NetEase game to expand

BEIJING • Chances are, few outside of China have heard of Internet technology company NetEase, though it makes more money from games than Nintendo. 

Now, it wants recognition, but first, it will have to learn what makes Western gamers tick.

It is on a global hiring campaign and exploring acquisitions or investments in foreign studios so it can earn 30 per cent of revenue from overseas by 2020, said Mr Ethan Wang, vice-president of NetEase Games.

The goal is to sustain the outsized growth that swelled its market value eight-fold since 2012 to about US$40 billion (S$54.4 billion).

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The move will also create another defensive platform to survive a saturated home market fought over with Tencent Holdings.

"Whenever we demonstrate our titles (such as Westward Journey) worldwide, people can see our self-made titles have very high production values," Mr Wang said.

"But we are not familiar with the rhythm of overseas users, their ways of playing games."

Still, the Hangzhou-based company - which remains best-known for bringing titles such as Overwatch and Starcraft to Chinese players - is aiming to punch the right buttons to knock out gaming enthusiasts.

NetEase is bent on making it in the US while Tencent itself prepares to quicken its overseas operations by taking its biggest hit, Honour Of Kings, to Americans.

Tencent has already spent billions acquiring Supercell Oy and Riot Games, picking up super-franchises Clash Of Clans and League Of Legends. NetEase is now mulling over its own list of potential targets, Mr Wang said.

Of the 100 biggest cash-making games on Apple's iOS system in China during the first half of the year, 27 were Tencent's while just 10 were released by NetEase, noted research group App Annie.

That is why NetEase has been tentatively pushing abroad since 2014.

While it became adept at producing viral hits in China, it is still learning the nuances in key markets like the US.

Mr Wang describes Clash Of Clans as a title where players "spend money to buy time".

In contrast, the domestic gaming market is dominated by free-to- play models that allow extensive sessions for customers, who then spend money on items such as weapons or outfits.

NetEase has more than 100 mobile titles either released or in development, with most aimed at Chinese users. 

Research firm NewZoo said few of NetEase's titles have managed to chart overseas, and those that did owed much to overseas Chinese gamers or culturally similar markets such as Taiwan.

One way to get up to speed quickly is by hiring, Mr Wang said. NetEase has around 70 staff in the US alone, but more are on the way.

"Our hiring depends on the projects. But, really, our overseas job listings are totally open. If we spot good talent, we'll take them all," he added.

 The ultimate goal is to boost revenue from abroad. "We hope that, by 2020, if we're talking about three years' time, that ideally 30 per cent will come from overseas."

The company's engagement with foreign customers is starting to pay dividends.

Onmyoji - where players collect decks of cards to battle rivals with swords and spells - briefly topped download charts in Japan and South Korea and is now getting translated into English.

Another reason NetEase is looking to pick up the pace is that, apart from Tencent, smaller rivals are beginning to take steps abroad.

Cheetah Mobile, FunPlus, Elex Wireless and Doodle Mobile are among home-grown peers whose titles regularly appear in top 10 charts.

"NetEase is more conservative in acquisitions," said Ms Marie Sun, a Morningstar Investment Service analyst. "Compared with Tencent, the growth of NetEase's online games business was mainly through organic growth."

NetEase, however, is revising its play book and has been researching potential merger and acquisition targets.

"When it comes to it, there's frankly no clear guidance of 'you can only spend X amount to buy a company,'" Mr Wang said of the "game on" directive from the top bosses.

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A version of this article appeared in the print edition of The Straits Times on August 08, 2017, with the headline 'NetEase game to expand'. Print Edition | Subscribe