BDA-网易深度研究与游戏业务系统诊断-20151015

BDAReportonNetEase

EarningsGrowthBeatConsensusForQuarters

Long-TermGrowthLessAttractive2015/10/15ForTigerGlobalOnly©BDA20152TableofContentsExecutiveSummaryStrongOnlineGamingMomentumDrivenByMobileGamingKaolaGrowthDrivenByLow-priceAndExpectedLossForYearsOnlineAdsLong-termSlowingDownMediocreOtherBusinessFinancialForecastonNetEaseExecutiveSummary3MobileGamesShortterm(3Q15-4Q16):RobustnetrevenueincreasemainlythankstothehighgrossbillingsofFWJ(梦幻西游)andWJO(大话西游);Grossmarginremainsover55%duetothelower-than-industry-averageAndroidchannelsharingproportionLongterm(2017-2023):Sluggishrevenuegrowthin2017-2020duetothehighbaseandpost-FWJ&WJOeffect;~12%annualrevenuegrowthafterwards,inlinewithmarketgrowth;GrossmarginslightlydecreasesClient-basedGamesNetrevenuewillseeaslightdeclineeveryyearsince2016duetomarketmaturityandmobilecannibalization;GrossmargingraduallygoesupasrevenuecontributionoflicensedgamesdecreasesCross-border

E-commerceNetrevenueisrampingupquicklyandexpectedtodoublein2016drivenbythelow-pricestrategyandstrongmarketdemand,butwillgrowatamoremoderatepaceafterwards.NocoredifferentiationscomparedwithcompetitorsGrossmarginis0%andOPmarginis-15%fornow.Hardtomakeprofituntil2020.AdvertisementDouble-digitnetrevenuegrowthin2015and2016thankstomobileads.Butgrowthisexpectedtoslowdowninthelongrun.

FinancialForecastNetRevenue:YoYgrowthisestimatedtobetriple-digitfrom3Q15to1Q16,and69%for2Q16;growthratewillsharplydeclineto21%and9%in3Q16and4Q16respectively,andremainaround10%forthefollowingyearsNetProfit:YoYgrowthisestimatedtobe~100%from3Q15to1Q16,and77%for2Q16;Howeverthegrowthratewillfallto14%in3Q16andbelowzeroin4Q16;From2016to2023,theCAGRofnetprofitisestimatedtobeonly4%Note:Forthewholereport,1USD=7.3RMB4TableofContentsExecutiveSummaryStrongOnlineGamingMomentumDrivenByMobileGamingMobileGaming:RobustInShort-Term;Low-teensLong-termCAGRKaolaGrowthDrivenByLow-priceAndExpectedLossForYearsOnlineAdsLong-termSlowingDownMediocreOtherBusinessFinancialForecastonNetEase5Chinamobilegamemarketwentthroughagrowthspurtin2013and2014,andweestimatethemarketwillgrowintoaUSD18BNmarketby2023…Source：GPC,IDC,CNG,Analysys,BDAforecastUnit：USDBNYoY327%42%87%91%247%145%53%24%18%17%16%14%13%12%11%As%ofGameMarket11%3%3%4%7%17%31%40%45%50%55%59%63%67%71%74%CAGR:153%CAGR:

19%2023F18.32022F16.52021F14.72020F13.02019F11.32018F9.82017F8.42016F7.22015F5.820143.820131.520120.420110.220100.120090.120080.0ChinaMobileGameMarketSize,2008–2023FNote：1.MobileandPCgamemarket

excludingwebgamemarket;Weestimatethemarket

willgrowintoaUSD25BNmarketby2023…andthegrowthismainlydrivenbyariseinannualARPUofactivegamers+19%23F1822F1721F1520F1319F1118F1017F816F715F6144Unit：USDBNChinaMobileGameMarketSize+7%23F22F21F20F19F18F17F16F15F14Unit:MNActiveGamerBase+12%23F22F21F20F19F18F17F16F15F14Unit:USDAnnualARPUPerActiveGamer+5%Unit:MNMobileInternetUserMobileGameras%ofMobileInternetUser17F23F22F21F20F19F18F16F15F14ActiveGameras%ofGamerBase×××Source:GPC,IDC,CNG,Analysys,BDAinterviewandanalysis6FWJMobilewasreleasedinMarch2015asamobilecopyofNetEase’smostsuccessfulclient-basedgame,FantasyWestwardJourney;FWJMobilefeatureslessintensecombat…7BasicInformationName:FantasyWestwardJourneyMobile(梦幻西游手游)Gamesize:327MB(latestversion)Launchdate:IOSversionwaslaunchedonMarch26,2015;fullreleaseonMarch30Gametype:MMORPGRevenuemodel:item-basedrevenuemodelIPValue:FWJisconsideredasoneofthemostsuccessfulIPingamingindustry,givenitsPCversionhasproventobeoneofthemostlastingclient-basedgameswithover10yearsofhistoryGameContentIntroductionFWJMobileinheritsandcustomizesthemajorityofcontentsfromthePCversiontofitmobiledeviceusers’demand;thecontentsofFWJmobilecompriseofthreemainparts:PVEPVPCultivationKeyFeatures(1/2)Playerscompletearangeofgamequeststoearnrewardsandenhancecharacters’ability;itconsumeslesstimeandmoneyPlayerscompetewitheachotherinPKmatchesorotheractivities,whichencouragesplayerstodevoteextratimeandcashinadditiontovirtualmoneyRound-basedbattlemodel:lessintenseandmoresuitableformobilegamingRound-basedbattlemodel:

bothFWJPC(梦幻西游端游)andFWJmobileapplyround-basedbattlemodelwhichgives30secsforplayerstosetcombatcommandspriortoeachround;incomparisontoinstant-battle,theround-basedmodelislessintenseSimplifiedcontrol:playerscangivecombatorderbysimplyclickingbuttonslistedontherightsideandthebottomAutocombat:itrelievesplayersfromordinaryandrepeatbattlesbyallowingcharacterstoactbasedonpre-setcommandsSource:BDAresearchandanalysisPlayerscanfocusoncultivationinsteadofbattling:petsandhomesystemsdemandplayerstospendtimeandmoneyonpetkeepingandhousedecoration…richgamecontents,andpowerfulsocialfunctionwell-suitedformobiledevices8GameFeatures(2/2)PowerfulsocialfunctionRichgamecontentsNumerousquestsandactivities:FWJMobile(梦幻西游手游)offersawiderangeofroutinequestsandactivitiesatdifferentlevelofdifficulty.Playermaychooseparticipatingdifferenttasksbasedontheiravailability;besides,FWJMobilemayorganizespecialeventsduringeachholidayVariedRewardsforparticipants:uponcompletionofeachquestoractivity,aplayerwillearndifferentrewardsrangingfromimportantgameitemstovirtualgolds,whichinreturnencourageplayerstotryoutdifferentgamecontentsTextandvoiceinput:inadditiontokeyboardinputs,FWJMobilealsoprovidesavoiceinputssystemthatcantransformaudiorecordingintotexts;playerscanalsosendemoticonswithFWJthemeMultiplechatchannels:FWJMobileplayersareabletointeractwitheachotherviadifferentchannelsfordifferentpurposes;forexample,worldchannelisusuallyusedforpublicactivitieslikeunionrecruitmentandsalesofitems,whereastheteamchannelisappliedundermoreprivatescenariosuchaschattingwithfriendsandteammatesSource:BDAresearchandanalysisThemonthlygrossbillingsofFWJMobile

notonlysetsanewrecordofChinamobilegamemarket,butalsoisfaraheadofothergames…9NO.5NO.4NO.3NO.2NO.116-26119126141133N/AN/AN/AN/AN/AN/AN/AN/AMonthlyGrossBillingsofiOSRankingtop5Games

fromApr-15toAug-151Note：1.ThegrossbillingsdataareavailableifthegamebelongstoNetEaseorTencent;GrossbillingsincludebillingsfrombothAndroidandiOS.MonthlyGrossBillings1

ofiOSRankingNO.1Gamesinhistory07/1506/1508/1502/1503/1413301/1414102/1412604/1411904/1505/1501/1506/1411/1405/1412/1410/1403/1508/1407/1409/14Unit：USDMNSource:BDAresearchandanalysisAprMayJunJulAugUnit：USDMN…becauseFWJMobileoutperformsothersinpopularityofIP,gamequality,andplayers’payingwillingness10BDACommentBasicInformationGameDeveloperNetEaseTencentLilithgameSohuChangyouTencent,NetEaseandChangyouaretop3clientgamedevelopersinChina,whileLilithgameisastartupcompanyWechatDashisalightgame,whiletheothersareheavygamesGameTypeMMORPGLeisureParkourAction

CardMMORPGPeakMonthlyGrossBillingsUSD

141MNUSD

41MNUSD

40MNUSD

30MNPeakMAU50MN>100MN8.7MN~10MNStrongIPAndChannelRecommendationIP(IntelligenceProperty)FWJPCisthetopgameIP,withalargergamerbasethanTLBBChannelTraffic/AppStoreRecommendationWechatDashhaslargetrafficfromWechat&QQ;FWJandAllstarHeroeswererecommendedbyiosappstoreGoodQualitytoRetainGamersGameplayDesign/GameContentUnlikeTLBBPCversion,TLBB3Dispooringamedesign;FWJhasthemostabundantgamecontentSocialSticknessFWJhasthebesteversocialfeaturesonbothPCandmobileversionsGamers’HighWillingnesstoPayGamers’PayingHabitMostofFWJandTLBBmobilegamersusedtopayforthecorrespondingPCversiongamesGameDesignFWJisbestinvirtualeconomicsystem,socialhierarchy,etc.SocialFeaturesThatEnablePayingGamerSelf-fulfillingPaidFWJgamescangainself-fulfillmentbygettinghigherranking,prettierdecorationandbetterfightingcapacitythanothers.FWJMobile梦幻西游WeChatDash天天酷跑AllstarHeroes刀塔传奇TLBB3D天龙八部3DSource:Companyinfo,AppAnnie,BDAresearchandanalysisComparisonofFWJandOtherHitMobileGamesBenefitingfromFWJPC’slargeuserbase,FWJMobilewasabletoboosttrafficrapidlybyconvertingchurnedandactiveplayersofthePCversion1120-30%ActiveFWJPCplayersChurnedFWJPCplayers40-50%30-40%NewFWJplayersDemographicPatternofFWJMobilePlayersFWJPChasownedover70millionusers;benefitingfromthelargeuserbaseatPCend,FWJMobilecanacquiretrafficrapidlybyconvertingchurnedandactivePCplayersintomobileplayers“FWJPCversionhasaccumulativelyrecordedmorethan300millionregisteredaccountssinceitslaunch10yearsago;ingeneral,eachplayerhasfourgameaccounts,bywhichFWJPCshouldhaveownedmorethan70millionusersbyfar.”--IndustryexpertBreakdownofFWJMobilePlayersChurnedFWJPCplayers:FWJMobileattractsalargenumberofchurnedFWJPCplayerswithitsstrongnostalgiainfluence

ActiveFWJPCplayers:theactivePCplayerstryoutthemobileversioneithertoseeknewgamingexperienceonadifferentterminalorbettermanagesparetimeNewFWJplayers:unlikethechurnedoractiveFWJPCplayers,mostnewplayersareattractedbychannelpromotionorfriendsrecommendation“FWJPCistheveryfirstPCgameinmylifesoitreallymeansalottome.IhadspentacoupleofyearsplayingthisgamebeforeIgottoobusyinschooltocontinue…IplayFWJMobilebecauseIwishtorecalltheoldtimeofplayingFWJPC.”--FWJMobileplayer“FWJMobileissimilartothePCversionbutalsohassomenewfunctioncustomizedformobiledevices.RightnowIstillspendthemajorityoftimeplayingFWJPC,butinfragmenttimeoroutdoorscenarioIwouldplayFWJMobile.”--FWJMobileplayer“IdownloadedFWJMobilebecausemyfriendrecommendedthisgametome…Iwasalsoimpressedbythegamerankingonappstore.”--industryexpertSource:BDAresearch,IDI,andanalysisMotivationofPlayingFWJMobileIPPopularityGoodqualityalsoencouragesplayerstospendlongertimeandmoremoneyinthegame;themajorityofplayersfeelsatisfiedwithFWJMobile’sgameplayfeaturesandcontents1212%25%326%440%526%Q:HowdoyourateFWJMobile(梦幻西游)’sgameplayfeatures1?(5isthebestrating,and1istheworst)Q:HowdoyourateFWJMobile’sgamecontents1?(5isthebestrating,and1istheworst)23%511%125%444%317%N=42N=36MostplayersratehighlyatFWJMobile’sgraphicsandcontrol,butafewintervieweescommentthatFWJMobilefailstomatchitsPCcounterpartNote1:BDAevaluatesgameplayfeaturesmainlyfromtherespectsofgraphicsandcontrols;gamescontentsareratedintermsofquantityofcontentsandconsistencywithPCversion.FWJMobile’scontentshaveimpressedmostplayerswithhighdensityandconsistencywiththePCversion;somefeltboredatthereplicatedcontent“FWJMobile’sgraphicoutperformsmostmobilegamesIhaveeverplayed;thegamecontrolisalsoveryfriendlytomobileplayers;theautomaticnavigationandbattlefunctionsavemealotoftime.”--FWJMobileplayers“ThetextureandgraphicsofFWJMobilelookevenbetterthanthoseonthePCversion.Thegamecontrolhasalsobeentailoredtofitmobiledevices.”--FWJMobileplayers“AsanoldFWJPCplayer,IamgladtoseeFWJMobilehasinheritedthePCversion’scontentsandkeptmostofthemintact.Otherwise,FWJMobilewouldseemverystrangetome.”--FWJMobileplayers“FWJMobilehasmuchmorecontentsthananyothermobilegameIplayedbefore.Itmaytakeyouseveralhourstocompletealltheroutinetasks,nottomentiontheotherfunpartsofthisgame.”--FWJMobileplayersSource:BDAIDIandanalysisGameQuality(1/2)FWJMobile’ssocialfunctionalsoearnsoverallpositiveremarks,whereascommentsonitschargingmodelconveyarelativelymixedmessage13Q:HowdoyourateFWJMobile(梦幻西游)’ssocialfunction?

(5isthebestrating,and1istheworst)7%1217%320%446%510%N=418%1217%329%433%513%Q:HowdoyourateFWJMobile’sChargingmodel?

(5isthebestrating,and1istheworst)N=19FWJMobile’stextandvoiceinputfunctiongainsoverallpositivefeedback,butit’salsosaidthatFWJMobileplayersinteractlessfrequentlythanPCplayers“Textingonmobiledeviceislesshandy,butFWJMobilealsosupportsvoiceinputandconversionfromaudiorecordintotexts.Thisfunctionmakecommunicationmucheasier.”--FWJMobileplayers“FWJMobileplayersinteractlessfrequentlythantheydoonPC.It’sprobablybecausemostpeopleusefragmenttimetoplaythisgameandthushaslessincentivesortimetosocializewithotherplayers.”--FWJMobileplayersCommentsonFWJMobile’schargingmodelsendarelativelymixedmessage；ingeneral,PVPandcultivationplayersmayfinditmorecost-consumingNote1:BDAasksrespondentstoevaluatethesocialfunctionintermsofinputsystemandinteractionbetweenplayers;thechargingmodelisreviewedmainlyintherespectofitemprice“Ihavespentsomemoneypurchasingitems,andthepricesarereasonable.Idon’tmindpayingmoreaslongasthegamekeepofferingnewitems.”--FWJMobileplayers“Youhavetospendalotupgradingthecharacter’sskillsandequipmentifyouwanttooutstandinPKmatch…housedecorationisanothercost-consumingpartofthisgame.”--FWJMobileplayersSource:BDAIDIandanalysisGameQuality(2/2)FWJMobileisasheavyasaPCgameandplayershavehigherwillingnesstopaythanothersuccessfulmobilegames’14Gameplayers

GameContentSocializationGoodpayinghabit:Over70%FWJMobile

playersalsoplayorusedtoplayFWJPC(梦幻西游端游)andarehabituatedtopayforgamebyFWJPC’stime-basedchargemodelSense

ofidentity:

FWJPCplayershavedevelopedstrongfeelingofidentity,forthePCversionhasover10yearsofhistoryLightgamewithlowerARPPU:SomelightgamessuchasWechatDash(天天酷跑)havemanyplayers,butmostarenotaccustomedtopayingIPinfluencefadesquicklyLiteratureIPgameslikeHuaqiangu(花千骨)caneasilyattractplayers,buttheIPinfluencefadesquickly“FWJPCisanMMORPGgame.InfactthistypeofPCgamehasthehighestARPPUplayers.IfFWJMobilesharetheseplayers,itsARPPUcanbereallyhigh”--industryexpert“ThequalityofFWJhasbeentestifiedbymillionsofhardcoreplayers.FewgamescandobetterthanFWJ.FWJMobilehascopiednearly40%ofthePCgame,itwilltakeatleastotheroneyeartofullytransplantcontentsofPCgame”--industryexpert“Inthe

late

gameIspendalotofmoneyonmygang.Mygangmemberdothesamething.Infactfinallyyouarereallyplayingforyour‘family’members”--FWJMobileuserFWJMobile

(梦幻西游手游)OtherMobileGamesLongupdatecycle:FWJmobileinheritscontentsfromFWJPC,whichhasrunforover10yearsandaccumulatedabundantgamecontentthatcanbetransplantedDiversecontentstherichcontentsenableplayerswithvariedtastestoplayandconsumeindifferentways.Shortupdatecycle:mobilegamessuchasKOF(拳皇)arealsoconvertedfromPCversionbutlackpotentialtoattractplayerstopayforlongduetothelimitedPCgamecontenttobetransplantedThincontents:mostmobilegamescannotbearasmanycontentsasPCgames.Well-adoptedsocialsystem:FWJPCisfamousforitssocialnetworksystemandFWJMobilejustkeepthedesign.ThegoodsocialnetworksystemcannotonlystrengthenuserloyaltybutalsocreatescenariosforconsumptionsuchasgroupactivitiesandunioncompetitionsFewGameRunSoLong:manymobilegamesalsohavesocialnetworksystemsbutFWJMobilestillhasaadvantageoverthecompetitors.BecauseFWJPChascultivatedmanygangscalled“family”,thesegangsdevelopandgrowstrongeranddrivethesocialnetworksystemofFWJSource:BDAIDIandanalysisWhatWeHeardWillingnesstoPayFWJMobile’sMAUhasdroppedsinceJuly,whichislikelytocontinuegiventheincreaseddifficultyofgettingnewplayersandthedeclinedtimespentbyexistingplayers15Acquisitionofnewusersisgettingmoredifficult…Existingusersstarttochurnorreducegametime…Despitethelowchurnrate,mostFWJMobile(梦幻西游手游)players’gametimehasdeclinedduetolackofsparetimeorgettingtiredofthegameIt’sestimatedasmuchas60%ofchurnedorcurrentFWJPC(梦幻西游端游)playershavebeenconvertedintomobileplayers,andconvertingmoreisimpractical“FWJMobilehasconvertedatleast60%ofchurnoractiveplayersfromthePCversion;Idon’tthinktheFWJgroupwillcontinuerelyingonthisstrategybecauseitwillaffectrevenuefromthePCversion.”--industryexpertBesides,useracquisitionismostlyaccomplishedduringthefirst3-6monthsandbecomeslesseffectiveafterwardsasdemonstratedinthecaseofAllstarHeroes4.805/143.43.53.911/1409/144.05.13.003/1507/1401/155.05.34.44.34.003/142.9NewUsersperMonthofAllstar

Heroes(刀塔传奇)Unit:MNIncreaseStableDecreaseChurnN=45Q:HowDoesYourTimeSpentonFWJMobileChangeComparedtotheFirstMonthFuture09/15

e06/1507/1505/1508/15-20%+25%EstimationofFWJMobileMAUUnit:MNFWJMobile’sMAUisestimatedtocontinuedeclininginthefuturemonths…Source:BDAIDIandanalysisAccordingtopreviouscases,amobilegame’sgrossbillingsisverylikelytodeclineasitstrafficdrops;FWJ’sgrossbillingsmayfollowthispatternifitstrafficcontinuesthedownwardtrend168.157.156.155.154.153.152.151.1512.1411.14DAUGrossrevenue8.157.156.155.154.153.152.151.1512.1411.147.158.155.156.154.153.152.151.1512.1411.14PALMobile仙剑奇侠传Unit:000’Unit:USDMNDAUandMonthlyGrossRevenueofHitTencentMobileGames,Nov2014–Aug2015I’mMT2我叫MT2WeFire全民突击Source:QuestMobile,BDAinterviewandanalysisNevertheless,ingeneral,qualitygamesareabletomaintainhighmonthlybillingsformuchlongerperiodthanaverage…17No.15No.10No.5No.114-Nov13-Nov15-MayTop515-Jul14-Jul15-Mar14-Sep13-Sep14-Mar13-May15-Jan13-Jan13-Mar14-Jan13-Jul14-MayI’mMTThurderRaidWeChatDashHeroesAllstarMonthlyRankbyRevenueofPopularMobileGames,Jan13–Aug15SampleGamesAccumulatedDurationinTop5(months)ThunderRaid全民飞机大战17I’mMT1我叫MT114WeChatDash

天天酷跑13HeroesAllstar刀塔传奇9DragonForce龙之力量7MU全民奇迹6WeChatSpeed天天飞车5DazzleFight天天炫斗3SGZR三国之刃3SXD

神仙道2QuanminHero全民英雄2……Average14Note1:BDAcalculatedfortheaveragedurationofallthe42mobilegamesthathaveenteredtop5sinceJan2013;however,theaveragedurationmightbeunderestimatedgivensomegameshadenteredtop5priortoJan13andsomewererecentlyreleased.Source:AppAnnie,BDAIDIandanalysisThunderRaid,I’mMT,WeChatDash,andHeroesAllstarareamongthemostlastinggamesinTop5;ThunderRaidbeatsotherswith17months’accumulatedstay……thusweexpectFWJMobiletohaveanevenbetterperformancethanotherhitgamesforitsbetterquality,longerupdatecycle,andstrategicimportancetoNetEase18I’mMT1我叫MT1FWJMobile梦幻西游AccumulatedRatingsofPopularMobileGamesontheAppStore,Aug2015“ItseemstomeFWJMobiledisplaysonlyasmallportionofFWJPC’scontents;IwillkeepplayingFWJMobileaslongastheycontinuetransplantingthestorylines,characters,andquestsfromthePCversion.”--FWJMobileplayerFWJMobile(梦幻西游手游)isexpectedtohaveevenbetterperformancethanothermobilegamesintop5foritsbetterquality…FWJMobilehaswonhighratingonIOSappstorewithitsfeaturessimilartoclient-basedgames“FWJMobilehasgainedverypositivereviews;mostplayersareimpressedbyFWJMobile’sextensivecontentsandoutstandinggameplaythatareparalleltoclient-basedgame.Ibelieveitsfutureperformancewillnotfallbehindanyofthehitgamesbefore.”--industryexpert…longerupdatecycleandstrategicimportanceFWJMobilereplicateslessthanhalfofcontentsfromthePCversion;transplantingtherestofcontentsmaytakeatleastoneyear“IchurnbecauseFWJMobileonlyreplicateslessthanhalfofcontentsfromthePCversion;ImightcomebackforthisgamewhenIcantryoutalltheFWJPCcontentsonthemobile,butitmaytakeoneyearbasedonitscurrentpaceofupdate.”--FWJMobileplayerFWJisNetEase’smostimportantIP,andNetEase

isunlikelytowasteitonashort-lifemobilegame“FWJisNetEase’smostvaluableIP.Basedonmyknowledge,NetEase

placesgreatemphasisonFWJMobileandwillnothesitatetoinvestcontinuousmanpowerandcapitaltosustainthisgame’slifeandperformance.”--industryexpertSource:BDAIDIandanalysisThunderRaid全民飞机大战WeChatDash天天酷跑AllstarHeroes

刀塔传奇WithgraduallydecreasingMAUandARPPU,andincreasingpayingratio…19QoQ9%43%-20%-20%5%-10%-5%20%-10%-20%-5%-5%-5%20%-10%-20%5%-10%-5%AugAprSepMay-15AugNovJunDecJunJulMayJulOctSepOctNovJan-16DecFebMarMAUSeasonalityPayingRatioARPPUXMAUincreaseinJan,JulyandOct.duetoholidayPayingratiodeceaseinJanandJulyduetobigincreaseinMAUARPPUincreaseinJan,Feb,JulyandAug.duetonewexpansionpackreleaseBDAForecast1Note1:ActualnumbersforMay-15toAug-15,forecastforSep-15andthereafterQoQ2.5%-2.0%-2.0%0.5%0.5%0.5%0.5%-1.0%0.5%0.5%0.5%0.5%0.5%-1.0%0.5%0.5%0.5%0.5%0.5%Unit:MN12%11%14%12%13%12%13%12%12%14%11%11%10%12%13%13%14%14%15%15%JunJulAprMay-15AugSepMayJulJunOctMarDecJan-16FebNovAugSepNovOctDecXQoQ-21%-9%41%0%-15%-9%-9%10%10%-10%-5%-5%-5%10%10%-10%-5%-5%-5%AugAprSepMay-15AugNovJunDecJunJulMayJulOctSepOctNovJan-16DecFebMarUnit:USDSource:BDAResearch…themonthlygrossbillingsofFWJmobilewillstayoverUSD51MNbytheendof20162009/1604/1610/1605/1606/1508/1507/1506/1608/1607/1609/1511/1512/1510/1501/1604/1505/1512/1611/1603/1602/16吸引新的玩家越来越难MonthlyGrossBillingsofFWJMobile(梦幻西游手游),Apr2015–Dec2016Unit:USDMNSource:BDAresearchandforecastNetEaserecognizesitsmobilegames’grossbillingsonastraightlinebasisoveraperiodofsixmonths2104/1505/1506/1507/1508/1509/1510/1511/1512/1501/1602/1603/1604/1605/1606/1607/1608/1609/1610/1611/1612/16631191261411331111058981981017672676377795961545104/15101005/1529101906/154810192007/15711019202208/1592101920222109/1510910192022211810/1511619202221181611/1511120222118161412/1510422211816141301/169721181614131502/169218161413151603/168716141315161204/168214131516121105/167813151612111106/167515161211111007/167216121111101208/166812111110121209/16661111101212910/16641110121291011/1662101212910912/1660121291098AccountingPolicyBycomparingtheactualgrossbillingswiththenetrevenueandincrementaldeferredrevenueonNetEase’s2Q15financialreport,aswellasconsultingNetEase’sIRmanager,weconcludethatNetEaserecognizesitsmobilegamebillingswithin6monthsonastraightlinebasis.GrossBillingsRevenueRecognized“Forallofourmobilegames,totalbillingsisindeferredrevenueswhichisthenrecognizedonastraightlinebasisovertheexpectedperiodoftheuser'splayingtime,whichisnolongerthan6monthsforanyofourmobilegames.”--NetEaseIRManagerRevenueRecognized1Source:BDAResearchNote1:Businesstaxrateis5.5%Unit:USDMNThustherecognizedrevenuefor2Q15and3Q15wouldbesignificantlylowerthanthegrossbillings22GrossBillingsandNetRevenueofFWJ,2Q15–4Q16Source:BDAResearch4Q16F3Q16F2Q16F1Q16F4Q15F3Q15F2Q15Unit:USDMNGrossBillingsNetRevenue

Note1:Businesstaxrateis5.5%WJOMobilewasreleasedonSep10,2015asamobilecopyofWJOPC;ThisgamegenerallydemonstratessimilarfeaturesasFWJMobile23BasicInformationName:WestwardJourneyOnlineMobile(大话西游手游)Gamesize:599MB(latestversion)Launchdate:IOSversionwaslaunchedonSep10,2015;fullreleaseonSep27Gametype:MMORPGRevenuemodel:item-basedrevenuemodelIPValue:AsanotherimportantIPofNetEase,WJOislesspopularthanFWJ,butWJOPCwasreleasedearlierthanFWJPC,andthelatterisgenerallyconsideredasanextensionfromtheformerGameContentIntroductionBesidesslightlydifferentstorylines,WJOMobileisverysimilartoFWJMobile(梦幻西游手游)intermsofgamecontentWJOMobiledemonstratessimilarlyconsistentcontentsfromitsPCversionversionitsgamecontentsalsocompriseofPVE,PVE,andcultivationelementsjustlikeFWJMobileThemajordifferencebetweenthetwogamescanbeseenfromtheartstyleanddensityofcontentWJOMobileandFWJMobileapplycompletelydifferentartstyle;whileFWJfeaturesCartoonstyle,JTWdemonstratesarelativelymorerealisticartstyleWJOoffersrelativelyfewercontentsthanFWJandsimplifiestheprocessofcombat,whichlowersthresholdfornewgamersandspeedsupthepaceofgameSimilarGameFeatureswithFWJSource:BDAresearchandanalysisRound-basedcombatandadvancedsocialfunctionWJOMobilealsofeatureslessintensebattlestylebyapplyinground-basedcombatandsimplifiedcontroljustlikeFWJMobileWJOMobilealsosupportsvoiceinputandchat