Netease will M&A Overseas Game Company on a Large Scale

Perhaps to reverse Netease founder William Ding’s “stingy” image? Netease decided to change its conservative attitude in investments and M&A – in a recent report from Bloomberg, Wang Yi, the Vice President of Netease Game, said:

Netease Game is recruiting talents globally, and meanwhile also exploring investments and M&A of foreign studios. It is hoped that the income earned overseas by Netease Game will account for 30% of its total revenue in 2020.

​In the past five years, strong revenue in gaming industry has boosted Netease‘s high-speed growth. Currently, market capitalization of Netease approaches $40 billion, 8 times as much as that in 2012. Meanwhile, Netease and Tencent “occupy” domestic gaming market, accounting for 70% of the market share. Apart from these two companies, no other mobile game company has a market share higher than 5%.

​As the only player in the domestic gaming market that can challenge Tencent, in recent years, Netease Game’s revenue and growth are very impressive. But behind these satisfying figures, this rapid growing company has to start thinking about: how to maintain a high-speed growth in the next five years? It seems that the Netease Game’s answer to this question is “overseas markets.”​

Globally, Chinese gaming market has a pivotal position. In the first half of the year alone, it has nearly ￥100 billion revenue, accounting for a quarter of the global gaming market. But it also means that three-quarters of the market is now waiting for Chinese developers to explore, and Netease can’t be indifferent to it.

​What’s more, not only Netease’s old rival Tencent has sped up the expansion of overseas markets, small competitors have also begun their exploration of overseas markets. For instance, companies like Cheetah Mobile, FunPlus and elex have already gained huge profits in overseas markets through their products.

​For example, elex’s Clash of Kings is a typical product of China’s highly profitable mobile game in overseas markets in 2016. Data shows that the average monthly revenue of this game was about 350 million yuan.

​Opportunity and risk coexist — for Netease Game, the overseas market is still full of challenges. Wang Yi said that although Netease was very good at producing popular games in China, it was still learning the nuances of key markets such as the United States, et al.

At present, Netease has launched hundreds of mobile games, but most of them are aimed at Chinese players. Jelle Kooistra, mobile product development supervisor of NewZoo said: “Few of these games perform well overseas. Even the few that have a good performance, it is due to Chinese players or the downloading and recharging of players from culturally similar countries.”

​Therefore, in order to quickly establish its own “sphere of influence” in overseas markets, Netease needs to both accelerate the release of its own products overseas, and to “boldly” conducted overseas M&A.

This article originally appeared in ifanr and was translated by Pandaily.

Click here to read the original Chinese article.