are TLBB’s PCU will significantly improve.

Compare TLBB’s APA of 1100k with ZhengTu’s APA of 1405k, you would think TLBB’s APA will grow, but not by a very big percentage from quarter to quarter.

Compare TLBB’s ARPU of 147 with ZhengTu’s ARPU of 309, I think TLBB’s ARPU can still have some distance to grow. In the earning conference, Sohu say that they predict the peak ARPU is 170. I think they are way too conservative.

I think in two to three quarters, the APA will probably be something like 1600k (or 45% increase) while ARPU be something like 190 (or 29% increase).

Now, given an ACU increase of 4% quarter to quarter, I estimate we shall have APA increase of 8%. For the ARPU, I estimate we might have 5% increase. Thus, the revenue from TLBB shall have an quarter over quarter increase of 1.08 * 1.05 = 1.134, or 13.4%. or the revenue from TLBB will be 22 * 1.134 = 24.95M

The following table is the revenue from Sohu’s other game, Blade Online

	2Q2007	3Q2007	4Q2007
Blade Revenue	1.5	1.8	2.0

Assuming Blade Online no longer grows, I predict that Sohu will get 2M from Blade Online in 1Q2008.

Combine the two, we have the total game revenue of 24.95+2 = 26.95M for 1Q2008. Compare to Sohu’s guidance of 25.5 to 26.5 millions, I think Sohu gave a pretty good guidance for the gaming portion of her revenue mix.

New TX2 Status Update

I was thinking about doing an update on the progress of games by Sohu and Netease after March, or after the 1^st quarter, but a lot of people had asked for it. So I am going to go through them in the next week or so. (Note, it is kind of strange that people want to know the status of these games now rather than after the 1^st quarter is over, is there anything going on in the next two weeks?)

I will start out with Netease’s TX2. My last post on TX2 is as follows:

http://chinese-net-gaming-stock.blogspot.com/2008/01/tx2-will-be-free-to-play.html

During the 4^th quarter earning conference call, Ntes said that TX2 will be going into closed beta during the 1^st Q 2008.

On 2/29/2008, TX2 went into very small scale closed beta testing. At this point, not much can be said of the game. But information about its graphical quality had dribbled out.

On 3/24/2008, TX2 will start the large scale closed beta testing.

The following are some in-game images captured by close-beta testers. It originally comes from this link:

http://tx2.netease.com/viewthread.php?tid=255790&extra=page%3D1&page=1

I will give a brief description on the images.

The first image is about the female character played by a closed beta tester. She went to a little village and get an assignment.

The assignment is to kill a millipede. The blue scaled horse thing next to her is a mythical Chinese creature called “chi-lin”. It is a very powerful animal. It is also her companion or pet.

Next, she is killing this fish monster.

More fight with the fish monster.

Now, she is talking to some in-game characters.

This is a picture with some interesting looking Chinese mythical beasts

Now, the above give a pretty good indication of how pretty the game is. But since they are still pictures, one can’t get any sense of fluidity and motion of the game.

The following is a video on a boss fight in a TX2 side quest. Don’t pay attention to the graphical quality of the video. There will be a lot of quality loss whenever it needs to be compressed on a youtube-like video.

http://v.youku.com/v_show/id_XMjAyNTE1MTY=.html

Nothing much can be say about this video. A team of 5 players went to this TX2 quest. It has two bosses. They killed the first boss. They had trouble with the second boss (a big spider). They were defeated by this spider boss twice. Eventually, they gave up.

By observing the still image quality of the captured images and observing the motion quality in the above video, one can get an idea about the overall video quality of TX2 game.

First of all, it is a very beautiful game. Probably even more beautiful than World of Warcraft (or at least on par). The style of the game is definitely Chinese. But less Chinese than the older TX2. The backgrounds are more detailed now. The background on the old TX2 game is more like a traditional Chinese drawing.

Actually, this is one of the main arguments on Netease users forum. The old TX2 players hated while the new TX2 players think it is great.

One of the main objective for the game designers is to make this game novice friendly. I honestly don’t see any closed beta players complaining about the difficulty in picking up the game play. That is a good sign. But hardly convincing because most closed beta players are pretty experienced (not novice).

At this point, it is impossible to know about the game play features. The closed beta just get started and Ntes has just started slowing releasing features.

So we know this game have eye-candies. But will this be a blockbuster game? I don’t know. I am pretty sure this will be a very successful game.

I think there are four factors that will determine whether this game will be a blockbuster game. First, the old TX2 is more like a global domination game where gangs (countries, or tribes) of hundreds of players fight castle siege battle.

It sounds great, but that also make it into a niche game. A game more like World of Warcraft has much broader appeal.

Second, the old TX2 is very much technology limited. Only players with newer PCs can play without much stutter. The newer TX2 has to have a much more forgiving game engine that allows much broader players (players with older computers) to play.

From my previous write up, TX2’s programmers use the updated game engine (the Australian game engine) and completely rework all the computer code to make the game more forgiving. We won’t know until more information is out. But a few posts mentioned in the users forum seem to suggest Ntes had done a pretty good job about this.

The third reason that might trip up TX2 is that it is Ntes's first attempt at free-paying game. It is probably less a worry. Other companies had been converting paying game to non-paying game in much more efficiency and under much stringent conditions. Ntes had so much time to work on it, they ought to get it right.

The final possible reason that may hold TX2 back is the lack of marketing sophistication of Ntes. Ntes haven’t marketing its games for the last few months. That is just absolutely unforgivable. It will probably make wall street analysts happen in the short term (less spending), but I care much more about the long term success of TX2. There are so many quality games out now, Ntes is still thinking like an ancient dinosaur.

I am very confident that this game will be very successful (at least a success game with a PCU of 200k). But whether it will be a blockbuster that will have PCU of 1 million or just a successful game with a PCU of 200k, I will have to wait another couple of months to make any prediction.

Statistics from DCCI on China’s Online advertising revenue

The following is an article on some “tigergate” stuff.

http://www.australianit.news.com.au/story/0,,23313705-5013040,00.html?from=public_rss

The original article is from the Wall Street Journal. The following is the Chinese translation of it:

http://community.yikuo.com/discuz/contentpage/200833/20083381241897.html

Nothing much about the story. But it does have the statistics from DCCI (Data Center of the China Internet).

I am sure I can find the information in DCCI site (their site: http://www.dcci.com.cn/List/1.21/2008-1-21.shtml ), but I will just give the important information below:

On China’s ad revenue, Sina, Sohu, Netease, and Tencent are the top four portal (in that order) and together get about 75% of total online brand advertising revenue.

The ad revenue from 2006 to the projected 2009 revenue and their year over year growth rate is as follows:

	2006	2007	2008	2009
Revenue (RMB)	10B	12.35B	16.19B	21.33B
Revenue (USD)	1.4B	1.74B	2.28B	3B
YoY Growth Rate		23.5%	31%	32%

Note: Assuming today’s conversion rate of 7.11 RMB for 1 USD

Now compare this to iResearch’s numbers (can be found here:

http://chinese-net-gaming-stock.blogspot.com/2008/03/iresearchs-china-advertising-market.html).

First of all, revenue of 1.74B for 2007 are just way too high. iResearch report’s portal advertising revenue of .417B for 2007 is more realistic. It is possible that DCCI is adding all the revenues (not just ads) for the companies.

The following table is 2007’s total revenue for the 4 portals:

	Tencent	Ntes	Sina	Sohu	Total
2007 Revenue	479	316	246	189	1.23B

Thus, the four portals’ total revenue accounts for about 1.23/1.74 = .71 or 71% of the total industry.

Unfortunately, total revenue (rather than advertising revenue) is not very meaningful. Tencent and Ntes make most of money in games. Sohu is big on games also. Sina and Tencent has big presence in wireless value added services.

Now, lets look at their prediction on 2008 and 2009. They predicted a nice increase of 31% and an even better 32% increase in 2009. Compare this with iResearch’s prediction of 62% increase in 2008 and 35% increase of 2009. (Note, I am not compare the exact numbers. DCCI’s number of total revenue is composite number. iResearch number of advertising revenue is much more specific. They are not apple to apple comparisons. But I am comparing the trend).

I think there are two school of thoughts here. One believe there will be nice pick in 2008 due to Olympics. But this pickup is not that strong as most people predicted. But China’s internet market is still at its infant stage and the pickup will continue and gathering speed through the next few years. I think DCCI is in this camp.

On the other hand, iResearch seems to suggest the best years for China’s internet sector is over and 2008 is the last year for any strong growth for China. After 2009, China’s internet industry will represent sun-set industry.

Clearly, comparing to US’s internet sector’s experience, considering how fast China is growing, considering only about 15% of Chinese are netizen, and considering how China’s internet companies represents only a tiny percentage of overall China’s advertising industry, it is pretty clear to me that I do not agree with iResearch’s prediction.

When I wrote the video report in September last year, (see my write up here:

http://chinese-net-gaming-stock.blogspot.com/2007/09/sohu-video-tv-stations-opened.html ), I predicted that Olympic this year will give the portals a good year. But starting 2009, there will be a revolution for the portals.

I understand that this line of thinking was against popular thinking. I think most people believe that there will be good growth in 2008 and follow by flat growth in 2009.

I think people are way over-emphasize on the effect of Olympics. I believe the Olympics will give the portal a good pop (though not great). But the real benefit of the Olympics will be to serve as the demonstration platform for what is to come next.

At this point, the portals are largely a text reading experience. But as the portals starts to add video, audio, and web-2.0 contents, they will start to take business away from the traditional TV and radio industries. China’s TV and radio industries are dotted with stodgy state-owned companies.

I believe that Olympics will serve as the demonstration of this new capability and starting 2009, we will start to see this fundamental industrial trend happening.

It was just my gut feeling and I don’t really have much data to back up my prediction. I am so glad an organization like DCCI with its survey results and expert prediction seems to match what I predicted.

Again, in one to two years, I will keep track with both DCCI and iResearch to see which one is right.

iResearch’s China Advertising market survey and prediction

On 2/21/2008, iResearch published their survey as well as their prediction on the China’s internet advertising market. See the following link:

http://www.iresearch.com.cn/html/consulting/online_advertising/DetailNews_id_76730.html

I don’t usually study their survey because I usually have some doubt about their mythology and accuracy. But I will study this one just to see I can see some patterns.

In this survey, they break it out to brand ads, search ads, classify ads, email ads, etc. For now, I just look at the brand ads.

First, I will make a table to make it more understandable:

	2004	2005	2006	2007	2008	2009	2010	2011
Total Ad	2.35	4.07	6.05	10.61	17.23	23.23	29.74	36.99
YoY	78.6%	78.9%	48.6%	75%	62%	35%	28%	24%
Brand Ad (%)	55.6%	50.1%	49.3%	45.9%	45.8%	42.3%	40.7%	39.3%
Brand Ad	1.307	2.04	2.98	4.87	7.89	9.83	12.1	14.54
YoY		56%	46%	63.4%	62%	24.6%	23%	20.2%
Portal %	51.3%	44.2%	39%	28.3%	27.2%	24.3%	22.7%	21.1%
Portal (RMB)	1.206	1.8	2.36	3.0	4.68	5.645	6.75	7.805
YoY		49%	31%	27%	56%	21%	20%	15.6%
Portal (USD)			.33	.417	.65	.784	.94	1.084

The second row is the total advertising market in China. The number is in unit of billions and it is in China’s currency, RMB. The third row is the year over year (YoY) growth rate of China’s total advertising market.

The fourth row is the brand ad as % of the total advertising market. The fifth row is the brand advertising market in China. Again, it has the unit of billions of RMB. It is just the product of the second and the third row. The sixth row is the year over year growth rate of the China’s brand advertising market.

The seventh row is the revenue from the portals (such as Sina, Sohu, etc.) as % of total advertising market. The eighth row is the revenue of the portals in unit of billions of RMB. The ninth row is the year over year growth rate for the portal’s advertising revenue. The final and tenth row is the portal’s revenue in USD. Note it is converted using today’s conversion of 1USD = 7.2 RMB.

Right away, we see something is wrong. For example, the growth rate for the brand ad market in China is 63.4% in 2007.

But how can this be? The following table has the advertising revenue from the top three portals. They are the year over year growth rate for the 4 quarters of 2007. Note that I only have the total advertising number for Sina and Ntes.

	1Q07	2Q07	3Q07	4Q07
Sina Ad	43%	40%	40%	40%
Sohu Ad	27%	24%	32%	35%
Sohu Brand Ad	41%	38%	42%	46%
Ntes Ad	-10%	-4%	2.5%	36%

There is just no way the brand advertising market grow as fast as 63.4% as indicated by iResearch data. But I think the confusion could be easily explained by iResearch doesn’t classify brand advertising, email advertising, multimedia advertising, search advertising, the same way most company does.

Some analysis on iResearch’s data.

The third row of the first table provides the YoY growth rate for China’s advertising market. There is a jump in 2007 and 2008. Then a very dramatic slow down in 2009 and beyond. The jump in 2007 and 2008 is largely because of the rise of the search engine.

But they don’t seem to capture the effect of the Olympics since they predict 2008 will have a slower growth rate than that of 2007. Their prediction of de-accelerating growth rate in 2009 and beyond is a little hard for me to believe. But that is their prediction.

From the ninth row of the first table, it has the YoY portals’ advertising growth rate. From those data, it looks bad! The 21% growth rate in 2009 is horrible!

As a matter of fact, iResearch is painting a very bleak picture of the whole China’s internet market place. That it will only growth at a meager 24% by 2011 is horrible!

I think there are four problems with iResearch’s methodology. First, as I mention before, iResearch seems to classify different advertising segment differently than most Chinese companies. It makes an apple to apple comparison difficult.

Second, their methodology is by observing one hundred thousand Chinese users and 170 Chinese companies over long term. It has its values. But how can that capture the extra-ordinary expansion of China’s internet growth (only about 15% of Chinese are netizens). By only focusing on segment of existing users, how can they capture all the new users.

Another thing is happening right now is the fundamental changes in China of changing from a text based internet to a multimedia based internet. I don’t believe iResearch capture that in its prediction.

Finally, I believe there are tremendous technology advances in China’s internet sector. Those advances will start to such revenues from China’s traditional media (TV, radios) onto internet. I don’t think iResearch accounted for that in its predictions.

But that is just my opinion. But if you believe in iResearch. China’s internet companies will enter nuclear winter stage starting 2009.

I don’t know who is right, but I will keep track of it. It will be interesting to see what iResearch's report will say this time next year.

TLBB expands oversea

I have talked about Sohu's TLBB for awhile now. My last TLBB specific post is all the way back in May last year:
http://chinese-net-gaming-stock.blogspot.com/2007/05/sohu-tl-game-progress.html

and my last article that is somewhat related to TLBB is here:
http://chinese-net-gaming-stock.blogspot.com/2008/01/sohu-starts-major-hires-for-its-game.html

Any way, just some tiny news regards TLBB. I believe TLBB is going to expand oversea. They are probably already in Vietnam. The following two articles talks about that they are going to expand into HongKong and Taiwan.

http://it.sohu.com/20080202/n255038340.shtml
They found the distributor in Taiwan. The distributor is the biggest game company in Taiwan. The closed beta is scheduled on March 2008.

http://news.17173.com/content/2008-01-26/20080126105117217,1.shtml
They found the distributor in Hongkong and Macao. The distributor is Gameone. The closed beta is scheduled on March 2008.

Even though I am from Taiwan originally, I don't have any clue of the game market in Taiwan. I believe that in the earning conference, Sohu said they don't believe they will have significant earning. But Sohu always down plays TLBB's earning potential.

But TLBB (the novel, not the game) and its original author are treated like the bible and a god in Hongkong and Taiwan. So many people has the collected edition (costs up to thousand of dollars) proudly displayed in their living room. It will be interesting to see how it goes in Taiwan and Hongkong.

Again, this showed that Sohu is much more marketing savvy than Netease. Netease still refuse to go overseas. Netease is saying that it is a 100% chinese company that only run game for Chinese only. It is wearing it like a badge of honor. But frankly, average Chinese treats Chinese companies that can go global with much more reverence.

XY2 & XY3 Server Status

My previous post on XY2 and XY3 is here:

http://chinese-net-gaming-stock.blogspot.com/2007/10/ntes-announced-delay-of-xy2-to-xy3.html

From my previous articles, NTES originally planned to use XY3 to replace XY2, but they changed their mind and keep both XY2 and XY3 as separate games. Both game have different development teams.

In the 2^nd quarter of 2007, XY2 has a PCU (Peak Concurrent Users) = 505k. In 3Q2007, it has a PCU = 305k.

In this article, I will give a chronological order of the XY2 and XY3 development.

For XY2, the last PCU record occurred on 10/1/2006. It had a PCU = 603k. But XY2 is an old game and is slowly dying. It can never get another PCU record again.

On 4/15/2007, it is the last time XY2 has a health PCU = 482k. After that, XY2 is clearly aging.

On 5/20/2007, it is about the time XY3 went into external closed beta. On that date, XY2 has a PCU =304k.

From then on, users can get to play XY3 for free (XY3 is in beta testing) and a lot of XY2 players start to migrate to XY3.

Therefore, on 9/9/2007, the Sunday prior to XY3 went into commercial operation, XY2 has a PCU = 190k.

But even after XY3 goes into commercial operation, a lot of XY2 players are revolting against Netease. A lot of XY2 players don’t want to migrate to XY3. They already had very high level player characters. Even though Netease promise them that they can migrate their player characters to XY3, a lot of XY2 users think that their characters wouldn’t be as powerful in XY3.

Netease relented. On 10/8/2007, Netease announced that they will keep XY2 alive. Rather than using XY3 to replace XY2, Netease will keep XY2 and XY3 as two separate games. There will be two separate development teams to develop those two games.

After that, XY2 is start to grow again. On 1/13/2008, the last Sunday, XY2 has a PCU = 294k.

On the same day, 1/13/2008, XY3 has a PCU = 152k.

If we adds the PCU of both XY2 and XY3 together, we will get a PCU = 446k on 1/13/2008.

Now, that is significant higher than the 3Q PCU of 305k. It is getting close to the 2Q PCU of 505k.

At this point, it is clear that both XY2 and XY3 are growing again. XY3 is growing by attracting a lot of non-XY2 players. XY2 is growing by attracting a lot of old XY2 players (who left 1 or 2 years ago) back.

After all this, by screwing up the execution, Netease got lucky. Now, from a dying title, Netease got two (or really 1.5) major titles. XY2 will keep on going to be a major title for probably another 2 to 3 years. At this point, with a PCU of 150k, XY3 is a very good hit. But it can definitely able to grow to be a major hit.

Chinese market almost amazes me.

In the United States, it is always important to follow the pre-determined milestones on schedule. But in China, it is probably more important to be nimble. Rather than sticking to the work plan and schedule, it is probably better to continuing modifying since the market condition in China changes so fast.

FF2 Status

My last post on FF2 is as follows:

http://chinese-net-gaming-stock.blogspot.com/2007/02/netease-ff2-info.html

From that article, FF2 was supposed to go into closed beta on May 2007 and open beta on August 2007. Clearly, it didn’t happen. It hasn’t go into closed beta yet.

Some news starts to come out. From the following link, http://ff.netease.com/viewthread.php?tid=3437480&extra=page%3D1

FF2 is going to start limited closed beta soon. But since they are only going to invite 50 to 100 players and only have the first 15 levels of game plays, it looks like very beginning of closed beta stage. They might have 1 or 2 more closed beta testing after this. After that they will definitely have open beta after that.

Everything is pure guess on my part. But we could be seeing 3Q or 4Q 2008 for the commercial operation of FF2.

At this point, since TX2 is going to be the first free-to-play game for Netease, the importance of FF2 is significantly reduced.

But FF2 could still be a moderately popular game. It will probably be a game that get lots of users, but I don’t think it will be a major hit as far as revenue generation goes.

TX2 will be free-to-play

My last post on TX2 is as followed:
http://chinese-net-gaming-stock.blogspot.com/2008/01/tx2-in-game-graphics.html

This is certainly unexpected. Just a few days after my last update on TX2, Netease announced that TX2 will be a free-to-play pay-by-item game.

See the following link:
http://tech.163.com/08/0116/11/42ATCEB7000915BF.html

The article said that Netease CEO announced that TX2 will be a free-to-play game. It will be start beta right after the Chinese New Year. It is expected to be in commercial operation during the 1st half of 2008.

I have to say that this is a great news to Netease investors.

If TX2 is a paying game, it is competing with World of Warcraft. From my previous articles on TX2, I predicted that it will be out in the 3Q2008. And I also predict that this game might surprise people.

But now TX2 is going to be a free-to-play game. The competition becomes much weaker all in a sudden. TX2 is going to be the best free-to-play game in China. I have no doubt that this game will be a major hit. On top of that, this game will be out in the 2Q 2008.

Excellent news.

DT Status

My previous post on DT can be found here:

http://chinese-net-gaming-stock.blogspot.com/2007/02/netease-dt-new-expansion-pact.html

DaTang was a big disappointment for Netease. It is still in operation. But there is very little players playing this game. There is hardly any new content being developed and Netease is not marketing the game to attract new players. Netease is busying developing DaTang 2 as the first major free-to-play game from Netease. The original thinking is to make DT undergoing a slow and graceful death so that DT2 will replace it when it is ready.

But interestingly, I think there is a complete change of thinking on DaTang within the management of Netease.

The developer of DaTang announced the new direction of development for DaTang. It is very short but has tremendous amount of information. The link is as follows:

http://dt.netease.com/viewthread.php?tid=276431&extra=page%3D1

The developer of DT had been hinting of new direction in several postings in the last two months. Together with the above posting, I am starting to get a more complete picture.

My translation and my though is as follows:

- There will be no new contents announced until Chinese Spring Festival (Feb 7^th, 2008).

- During November and December, 2007, Netease hired a lot of new programmers and developers to DT’s development team.

- Major contents will be released around Spring Festival.

- Netease will start major marketing push for DaTang after the Spring Festival.

- A big area of the new content is to provide more material for the new players.

- More activities.

- More features.

I am starting to get a full picture now.

Based on my server count, it is clear now that XY2 and XY3 had been successful. Originally, Netease planned to use XY3 to replace XY2. But now, both XY2 and XY3 are doing great and are two stand alone games.

XY3 is used to attract new users and XY2 is used to keep the old players. It is clear based on the server count that the combination of both games had exceeded the old XY2 by itself.

It is interesting to observe the Chinese market. Unlike other market, Chinese don't seem to mind playing the prequel and sequel at the same time.

I believe Netease is going to do similar thing with DaTang. Rather than using DT2 to replace DT, I believe Netease is going to make these two games separate (though related) games. DT will be a paying game while DT2 will be a free-to-play game.

Like XY2 and XY3, both DT and DT2 will be developed by two separate and distinct teams. DT2 is probably not going to be ready until 3Q or 4Q. But Netease is going to do some major push for DT after February 2008.

2008 is going to an important year for Netease. XYQ is still growing (last PCU record occurred on 12/2/2007), though slowly. XY2 is starting to grow again. XY3 is also growing. They are going to do a major push for DT in the 1Q and 2Q. After that, TX2 is going into commercial operation. FF2 will probably go commercial some times in the first half of 2008. Finally, DT2 will probably be out in the 2^nd half of 2008.

And let’s not forget about the Olympics and all the advertising dollars that will go to Netease (as the number 3 portal in China) as a result.

2008 is going to be an interesting and profitable year for Netease.

TX2 In-game graphics

There are a little more information on TX2. My previous post on TX2 is as follows:

http://chinese-net-gaming-stock.blogspot.com/2008/01/tx2-status.html

One of TX2’s graphic designer was interviewed. As expected, he said the new TX2 will be very beautiful. I won’t provide a translation for it since it really doesn’t add too much.

But it also provides several in-game graphics. The first link has the graphics of several game characters:

http://tx2.netease.com/viewthread.php?tid=215365&extra=page%3D1

The second link has graphics for the in-game sceneries:

http://tx2.netease.com/viewthread.php?tid=215405&extra=page%3D1

As you can tell, the new TX2 is going to be a very beautiful game. I will say more beautiful than WOW (World of Warcraft) and definitely more Chinese.

Of course, the big question is whether these graphic complexity can be supported by entry level computers. If average Chinese’s PC can play TX2 with this kind of graphic details without any lag or stutter, then TX2 will be an awesome game.

At this point, WOW is the only major paying-3D game in China. There are a lot of good 3d games, but they are all free-to-play games. But WOW is starting to get a little long in her tooth. It is about time there comes another major paying 3D game with game playing features similar to WOW. If that game is Chinese centric, it would be even better.

If TX2 solves some technical issues and make a lot of interesting side-quests, it could be the first new paying game that hit major in the last two years. In the time where most major hits are free-to-play, TX2 could really surprise people.

TX2 Status

My previous post on TX2 can be found here:

http://chinese-net-gaming-stock.blogspot.com/2007/10/status-on-tx2.html

Netease’s TX2 developer answered some questions regards to the new game. The link is as follows:

http://tx2.netease.com/viewthread.php?tid=208555&extra=page%3D3

I will translate the important point.

- There will be a lot more contents.

- A lot more main quests.

- Allows more costumes and in game items.

- Allows the players more options to turn on/off various graphics options.

- Much more Player vs Player (PvP) features. In addition to the existing features of castle siege and gang-warfare, it will adds three new PvP features, battlefield, fighting ring and beast fighting ring.

- Closed beta will start after the Spring Festival (2/7/2008).

My impression is as follows:

One of the main knock against TX2 before is that the game is too much for the players with old computers. It looks Netease is taking a three-prawn approaches. It will use the latest version of the game engine. It will re-write the game from the ground up, but this times emphasize on the game resource allocation. Finally, it will allow players more options that will allow them to turn off graphic options dynamically when the players are in the middle of major battle field. Hopefully, this will solve this problem.

I was a little surprised at the emphasis on the PvP features. But after further reading, it starts to make sense. The older PvP features (castle siege and gang warfare) are designed specifically for major gangs and tribes. The old TX2 was a game for global domination. But the new PvP features are more for individual and for small groups.

World of Warcraft is a game that had thousands of side-guests that will keep players busy for long time. In addition, it has a lot of PvP features that keeps the players interested after they finished the side quests.

The older TX2 was a completely different game. It was a global domination game that are designed for big gangs (or tribes) that have hundreds or thousands of members.

I always wished TX2 can be a WOW clone. If TX2 adds many more side-guests, the transformation will be complete. A WOW clone will give TX2 a good chance to be a major hit in China.

They are going to start closed beta in mid to late February, 2008. The closed beta could be 2 to 4 months in duration followed by 1 month of open beta.

My speculation is we might be seeing commercial operation somewhere either from middle of 2Q to the end of 3Q.

Note: From the following link, the 2^nd closed beta will most likely be early March. The link:

http://tx2.netease.com/viewthread.php?tid=206599&extra=page%3D2

CNNIC Blog survey report:

CNNIC came out with a survey report on China’s 2007 Blog. To give some background, I also find its 2006 report. The following is the important part of the report:

For 2006 report, the link is as follows:

http://www.cnnic.cn/uploadfiles/pdf/2006/9/28/182836.pdf

Internet user: 123 million

Blogger: 17.5 million. (14.2% of internet users)

Active Blogger: 7.7 million (44% of Bloggers)

Blog: 33.7 milion

Blog reader: 75.6 million (60% of internet users)

48.9% of Blogger are male and 51.1% are female.

Didn’t have survey result on who is the most popular blog sites. But from the report, it seems Blogcn, Sina Blog, MSN blogs, QQ blogs, Bokee Blog, Tianya Blog, Blog.com.cn, Netease Blog, Sohu Blog, Mop Blog, and Baidu Blog (in order of popularity) are the most popular blogs.

For 2007 report, the link is as follows:

http://www.cnnic.cn/uploadfiles/doc/2007/12/26/113707.doc

Internet user: 180 million

Bloger: 47 million (27.6% of internet users), or about 170% year over year growth.

Active Blogger: 16.9 million (36% of Bloggers), or about 120% year over year growth.

Blog: 72.8 million

Didn’t talk about who is the most popular blog sites. But it implies the portals are very popular for the bloggers. It said QQ space, Sina Blog, Netease Blog and Sohu Blog are very popular.

From the report itself, it is hard to tell if portals such as Sina, Netease and Sohu are gaining market shares from the standalone blog companies. But if they grow over 120% year over year, then we know they are gaining market shares. Hopefully, they will published the year over year increase number for the blog during their next earning conference.

Sohu starts major hires for its game division

My last post on Sohu’s games such as TL is as follows:

http://chinese-net-gaming-stock.blogspot.com/2007/05/sohu-tl-tls-peak-concurrent-user.html

On 12/27/2007, Sohu starts major hiring for their gaming division. There is a total of 35 different kinds of positions they are looking for.

The details is as follows:

http://job.17173.com/mem/adv_detail.php?cid=6805&id=1058

1. Customer Support for TLBB. 100 positions
2. Assistant. 3 position
3. Database programmers. 5 positions.
4. Game management engineer. 5 positions.
5. 3D graphics artists. 20 positions.
6. Graphics designers. 20 positions.
7. Gameplaying designers. 20 positions.
8. Game programmers. 40 positions.
9. Linux programmers. 5 positions.
10. QA (Quality Assurance) engineers. 40 positions.
11. Database (DBA) management. 3 positions.
12. Client gaming programmers. 10 positions.
13. 3D engine developers. 10 positions.
14. Game server management engineers. 10 positions.
15. Game support assistant. 5 positions.
16. Game plot authors. 5 positions.
17. Game promotion area managers. 10 positions.
18. Business administration support. 2 positions.
19. Lawyers. 3 positions.
20. Gaming market researchers. 10 positions.
21. Ads. Designers. 5 positions.
22. JAVA programmers. 3 positions.
23. Web programmers. 10 positions.
24. Game promotion department. 20 positions.
25. Game training managers. 5 positions.
26. Game management department. 3 positions.
27. Personnel management. 3 positions.
28. MIS engineer. 3 positions.
29. Statistical Analysis. 5 positions.
30. Client services quality control. 5 positions.
31. Web developers. 5 positions.
32. Anti-pirate servers specialists. 5 positions.
33. Game analysis specialists. 5 positions.
34. International branch product managers. 2 positions.
35. Salesmen. 20 positions.

It adds up to 425 new hires for their gaming division.

What is most interesting is that they are adding 100 new customer supports for their existing games (TLBB and Blade Online). It is pretty clear its hit game TLBB is growing exponentially.

Sohu managers may be talking about TLBB leveling off after the 1Q2008. But their action (major hiring) is telling a different story. I think the manager is purposely talking down their success in TL during the earning conference so that they can come out with earning surprise in the future.

In addition, they must be cranking up their new game development with those 300 new game designers and programmers.

In the positive way, I think TLBB will surprise through the next few quarters and won’t level off for quite a few quarters.

On the other hands, Sohu’s expenses will go up as they starts to develop many new games.