Sales 2023: RMB 103.500 billion (€ 13.512 billion)

Overview

The Chinese tech group NetEase was founded in 1997 by Ding Lei, who still heads the company. NetEase develops and operates online games, a music streaming platform, e-commerce and e-mail services. The online role-playing game released in December 2001 Fantasy Westward Journey became one of the most lucrative video games of all time, with revenues of 6.5 billion US dollars (as of 2019).

General Information

Headquarters:No. 599 Wangshang Road
Binjiang District
Hangzhou, 310052
China
Telephone: 0086 571 89852070
Internet: ir.netease.com

Branches of trade: Internet games, e-commerce, music streaming, online education Legal form: corporation
Financial year: 01.01 – 31.12
Founding year: 1997

Basic economic data (in million RMB)

	2023	2022	2021	2020	2019	2018
Revenue	103.000	95.496	87.606	73.667	59.241	51.178
profit after taxes	n/a	19.843	16.976	12.330	21.431	6.477
Stock price (year end)	91.19	72,63	101,78	95,77	64,93	45,95
Employees	n/a	31.119	32.064	28.239	20.979	22.726

Executives and Directors

Management:

• William Lei Ding, CEO
• Charles Zhaoxuan Yang, CFO

 Supervisory Board:

• William Lei Ding, Director and CEO
• Alice Cheng, independent director
• Grace Hui Tang, independent director
• Joseph Tong, independent director
• Michael Leung, independent director

History

In June 1997, telephone technician Ding Lei, then 26 years old, founded NetEase with three employees, initially as an Internet search engine and free email provider. Although Lei was able to convince Baring Private Equity Partners to invest five million dollars, and the NASDAQ IPO in 2000 brought in around 70 million, the young company nevertheless ran into turmoil after accounting fraud and was briefly delisted from the stock exchange in September 2001.

In March 2000, as we remember, the dotcom bubble burst in the USA (and Europe), but the shares of Chinese Internet companies continued to rise, with NetEase being the most successful NASDAQ share in 2002 (plus 81 percent). It was clear that the tech rally in China would be more sustainable, not only because of the 1.3 billion potential users. It was also because the Chinese business model did not rely solely on advertising revenue. In China, every short message and every traffic subject to a fee.

Ding Lei soon became one of the richest Chinese. The most important reason and smartest move: entering the online gaming business, especially with the fantasy Westward Journey, a so-called MMORPG ("massive multiplayer online role-playing game"), which the company has been developing since 2001. In 2005, the game had 25 million users. NetEase also developed various e-commerce platforms such as Koala and Yanxuan, released in January 2015 and April 2016 respectively. At the end of 2018, the music streaming service "Cloud Music" was founded with other investors (with NetEase as the majority shareholder).

management

NetEase founder and CEO William Lei Ding, born in 1971 in the eastern coastal city of Ningbo, has had a textbook "rags to riches" career, from telecom engineer to the eighth richest Chinese. After studying at the Chengdu Institute of Radio Engineering (now the University of Electronic Science and Technology of China), obtaining a bachelor's degree and a job at the software company Sybase in Guangzhou, he was briefly the richest man on the Chinese mainland and one of the People's Republic's first dollar billionaires just six years after the company was founded. In mid-June 2022, according to Forbes, he was ranked 39th among the richest people in the world with a fortune of 31.5 billion US dollars. 

As a hobby, but still professionally and as a kind of counter-model to the current tech business, Ding runs a pig farm. He breeds the black Jeju pigs, known for their excellent meat taste, using modern, environmentally friendly and sustainable methods. As an animal lover or to ease the corporate conscience, but hardly for profit reasons.

Business Units

NetEase is one of the leading Chinese first-generation tech companies, alongside Tencent (ranked fourth in the IfM ranking), Sina Corporation (ranked 95th in the IfM ranking), which operates the microblogging service or “Chinese Twitter” Weibo, and Sohu.com (Beijing). 

Active in the following business areas:

As an Internet service provider with more than a billion registered email customers and as a provider of various streaming platforms, such as NetEase CC (live streaming of games and entertainment) and NetEase Cloud Music (music streaming, including through a licensing deal with Sony Music). The Bertelsmann fund "Asia Investments" also participated in a financing round of the music platform at the end of 2018 with over 600 million dollars. In the news business, NetEase is mainly active with the "News App" (network of Chinese-language news channels) and associated communities. It also operates online retail (Yanxuan), online education services (NetEase Youdao) and the cloud reader service "NetEase EaseRead".

But NetEase makes the most revenue from online gaming (as a domestic competitor to market leader Tencent). With some of the most popular PC client and mobile games in China, some developed in-house, some in collaboration with Blizzard Entertainment, the Microsoft subsidiary Mojang AB and other global game developers. The best-known titles are Fantasy Westward Journey Online and New Westward Journey Online II, or Tianxia III, New Ghost and Justice. With Blizzard Entertainment, Inc., NetEase distributes successful international online games on the Chinese market, including World of Warcraft, StarCraft II and Diablo III: Reaper of Souls.

Current developments

Even a global tech company like NetEase, with billions in renminbi sales, is subject to Communist Party regulation. New games must first be officially approved; online content from video streams to games is being increasingly monitored under President Xi Jinping to ensure that it complies with the CCP's value standards. Or as Guo Yiqiang, head of the publishing bureau of the CCP's propaganda department, put it at China's largest games fair "Chinajoy" in 2019, the year of the People's Republic's 70th birthday: Games publishers "must seriously consider the social impact... and always steer in the right direction in terms of politics, values, content and quality, and never provide platforms and channels for false views and bad taste." 

NetEase therefore strives to incorporate "socialist values" and "patriotic themes" into its titles, for example when you fight alongside monsters from Chinese myths in the adventure game "Ink, Mountains and Mystery". CEO William Ding is generally not worried: "We fully understand and support the government's intention... China is the fastest growing and now also the largest games market in the world. Of course, problems arise there. For example, the undesirable effects of inappropriate content." 

Germany's former international player Mesut Özil, for example, was able to experience what such "inappropriate content" looks like. After he made critical comments about the situation of the ethnic Uighur minority in China at the end of 2019, his virtual character was promptly deleted from the Chinese version of the football simulation "Pro Evolution Soccer" published by NetEase. According to the Chinese Foreign Ministry, Özil had fallen for "fake news" when making his comment. NetEase justified this with Özil's "extreme statements about China".