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Netease Shifts Focus to Paid Wireless Services
The NASDAQ-listed Chinese Internet portal Netease.com vowed to make major changes in its business model and management after incidents of incorrect reporting of financial revenues and the aborted merger with the Hong Kong-based i-Cable Communications Ltd.
"We will not rely on advertising for revenues due to the depression of the market in China and the fierce competition with Sina.com and Sohu.com for the pie,'' said founder and acting CEO William Ding in an interview.
Paid wireless services and online entertainment will become two other major sources of revenues.
According to Ding, the two categories will account for about two-fifths of Netease's revenues by the end of this year.
The main products of paid wireless services include short messaging service (SMS) and an online stock transactions system through co-operation with Fayhoo.com, an online stock services provider.
The company has already acquired more than 700,000 registered users of SMS and 200,000 messages are sent through Netease's system every day, which is believed to greatly increase the company's revenues.
Meanwhile, online gaming has become a key revenue channel for Netease, with the business earning more than 200,000 yuan (US$24,000) every month with its online game-Stone Age.
"That is only one-fifteenth of the total market share of the game and we have already broken even on that project,'' said William Ding.
"The possibility for Netease to take the total market (US$375,000 per month) is not too unrealistic,'' he added.
The company, faced with the resignations of senior executives, including the CEO and chief operating officer on June 12, will look for new executives next week, and local Chinese are the ideal candidates.
"They must have sufficient knowledge of the Internet industry in China and be able to share the vision of Netease,'' he pointed out.
He also revealed that the investigation into suspicious financial operations last year, which involved about US$3 million, would end next quarter, and reports that Netease could face a group law suit from its investors will depend on the result of the investigation.
Ding also pointed out that in the long run, his company would still seek to merge or co-operate with international companies to sharpen its competitive edge.
Netease's decision to solve its internal problems and improve its performance on the NASDAQ market indicate that the company is moving in the right direction, although problems still exist.
"Chinese portals must find out where their strength lies. And for Netease, how to take advantage of its reputation among Internet users is very important,'' said Wang Ran, a local Internet strategy analyst.
"Since many problems with Chinese portals were exposed recently, their chances of merging with international buyers will become quite slim, so they must solve the problems and make their development healthy enough to attract overseas investors,'' said a Beijing-based IT analyst.
However, some experts are still doubtful if Netease's new moves will solve the present conditions.
"To get more than 40 per cent revenues from channels other than advertising will be a sudden change for the Chinese Web business, which has relied on advertising heavily,'' said the IT analyst.
"If paid services and online gaming can play Netease's advantages to the fullest is still not clear, as most of the players in the sector are doing similar things,'' he added.
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