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NetEase's middle age anxiety: electricity business is not up to date, 2B business is slightly weak.

via:博客园     time:2018/11/16 19:49:08     readed:197

Author: Ma Cheng

Established in 1997, Netease has entered middle age. It is similar to the Internet companies that were popular at the same time, such as Sina and Sohu, relying on the advantages of portals, and hovering between the two-tier Internet echelons all the year round.

NetEase was once thought to be

For investors, Netease, listed in 2001, has been a good target for U.S. stocks, with steady revenue growth and low market value, but has been relatively stable. However, since 2018, NetEase's share price has dropped by about 35%, and its market value has shrunk by 29 billion 500 million US dollars. After the release of the third quarter earnings, the stock price did not rise significantly even though the revenue growth of games and businesses exceeded expectations.

The slide in stock prices reveals a fact that is hard to hide

As the first group of Internet bigwigs, Ding Lei has been keeping his pace. Wuzhen dinner has always been Ding Lei's home. Over the past few years, he has brought good pork to entertain the big boys from all sides. But after the banquet, he did not pretend to be a team member, nor did he like to show his advice.

In this year's Wuzhen, Ding Lei has repeatedly raised his voice in the face of doubts, expressing his confidence in Netease's game business, saying that Netease has become a world-class game company, and even in front of the camera, he has not evaded suspicion to publicize Netease's strictly selected products to all the big guys.

Close to NetEase's investors in all-weather technology said that the game still determines the direction of NetEase. And the decline of popular games, such as Onmyoji, is the focus that investors are worried about.

Recently, Netease cloud music, Youdao and other brands have been independently financed, and it is reported that the comic book business will be sold. Netease may take the opportunity to divest part of its business and focus on the field of electronics business.

But just like Ding Lei's conservative and patient style, the anxiety of NetEase has not been revealed. The clarion call for NetEase transformation has not been officially launched.

Ecommerce breakthrough

NetEase koala, who has just been in the past, turned over the first answer form of a comprehensive ecommerce business, which began in June, was transformed into a comprehensive ecommerce business.

Ecommerce has become the other pole of NetEase's revenue. In the third quarter of 2018, e-commerce accounted for nearly 30% of total earnings. Ding Lei placed great hopes on e-commerce business.

But in the industry, the scale of Netease's e-commerce is only a drop in the bucket in the tens of trillion-level domestic market. When double eleven was sold, koala broke through 100 million, Tmall had already exceeded 10 billion.

This year, when the state promulgated the Haitao policy and Haitao business suffered heavy losses, NetEase Koala decisively announced the transformation of integrated e-commerce, and on the basis of overseas purchases, through the establishment of world factories and stores, and strict selection of the model to get through.

The transformation of integrated e-commerce has brought about a substantial increase in earnings for NetEase, but also means a larger investment.

On November 15, Netease released its third-quarter earnings report. Netease's e-commerce business revenue was 4.458 billion yuan, up 67.2% year-on-year. Since the fourth quarter of 2017, it has maintained a comparative growth trend of more than 50%, but the third-quarter growth rate is lower than the 75.2% of the previous quarter.

But at the same time, the other two data are not clear. First, the gross margin of e-commerce business declined year-on-year. The gross margin of e-commerce business was 10.0% in the third quarter and 11.5% in the same period last year. Netease explained that the comparative decline in gross margin of e-commerce business was mainly due to the relatively high promotion intensity in the third quarter of 2018.

Two, NetEase's overall net profit in the third quarter was 329 million US dollars, down 25.3% compared with the same period last year. Previously reported second quarter earnings, net profit of $318 million, down 29% over the same period.

Although business growth has exceeded expectations, net profit has been declining. Zhu Yue, CEO of CIC Consulting, mentioned that Netease has invested more in industries, especially in electricity business. Because its e-commerce business model and form belong to a relatively primary stage, compared with Jingdong, Tianmao and Taobao, it needs to pay more cost to divert the market, including building the supply chain system, to the bottom. Tour customer service and so on.

According to Chuang Shuai, founder of IT and founder of IT, NetEase's mailboxes, cloud music and NetEase news are channelling traffic to e-commerce businesses and attracting old users of NetEase into new fields.

But NetEase transformation e-commerce faces many obstacles, first of all must burn a large amount of money, expand categories, flow. This has always been

Established in 2015 and in 2016, Koala has now made an appearance in cross-border e-commerce and quality e-commerce, illustrating Ding Lei's vision.

Ding Lei's use

However, Zhuang Shuai believes that the disadvantage of NetEase's ecommerce lies in the absence of outstanding technical reforms.

At a time when many urban white-collar workers were giving NetEase a good choice, the focus was focused on.

NetEase seems to have realized this too. In September, after pinduoduo went public, NetEase made a serious choice to enter NetEase and opened a brand store. This one

In the field of electronic commerce, NetEase has a tough battle to fight.

Lonely games and content that can not be helped

Compared with the electricity supplier business, the recent performance of the game business can let Ding Lei breathe a sigh of relief. In the two or three quarter of 2018, NetEase game revenues reached 10 billion orders in the two quarter.

Although in the past year, the game "Yin and Yang Division" has been weak successively, the Fifth Personality has not raised the performance flag, Wilderness Action is still chatting with the Blue Hole, but in the winter of the game, the revenue of Netease games is still rising, with 10.348 billion yuan in the third quarter, an increase of 28% over the same period last year, while Tencent games in the third quarter. Revenue fell by 4% over the same period last year. This contrast also reflects the deep foundation of NetEase's game department.

However, compared with Tencent in animation, games, film and television, literature, music and other business has actively tried to carry out linkage, a "full-time master" cartoon, can form the upsurge of film and animation linkage. But NetEase's game department is in a state of isolation.

Netease once laid out a large-scale pan-entertainment industry, but in addition to Netease cloud music, other sectors are not well known to the public.

Recently, financial and other media broke out, the two yuan video community B station intends to acquire NetEase cartoons. Some investors close to the deal mentioned that Netease intends to sell original comics business because comics are not important to Netease. Netease comics have not created a truly influential IP in recent years. On the contrary, comics rely largely on the reverse output of Netease games such as Master Yin and Yang.

By the end of 2016, NetEase had integrated its animation brand, including the community GACHA, photo social software LOFTER, NetEase comics, NetEase cloud reading has been integrated into a unified department, the original independent technology, products, operations team has also been merged.

Live broadcast is another draught for NetEase. In 2012 and 2016, Netease launched live CCs with game broadcasting as the main part and live menthol broadcasts with show as the main part, but in the end, it did not get much attention.

It can be said that there is no strong association in the content section of NetEase. Netease Literature, Netease Cartoon and other businesses are difficult to commercialize under the circumstance of limited user size and volume.

After four years of independent development, NetEase has completed 750 million yuan financing in 2017 with an estimated value of 8 billion yuan, and recently completed a new round of 600 million yuan financing led by Baidu, Pan-Atlantic Investment Group and Boyu Capital.

But compared with the ultra-high user reputation, NetEase's valuation is still far behind Tencent's $30 billion valuation. In the copyright war, Netease Cloud Music needs strong financial support, and in terms of traffic, it must also rely on greater channel support.

Zhu Yue believes that under the attack of the giants, the overall development of the NetEase system content board has been enmended on all sides.

The third quarter results show that Netease's advertising revenue is 644 million yuan, up only 2% from the same period last year, a new low growth rate in the near future. Behind the slow growth of advertising revenue, it has nothing to do with the decline in the size and growth rate of the C side.

This may be an important reason why Netease is preparing to split cloud music, seek independent listing, and divest its comic business.

B terminal business is weak

To B business is the focus of giant transformation in recent two years. From Baidu All in AI to Tencent restructuring, the establishment of cloud and intelligence departments, enterprise services is the next wave of important harvesting areas.

But NetEase has yet to show signs of transition. Beyond games and ecommerce, NetEase's third largest segment

According to the third quarter report, the revenue of mailbox and other businesses was 1,403.8 billion yuan, up 31.5% from the same period last year, accounting for no more than 8% of the total revenue.

Throughout Netease business lines, Netease e-mail and Netease cloud as the representative of business services, as well as Netease Road is most likely to achieve success in the B-terminal line.

However, it is worth noting that enterprise service products are still concentrated in the direction of enterprise mailbox, office software and strictly selected enterprise procurement mode. For example, in 2017, NetEase's corporate mailbox customers broke through 65, which is the revenue of the field.

NetEase, who has concentrated high and new technology, has been developing a speech recognition system.

As an enterprise that has laid out AI since 2011, Netease has a lower sense of existence and a lower degree of commercialization than expected.

In April this year, Netease Youdao received 1.1 billion strategic financing, becoming the third independent financing brand of Netease after Netease Cloud Music and Netease Weiyang, and joining the China Internet Licorne Club at the same time.

NetEase youdao in the past two years, from a tool-based company, to All in education, while facing the B-terminal and C-terminal expansion of the market. NetEase youdao CEO Zhou Feng once mentioned that

But neither the NetEase nor the results of the transformation have been revealed in the earnings report.

Cheng Lingfeng, a well-known IT commentator, once commented on Ding Lei:

An investor close to NetEase mentioned to all weather science and technology,

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