Although China’s domestic mobile games market is set to slow down during this year, NetEase’s (网易) overseas strategy is on its way up boosted by great revenue results in the second quarter of 2017, Caixin reports (in Chinese)
NetEase’s latest earnings report show that the company had a net income of RMB 13.37 billion, an increase of 49.4% compared to the previous year. Online gaming services earned RMB 9.43 billion, compared to last year’s RMB 6.43 billion and RMB 10.73 billion in the previous quarter.
According to the report, mobile games accounted for 72.4% of its net income which signals that NetEase is relying more and more on this product. NetEase’s good results in this quarter can mostly be attributed to the success of mobile game Yin Yang Shi, also known as Onmyoji. The game scored great results in South Korea, Japan, Taiwan, Hong Kong, and New Zealand.
However, NetEase will need more than that to beat its biggest competitor Tencent which earned RMB 22.8 billion from online games in the first quarter of 2017. The company has recently announced its new merger and acquisition plan aiming to spread NetEase’s influence abroad. This represents a change of tactics for the company—NetEase CEO and founder William Ding was known to have a conservative approach to expansion, placing China’s domestic market as his main target.
According to a recent report from Bloomberg, NetEase plans to start global recruitment and is also exploring acquisitions or investments in foreign game studios. The company is hoping that by 2020 overseas transactions will make up 30% of its total revenue.
NetEase has set up R&D departments in Korea and the US and is planning to give priority to markets in North and Southeast Asia which are more suited to NetEase’s products. The company is also exploring possibilities in other markets and has already developed some products which are more suitable for the European and North American markets. In addition, NetEase has been actively looking for good global game products that can be introduced into China.
The foreign expansion can be viewed as a reaction to downward trends within China’s mobile game market. According to a report from NewZoo, China’s mobile game market will grow in 2017 but will slow down in 2018. The domestic market is now entering a more stable phase and overseas growth may be a way for NetEase to maintain high growth in the game business.