News and Research on NetEase.com, Inc. (NTES)
Business Description
NetEase.com, Inc., an Internet technology company, provides Chinese language content and services through its online games, Internet portal and wireless value-added services businesses in China.
Services
ONLINE GAMES SERVICES
The company's online games business focuses on offering massively multi-player online games, more specifically role-playing games, to the Chinese market. These MMORPGs, as they are commonly known, are played through the Internet in ‘virtual worlds’ that exist on networked game servers to which players simultaneously connect and interact. The company develops and operates MMORPGs that are targeted at or localized to the Chinese market, and it strives to provide the quality game playing experience to its users.
The company works with various distributors to distribute its point cards to gamers across China. Point card distribution channels include wholesalers, Internet cafes, software stores, supermarkets, bookstores and newspaper stands, as well as convenience stores mainly in Guangzhou Province, Shanghai and Beijing.
The company has also developed an online casual game platform with various multi-player games.
Massively Multi-player Online Role-Playing Games (MMORPG)
The company offers MMORPG, Westward Journey Online, Westward Journey Online II, PristonTale, and Fantasy Westward Journey. The company licensed a Korean developed 3D MMORPG, named Fly For Fun. In addition, the company launched its 2.5D game, Datang, in 2006 and is developing a new 3D game, Tianxia, as well as a version of Westward Journey Online II. The company is in the process of altering and adding more features to Datang and its version of Tianxia (Tianxia II) in response to player feedback.
Casual Games
The company launched an online casual game platform which has various multi-player games such as billiards, card games and mahjong. Casual games are easier to play than MMORPGs and can be played to a conclusion within a short period of time. The basic versions of such games are available free-of-charge, and it sells virtual game enhancements, such as options for changing the appearance of the game-play or tools, which players can use in the game, utilizing its prepaid point system. During 2006, the company launched Phase II of its casual games, and as of December 31, 2006, the company had 22 online casual games. The company is developing a set of casual games.
INTERNET PORTAL
The company's Internet portal business, which is conducted through the NetEase Web sites, offers Chinese Internet users a network of Chinese language-based online content channels, community and communication services, including e-mail, personal homepages, Web hosting and instant messaging, and commerce services. The company also offers other Web-based applications and services, including a text Chinese language search engine and a Web directory. Its Internet services are all designed with user interfaces.
The NetEase Web sites provide Internet users with Chinese language online services centered around three service categories—content, community and communication. Its various content appeals to an audience group spanning all age groups.
Content
The NetEase content channels provide news, information and online entertainment to the Chinese public. The Web sites consolidate and distributes content from international and domestic content providers. Content is distributed through various channels, including channels focusing on news, entertainment, sports, finance, information technology and automobiles.
The main homepage of the NetEase websites, www.163.com, provides a destination for Chinese Internet users to identify and access resources, services, content and information on the Internet. The NetEase Web sites aggregate, organize and deliver information to meet the needs of Internet users in China. The company's media channels provide users with an easy way to explore and utilize a wealth of information and content organized around various topics.
The NetEase Web sites include various channels focusing on news, entertainment, sports, finance, information technology and automobiles.
The company's content distribution platform enables the NetEase Web sites to offer in-depth local content as well as a variety of locally relevant regional and international content. The company's content partners display their content on one or more of the NetEase Web sites and media channels. The company distributes this content through its content distribution system to Guangzhou NetEase, which determines the appropriate content to publish on the NetEase Web sites and to distribute to users of its wireless value-added services. The company's content alliances are non-exclusive.
Community and Communication
The NetEase Web sites provide various free and fee-based community and communication services, including e-mail, blogging, instant messaging, matchmaking, alumni directories, clubs, e-cards, chat rooms and community forums.
NetEase users can interact through various community services. They include:
E-mail: The company provides registered users with free and fee-based premium Web-based e-mail services which support both the Chinese and English languages. Registered users can access and send e-mail through their Web browsers or through the POP3 and SMTP standards, which allow users to handle e-mails on their own e-mail applications without opening their browsers. The free Web-based e-mail service also includes free SPAM filters and anti-virus protection as well as the convenience of an address book to maintain user contact lists online. As of December 31, 2006, the company had approximately 195 million registered free email users. The company also offers value-added e-mail services for individuals, known as VIP, which provide fee-paying subscribers with the latest anti-virus and anti-spam filtering capabilities. The VIP e-mail service also includes enhanced security features as well as various convenient online and offline payment methods. As of December 31, 2006, the company had approximately 196,000 active VIP e-mail subscribers.
Online Community Forums: The company offers NetEase registered community members various community forums where they can post messages and articles for viewing by other registered community members and other users. The NetEase online communities are hosted by volunteers, who are chosen by the company based on their contributions to the communities. The NetEase community volunteers monitor its community forums and select appropriate articles for posting. In addition, these forums are also monitored by NetEase customer service personnel.
Instant Messaging: The company offers NetEase registered users a communications platform to notify their online friends and other users with similar interests when they are online and to send and receive text messages seen by both parties, allowing NetEase registered users to participate in real-time dialogues. Users can access this service by downloading free software from the NetEase websites. During December 2006, the company had approximately 175,000 peak concurrent users of its instant messaging service.
Matchmaking and Others: The company offers a number of other community services, including online matchmaking services, a dating center, online greeting cards, chat rooms, alumni directories, photo album sharing, diary and blogging. Its online matchmaking service had approximately 9.4 million accumulated registered accounts and approximately 58,500 subscribers as of December 31, 2006.
Other
The NetEase Web sites provide other services to its users, including a Web sites directory, web pages search service and classified advertisements. The company also hosts online yellow pages and classified advertisement services. The company is developing its own proprietary Internet search engine.
Advertising Services
The company's online advertising offerings include banner advertising, channel sponsorships, direct e-mail, interactive media-rich sites, sponsored special events, games, contests and other activities.
WIRELESS VALUE-ADDED SERVICES
The company offers various wireless value-added services (WVAS) which allow users to receive news and other information, such as stock quotes and e-mails, download ringtones and logos for their mobile phones and participate in matchmaking communities and interactive games.
The company's primary wireless value-added offering is short messaging services (SMS), which allows mobile phone users to, among other things, send and receive text messages from the Internet. The company offers various SMS services in the form of individual messages and subscription packages which allow users to receive news and information such as daily news and e-mails, download ringtones and logos for their mobile phones and participate in matchmaking communities and interactive games.
The company also offers wireless application protocol (WAP), services, which provide a browser-based platform to access and use wireless value-added services, and multimedia messaging services (MMS), which provide content-rich mobile messages. Both WAP and MMS services are available to mobile users with phones that are compatible with the 2.5G mobile networks in China. The company also offers interactive voice response services (IVRS). IVRS allows users to access pre-recorded information from their mobile phones or interact with other users through voice chat by dialing specially designated IVRS phone numbers and responding to menu options. Its users can also order color ring-back tones, which enable users to customize the ringtone a caller hears. These ringtones can include voice recordings as well as pre-recorded music.
Sales and Marketing
The company sells game playing time to users of its MMORPGs in the form of prepaid point cards. The company sells prepaid point cards to end users through approximately 1,200 distributors as of December 31, 2006.
Subsidiaries
The company conducts its business in China through its subsidiaries, NetEase Beijing, NetEase Shanghai (until it was dissolved in February 2006), Boguan, NetEase Yodao and NetEase Interactive (and NetEase Interactive’s wholly owned subsidiaries Guangzhou Interactive and NetEase Hangzhou).
Competitors
The company's competitors include Shanda Interactive Entertainment Limited, The 9 Limited, Sina Corporation, Sohu.com, Inc., Tom Online, Inc., 263.net, Linktone, Ltd., Tencent, Chinadotcom Corporation, Baidu, and 21cn.com.
The company faces competition from other Web sites that offers online content and online community services, including Sina, Sohu, Tom.com, Tencent, 263.net, Baidu and 21cn.com. The company is also encountering competition from companies offering MMORPGs and casual games that target the China market, such as Shanda, Softworld, Softstar Entertainment, Inc., Actoz Soft Co., Ltd., NCsoft Corporation, The9, 9you, Kingsoft Corp. and Waei International Digital Entertainment Co., Ltd.
The company's competitors in the Internet portals include Sina and Sohu, and service providers, such as Linktone, MTone Wireless Corporation and Newpalm Information Technology Co., Ltd. (a subsidiary of Chinadotcom).
The company's online advertising competitors include Baidu, Tencent and other vertical Internet portals. In addition, the company faces competition from US-based portals, such as Yahoo!, Yahoo! Chinese and MSN. In the Chinese Internet market, the company's competitors include Yahoo!, Google and Microsoft.
History
NetEase.com, Inc. was founded in 1997.
