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.

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.

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.

Sohu – TL – TL’s Peak Concurrent User estimate

This is the final part of 4 part series. The 3nd part is here:
http://chinese-net-gaming-stock.blogspot.com/2007/05/sohu-tl-reasons-i-think-tl-is-popular.html

Now we have all the data we can use to provide some estimate for TL’s PCUs. I will be doing this through two completely different approaches. The first approach is by comparing to its peer. The second approach is by extrapolate from its server counts.

Approach A. Estimates from peers.

The idea in this approach is by comparing with it peer’s PCU, we can get an estimate of TL’s PCU. In this case, peer means a MMORPG game that just started open beta.

We can’t compare it with an existing game that had been in operation for years because relationship between the number of downloads and the number of searches to PCU is different between new games and older games. For a new game, there will be more downloads simply because it is a new game.

In this case, NTCY’s SUN provides a reasonable base of comparison because SUN is a new game. From the data in the last two articles, we can formulate the following table:

________iResearch___Baidu____Xunlei Download___ Xunlei Search
TL______5711182____43758_____36688__________6373
SUN_____391959____26523_____9292___________1602
TL/SUN___146%_____165%_____395%___________398%

For this study, I will ignore the last two columns (Xunlei download and Xunlei search). There is no way TL has 4 times as many users as SUN.

Xunlei’s one day numbers seem to be skewed. A possible reason is that since these are one day numbers, they may be subject to wide fluctuations. (As a matter of fact, Xunlei’s one day numbers always seem to have problem with accuracies.)

Now, if we take the result from the iResearch (which is really Xunlei’s one week statistics) and Baidu column and average them out, we would have gotten a combined TL/SUN = 155%.

Since NCTY proclaim that SUN has a PCU of 400k, we can estimate the PCU for TL to be 1.55 * 400k = 620k.

Approach B. Estimate from the number of servers.

As of now, TL has 159 servers. Each server’s maximum capacity is 5200 players. Sohu had been adding servers like crazy. It means tremendous new users. But after more than one month, I believe it is able to support almost all users now. Therefore, I estimated that a small number of servers still have servers that are almost full (30) while the majority has a very good balance of users in them (90).

But since Sohu is adding servers so fast, it also means that some older servers may neve get the chance to get fill up. I picked an estimate of 39 servers that have numbers that are lower than expected, but not low enough to warrant server consolidation.

Thus, the calculation is as follows:

30 servers @ 4500 players per server
+ 90 servers @ 3000 players per server
+ 39 servers @ 2000 players per server
= 483,000 players.

Or PCU = 483k.

Clearly, this is a highly subjective estimate. By varying the numbers, you could get very different results.

Now, if we combined the two numbers (just average them),

We get a PCU = 552k

This is a truly amazing number from a game nobody saw it coming. Well, I predicted TL will be a successful game. But I was thinking about a mid-level game that can give 5M per quarter surprise to Sohu. But a PCU of 552k for open beta is indicating something completely different.

PCU like this for open beta is un-precedent. It is indicating a major blockbuster in the making.

In summary, in this series, I pointed out 1 possible inconsistency, I dispelled 2 myths and I gave 5 reasons for a strong TL. In the end, the evidence is just too strong in one direction. Hopefully, I answered the question why I think TL is on his way to be a blockbuster.

Sohu – TL – Reasons I think TL is popular

This is the 3nd part of 4 part series. The 2nd part is here:
http://chinese-net-gaming-stock.blogspot.com/2007/05/sohu-tl-myths-that-tl-is-not-popular.html

Reason 1: iResearch said so
See the link: http://www.iresearch.com.cn/html/online_game/detail_views_id_44137.html
It is the cumulative number of downloads between 5/14 and 5/20 as compiled by Xunlei. There are 571k downloads of TL. TL is ranked 3rd behind two casual games. Thus, it is number 1 in MMORPG games. Netease’s XYQ is number 4, Zhengtu is number 5, WOW is number 6 and NCTY’s SUN is number 8.

Reason 2: Xunlei’s download ranking said so
See the following for Xunlei game download ranking for the previous day:
TL is number 1 with 36688. SUN is number 4 with 9292. XYQ is number 7 with 6240.

Reason 3: Xunlei’s search ranking said so
See the following for Xunlei game search ranking:

TL is number 3 behind two casual games.XYQ is number 4, Zhengtu is number 6, WOW is number 7, and SUN is number 14.

Reason 4: Baidu Game ranking said so
See the following for Baidu’s top 50 game search ranking:

TL is number 2 and is sandwiched between the two casual games. WOW is number 4 and SUN is number 5.

Note that Xunlei is a download accelerator and a P2P program. Sohu’s biggest focus now is P2P video (with download accelerator function provided for free). Thus, they are direct competitors.

In addition, Xunlei is allied with Google. Google is Sohu’s direct competitor because Sogou is Sohu’s property. For the same reason, Baidu is direct competitor to Sohu also. There is no reason that Xunlei and Baidu will do TL’s bidding by hyping TL’s popularity.

In addition, this is not something you can fake. We are talking about half of millions of downloads or searches. If all these downloads or searches are coming from a few thousands IP addresses from a few cities, alarm bells in Xuelei and Baidu would ring of possible fraud. I am sure Xuelei and Baidu would lick their chops in sticking it to Sohu without mercy if that is the case.

Reason 5: It (faking server numbers) could kill the game
To me, this is the biggest reason why I think TL is popular. There are 159 servers. TL can’t fake it. If there are phantom servers, players would know since they can’t get into these servers, nor can they register with these servers. Assuming Sohu is faking it, Sohu could annouce that these servers are in maintenance or full. But how can they be full or in maintenance all the time. Players will get awfully suspicious if any server becomes full on 4am every day.

Similarly, if there are very few players in the servers, players will notice also. A server can handle 5200 players. If there are only 500 players during peak time, players will notice and complain because it would be no fun to play in a sparsely populated game. It would be awfully easy to spot in various game forums.

But there is a possibility that the sever only have one or two thousand players during peak time. Players might not complain and TL gives people the impression that they are 2 or 3 time more popular than they really are.

But I don’t think it is the case. By doing that, they could kill the game completely.

The reason they potentially want to inflate the server number is to create hype to attract players. But if they start to adds new servers when the old servers (in the same geographic location) only has 1000 or 2000 players, they will start to create ghost servers.

Ghost servers are naturally created event for MMORPG. Netease’s XYQ, XY2, and DaTang consolidate servers to get rid of these ghost servers. Zhengtu consolidates ghost servers almost every two weeks.

There is a threshold on the server that when the number of player goes below that, that server starts to lose players quickly. As more players leave, it becomes less fun for existing players. It then becomes a vicious cycle.

This is not something game companies would do. They would do anything to get rid of ghost servers. They definitely won’t do anything to help create many ghost servers.

Tomorrow I will conclude this series by providing my calculation for TL’s PCU.

Sohu – TL – Myths that TL is not popular

This is the 2nd part of 4 part series. The 1st part is here:
http://chinese-net-gaming-stock.blogspot.com/2007/05/sohu-tl-is-its-server-counts-for-real.html

Before I went further, I just want to say that I created this article on 5/25/2007. Therefore, all the data supplied are up to the date of 5/25/2007. As of today, TL has 159 servers.

Myth 1 – Why does the Sogou Game ranking ranks TL so low?

Well, they rank them so low that you can’t even find it on Sogou’s top50 game search ranking:
Actually, the answer to this is very simple.

If you go to the Sogou top50 book ranking:

There is it, number 3 right behind “adult novel” and “Love novel”. There is no way TL the book is so popular. TL is popular not because of the book, but the game.

The lesson from this is not TL is not popular, but Sogou is still immature in classifying phrases. Another lesson is Sohu’s various divisions are very independent. Most times, I got the impression that there are very few coordination between the divisions.

One thing is for sure; there are is no vast Sohu conspiracy to lie about TL’s popularity since both Sogou and TL are Sohu’s property.

Myth 2 – Why does 17173.com rank TL so low?

Again, another Sohu’s property seemingly dissing TL! From the following 17173 game download ranking:

TL is down all the way to number 211!

I will give a possible reason.

If you go to TL’s download site:

You can see the latest version is dated 5/10/2007 and the file has 471MB of data. But if you go to 17173’s download site for TL:

You see the version is dated 4/28/2007 and the file is 456.15MB. 17173’s file is a couple of versions back.

Actually, it doesn’t matter whether you start out with 5/10 or the 4/28 version, during the installation process, it will auto-patch to the latest version anyway. But new players don’t know that. Given the choice, they download the latest one. They either got it from Xunlei or from the official site, or other places that has the latest, rather than from 17173.

The answer is really simple. 17173’s game ranking ranks by the number of downloads. TL has low ranking because gamers don’t download TL from 17173. They don’t download from 17173 not because TL is not popular but because 17173 doesn’t have the latest file for TL.

Again, no vast Sohu conspiracy to lie about TL’s popularity since 17173, Sogou and TL are all Sohu’s property.

Tomorrow, I will provide 5 reasons why I think TL is extremely popular.

Sohu – TL – Is its server counts for real?

My previous post on TL is here:
http://chinese-net-gaming-stock.blogspot.com/2007/05/sohu-tl-start-charging-money-during.html

The author of the intelligentinvesting blog had the following comments:
“Please explain why you are so certain that Sohu's TL is a blockbuster. I am still not very sure about that right now even though I really wish TL will be a big hit. One concern I do have is whether Sohu's claim of TL operating 145 servers is credible. Yes, TL is ranked top on Baidu's most searched online games. But it is not ranked at all on Sogou's website(http://www.sogou.com/top/class19_1.html). It is also not ranked very high on its own 17173.com webiste or xunlei.com, another popular online game portal.”

As the matter of fact, the same concern bothers me a great deal until I looked more into it. In the next series of articles, I will dig deeper into it. By the end of this series, I will provide my estimate for TL’s PCU (Peak Concurrent User).

In today’s article, I will talk about one possible reason why TL’s server numbers are just marketing hype. In tomorrow’s article, I will provide many reasons why TL’s number is for real. In the third and concluding article, I will provide my calculation for TL’s PCU estimate.

The case for caution:

I can only see one symptom that might arouse caution. Why didn’t Sohu published its PCU number if TL is so hot? It makes no sense. Game companies want to hype its games to create momentum. They hype their games by announcing PCU numbers. Average gamers understand PCU numbers. They don’t really care about the number of servers.

One possible reason could be that they are holding the PCU number back until commercial operation to give maximum PR impact.

Or one could say since Sohu is a public company, they don’t want to give out false PCU numbers.

As of 5/26/2007, they have 159 servers. I believe these are 159 physical servers for TL. But each server might only have 500 players playing rather than 5000 players playing. This way, they are not lying about the number of servers, but they also accomplish the purpose of giving people a false impression that TL is extremely popular.

Well, there are major holes for arguing pro or con of why Sohu didn’t publish its PCU number. But either way, it is very unusual why a company won’t publish PCU number for a popular game.

Tomorrow, I will dispel the myths that TL is not popular. After that, I will provide 5 reasons that that indicates TL is popular. In part 4, I will provide the calculation of TL’s PCU.

Sohu – TL – Start charging money during open beta

My previous post on TL is here:
http://chinese-net-gaming-stock.blogspot.com/2007/05/sohu-tl-open-beta.html

TL was a successful story in Sohu. Sohu gives TL’s chief designer (hired away from Kingsoft) plenty of time and resources to develop the game right. It is a game that will make a lot of money for Sohu investors.

But 2 things happened recently that might cast a dark cloud over it. I won’t talk about one because I need to investigate it more. But I will talk about the other now.

I think Sohu is starting to charge players now. First, its final stage of “close beta” is really an open beta. And now they are treating the open beta as commercial operations?

When in beta stages, players are not supposed to pay!

From the following official site:
http://tl.sohu.com/content/tlissue/contentdetail.php?id=6340&type=service

TL had started to charge money for in game items. There are four places you can purchase the game card:
1. Internet Bar
2. UDPay
3. Convenient Stores, Supermarket, and Newspaper Stand
4. Through Sohu’s Online Store: http://esales.sohu.com/online/tlcost/index.jsp

To purchase in-games items, go to the online stores (where you can buy goodies).
http://tl.sohu.com/events/shop/
Not a lot of stuff yet, but I am sure they will add a lot more goodies as time goes by. Also, players who killed too many other players can lessen the punishment by paying game currency.

Some players had already started buying the game card already.

At this point, the game is still growing like crazy (nothing I ever seen before). I am pretty certain this game is going to be a blockbuster.

In the just concluded 1Q earning conference, Sohu said that there won’t be any revenue from TL in the 2Q. Now, it looks like there might be some significant revenues in the 2Q from TL after all.

I am sure it will make short term investors very happy. But is it necessary for Sohu to do this? It is awefully short-sighted of Sohu.

SOHU – TL – Open Beta

My previous post on TL is here:

http://chinese-net-gaming-stock.blogspot.com/2007/05/sohu-tl-game-prediction.html

TL just keeps on surprising me. From the “Final Closed Beta” (which is really the open beta) on 4/4/2007, it started out with 16 servers. It continues on growing and went all the way to a total of 103 servers on 5/8/2007. Most games would have started to peak after few weeks. It is doubly surprising considering that NCTY’s SUN went into open beta on 4/18/2007.

But what is truly surprising happened yesterday. Yesterday (5/9/2007) is the date of the official “Open Beta” for TL. Netease planned to add 10 more servers. But the servers were overwhelmed. Netease eventually added 24 more servers in one day. See the following link:

http://tl.sohu.com/20070509/n249925682.shtml

It is not surprising that a game has big jump in the number of game players for an open beta. But it is surprising that a game has big jump for a second open beta.

As of today, TL has 127 servers. With the maximum capacity of each server at 5200 players, I would conservatively estimate a PCU = 550k.

One thing that bugs me is that Sohu is not advertising its PCU number. Usually, game companies would have broadcast the PCU number to build up the hype.

But I am pretty sure this is a very popular game. There are a lot of players everywhere you go and players were still complaining to being too crowded and asking for new servers.

Maybe Sohu did change to a low-key company. The Sohu of a year ago would have the CEO and other senior management in the news pushing the story. Well, the CEO of Sohu is climbing the high mountains for Sohu's Olympics events. Maybe that has something to do with the low profile.

It is interesting to see if TL will just keep on going up. I do expect that they will add a few servers before this weekend. But the key to see if TL is still growing is if they are still adding servers the next few weeks. Another key point is if they will lose a lot of users after commercial operation (free-to-play games don’t usually lose as much players as Paying games right after commercial operation).

From the game players comments and game developers reaction, there are less and less bugs, and TL doesn’t have a lot of bugs to beginning with. TL is starting to test out the pay-for-item features (by giving players free credits).

Unless there is a big hidden design flaw (which is unlikely), I can’t see this open beta last more than a month.

Sohu – TL – Game Prediction

My previous post on TL can be found here:

http://chinese-net-gaming-stock.blogspot.com/2007/05/sohu-tl-game-progress.html

I had always have the idea that Netease is the best game company in China by far. But it is also a company like Apple. Just like a big fat apple, ready to be picked by a company like a Microsoft.

Netease is a great technology company. But it has so many flaws. The company has a distaste on marketing bordering on psychosis. It would try to save a few millions on marketing so it can spend 200 or 300 millions to buy back its own stocks.

It won’t expand its market share, it won’t buy companies or technology and it can’t do more than one thing at a time.

But how to be successful to be an online gaming in China? Easy, just follow what Netease do.

Kingsoft tried to do that. But Kingsoft has an overbearing CEO who think he knows everything.

I had been following TL for more than 6 months now. Sohu gives TL more than 100 developers and 3 years of time and ample of room for the developers to do their things.

It is also clear that Sohu will keeps on devoting resources to continuing updating TL.

In a nutshell, Sohu is following Netease’s formula to a tee. But Sohu definitely don’t have Netease’s distaste in marketing.

There is a difference in how to be a good paying game vs. free-to-play game. To be a good free-to-play game, you want the players to feel somewhat comfortable, but not too comfortable. It shall be somewhat fun to play for the players so they want to play the game. But it can’t be too much fun unless they pay for the in-game items.

TL seems to have the right balance. It allows for very liberal PK (player kills). There is definitely incentives for players to buy powerful swords, etc. so they can hold their own in PK battles. It allows for players castles. For gangs who want to develop their own castles and gangs, there are many things to buy. It will definitely be costly for the gangs to make their castle invincible.

I am certain that their recent experience in converting Blade Online from a paying game to a free-to-play game helps.

I used to think Sohu’s CEO could be somewhat overbearing. But Sohu, as a company, seems to slowly changing in the last 6 months. It is starting basic research in search. It build a lab (Sogou Lab) to do research on the internet. It is slowly mutating from a basic text-based internet company to a multimedia company. It has a game that will give Sohu a great run in the next 4 to 5 years. Dr. Charles Zhang seems to mutate from a CEO who gets into every details of the company into a CEO who gives out grand strategic vision while his vice-presidents do the day-to-day. Maybe the promotion of Dr. Yu Gong to COO had convert Sohu from a company of short-term profit (a company who would hide spyware in its software) into a company of long term vision.

Everybody seem to be so excited about next year, the year of Olympics. For me, I am more excited about 2009 and beyond when Sohu and Sina will mutate to completely different companies.

That mean there will be a lot of expanse on R&D in the next two years to prepare for the future. But for Sohu, there are the TL and Olympic to absorb the cost.

I guess that is the difference between me and almost everybody else. I see the Olympic and TL as merely the stepping stone for companies like Sohu and Sina to become the dominant multimedia companies of the next few decades.

That will also means they might disappoint the stock market as the margins fall. But they are not spending money out of the weakness, but out of strength. They are not spending money so they can keep their market share.

They are spending money so they can be one of the few dominant multimedia companies. It will allow them to be a dominant multimedia internet company. It would give them tremendous leverage in the 3G mobile phone’s content battle. It allows them into making new shows and TV productions. They could follow Sina and try to be the platform of choice for legal music and video contents (in case China does come down on piracy). They will also continue to invest in search.

For those who keeps on asking me of my prediction of what will the stock price be. I don’t give those out for the simple reason that I don’t really know myself.

I am a fundamental investor and I won’t do options. I try to find as much company information as I can. But I don’t really know how to put all these information into stock price prediction.

But I do know that TL will be a surprised hit.

Sohu – TL – Game Progress

My previous posts on TL can be found here:

http://chinese-net-gaming-stock.blogspot.com/2007/04/sohu-tl-final-closed-beta.html

http://chinese-net-gaming-stock.blogspot.com/2007/04/sohu-tl-game-status.html

http://chinese-net-gaming-stock.blogspot.com/2007/03/sohu-tl-open-beta-soon.html

Also, for much more detailed coverage on TL, the following blog site seems to do a better job than I can: http://intelligentlyinvest.blogspot.com/

Anyway, let me get to the point.

I was going to report on the horrible news on TX2 of Netease. It is not a minor course correction. Adding another phase of open beta usually mean another 1 to 2 months of open beta.

But it is going to be a lot worse than that!

I was going to go through the game progress on all of Netease’s games. But with the Sohu’s latest earning conference call, I will just spend two days on Sohu’s TL.

On 4/4/2007, TL went into the final stages of “closed beta”. But since it allows anybody to play and the player stats would not be erased, it is really an “open beta” except in name only.

On 4/4/2007, Wednesday, it starts out with 15 servers, it adds 16 more servers later on. It has a total of 31 servers.

On 4/5/2007, Thursday, it adds 3 new servers, It has a total of 34 servers.

On 4/6/2007, Friday, it adds 8 new servers. It has a total of 42 servers.

On 4/7/2007, Saturday, it adds 6 new servers. It has a total of 48 servers.

On 4/9/2007, Monday, it adds 4 new servers. It has a total of 52 servers.

On 4/10/2007, Tuesday, it adds 6 new servers. It has a total of 58 servers.

On 4/11/2007, Wednesday, it adds 4 new servers. It has a total of 62 servers.

On 4/12/2007, Thursday, it adds 2 new servers. It has a total of 64 servers.

On 4/13/2007, Friday, it adds 5 new servers. It has a total of 69 servers.

On 4/14/2007, Saturday, it adds 5 new servers. It has a total of 74 servers.

On 4/15/2007, Sunday, it adds 2 new servers. It has a total of 76 servers.

On 4/16/2007, Monday, it adds 3 new servers. It has a total of 79 servers.

On 4/17/2007, Tuesday, it adds 2 new servers. It has a total of 81 servers.

On 4/18/2007, Wednesday, it adds 4 new servers. It has a total of 85 servers.

On 4/20/2007, Friday, it adds 1 new server. It has a total of 86 servers.

On 4/21/2007, Saturday, it adds 2 new servers. It has a total of 88 servers.

On 4/24/2007, Tuesday, it adds 2 new servers. It has a total of 90 servers.

On 4/25/2007, Wednesday, it adds 2 new servers. It has a total of 92 servers.

On 4/27/2007, Friday, it adds 5 new servers. It has a total of 97 servers.

On 4/30/2007, Monday, it adds 4 new servers. It has a total of 101 servers.

On 5/1/2007, Tuesday, it adds 2 new servers. It has a total of 103 servers.

As can be seen, it has even more success than what I expected. (and I was expecting very good success). It hits a little rough spot on 4/18/2007, the date that NCTY’s SUN went into open beta. But it seems to start growing again.

The game is developed by the Firefox branch of the company. It takes about 100 developers 3 years and about 100 million RMB to make.

At this point, the server can hold 5200 players. Therefore, I would estimate that TL had already achieved a PCU of 450k.

Also, it is official now, TL will be a free-to-play game. See the link:

http://tl.sohu.com/20070410/n249329243.shtml

As I mentioned, it spells good things about TL. TL can’t compete with the likes of TX2 or WOW. But as a free-to-play game, it is going to be a very successful game.

A new trailer had come out (right click, save as): http://files.sohu.com/tlbb/tlbb_trailer.avi

From the movie, it is clear that the graphic is nothing to brag about. If TL is successful (and I predict it will), it is another confirmation that game-play features are much more important than eye-candy.

On 5/9/2007, TL will go into open beta. See the following link:

http://tl.sohu.com/20070424/n249651653.shtml

I will talk about why I think TL will be a very success game tomorrow.

Sohu – TL – Final Closed Beta

Sohu’s TL game goes into final closed beta on 4/4/2007. But according to Sohu, anybody can get an account and the account will not be terminated. How is this any different than open beta? Nothing! My guess is that since this is Sohu’s first major internally developed game, they want to be absolutely certain. So if there are anything wrong, they can always pull it back before the “official” open beta.

Anyhow, the response had been overwhelming.

It starts out with 15 servers. All the servers overflows after 5 minutes. It adds 16 more servers (for a total of 31 servers) before the first day is over. After one day, 4/5/2007, it adds 3 more servers (total of 34 servers). On the third date, 4/6/07, it adds 8 more servers (total of 42 servers). So far into the fourth date, 4/7/07, it had added another 6 servers (total of 48 servers). And we are not even into the weekend yet!

Holy cow, only one word can describe this, tremendous success!!!

You would have never heard of this game in wall street. Sohu doesn’t talk about this game in its earning conference. But somehow, Sohu knows how to market its game in China and Chinese players knows a good game when they see one.

From now on, it is all up to Sohu on how it executes. It is still Sohu’s first major internally developed game. She will still hit some potholes. But indeed, the future looks bright.

Finally, I hope this game is free-to-play. If Sohu think this game can compete with the likes of TX2 or WOW, she will be badly mistaken.

If this game is free-to-play, and it will most likely be, it has to be bad news to SNDA and NCTY. It will also be bad news to the upcoming NTES’s two free-to-play games, DT2 and FF2.

Sohu – TL – Game status

Was planning to continue with the Video article, but I think I need to report Sohu’s new game. I will continue with the Video article tomorrow.

TL is going to be Sohu’s flagship game. It could be a dark horse that surprises most people.

It is going into the final stage of external closed beta on April 4th, 2007. It will accept all applications and would not close the account at the end of closed beta. How is this different than open beta?

My guess is they are not absolute certain of the stability of the game and by claiming final closed beta, they could always pull it back.

They are starting to do marketing now. Since Sohu own 17173.com, it already has a very powerful marketing tool. In addition, they are letting the player select who would be TL’s spokesperson. By looking at the choice (all are the most famous movie stars), Sohu is sparing no expense. See link:
http://act.17173.com/2007/03/tl0321/index.php

It is also starting cross promotion with Haier and Intel. It has Haier’s PC, with Intel’s CPU, running Sohu’s TL game. See link:
http://tl.sohu.com/20070330/n249090827.shtml

According to Sohu, Sohu spends 3 years and 100M (RMB) to develop TL. I believe it. Even through the graphics is not that hot, it has many features. It is a game with much playability. See the following link for some major play features:
http://tl.sohu.com/20070402/n249133835.shtml

According to the following link:
http://tl.sohu.com/20070402/n249149248.shtml
It will have 15 servers on 4/4/2007 and will be a free-to-play game.

At this point, Sohu is doing what Ntes is famous for, they take their time and effort to make great games. But Sohu is also much better in marketing.

TL is not going to be a revolutionary type of game. But it is extremely playable and fun. It graphic is not top notch. But it is acceptable and is accessible to even players with weak computer. It will most likely be a free-to-play game. In that genre, it will definitely be a top contender in the free-to-play genre.

At this point, it is too early to tell how successful this game will be. But I don’t think anybody in wallstreet has expected anything out of this game. This game could really give a good upside surprise later in 2007 and 2008. An unexpected 5 to 10 million extra revenue per quarter for a 35M/Q company will definitely surprise the street.