INTERNET: NetEase Outgames Tencent, Porks Up

Bottom line: NetEase’s finish at the top of a global ranking for mobile game downloads attests to its rising status in the sector, while the pork business of its founder Ding Lei also appears to be gaining traction after years of effort. 

Perennial runner-up NetEase (Nasdaq: NTES) has suddenly vaulted into the champion’s spot on China’s mobile game leader board, unexpectedly passing Tencent (HKEx:) in an important metric for their industry. The surprise move is probably a fluke, and I expect Tencent will retake the top spot in the next rankings for most sales from online mobile game app downloads compiled by App Annie. Still, it does underscore why I’ve previously said that NetEase is probably the most underappreciated company among China’s top Internet players.

At the same time, NetEase’s soft-spoken founder Ding Lei, sometimes also known as William Ding, is in a separate headline involving his pig-raising business that he launched 7 years ago. That particular headline has the business, which is separate from the publicly traded NetEase, holding a first auction for its pork products including pricey black-haired pigs, which must be considered a delicacy in China.

We’ll return to the pig story later, and what it might mean for NetEase, if anything. But more broadly speaking, both the pig and the bigger online gaming story attest to Ding’s quiet but determined nature. Perhaps not coincidentally, I find Ding and Tencent found Pony Ma to have very similar personalities, as both are very quiet and awkward in public, but also very passionate about their pursuits. So perhaps it’s not surprising that both have ended up as China’s quiet Internet giants, and both have found big success through their low-key but persistent determination.

We’ll begin with the latest App Annie rankings, which show NetEase emerged as the world’s top mobile game seller in October by downloads, ahead of Tencent, which finished second. (Chinese article) It’s somewhat revealing that NetEase had 300 apps on offer during the month, while Tencent had a whopping 444. By comparison, number-three finisher Supercell, which Tencent recently acquired, had only 12 apps on offer during the month. Even fifth finisher global giant Activision Blizzard (Nasdaq: ATVI) had only 102.

Those numbers underscore the fact that China’s game makers are much more focused on quantity rather than quality, which tends to be a broader theme in China. The Chinese companies area also quite happy to license games from other designers, compared with names like Activision and Supercell that tend to only develop and operate their own games.

Still a Distant Second

In terms of the bigger picture, Tencent is still easily China’s largest online game company, earning 18.2 billion yuan ($2.6 billion) in revenue from that source in its latest quarterly report. That’s nearly 3 times as much as NetEase, which earned just 6.3 billion yuan. Neither company broke out specific mobile game revenue in its latest quarterly report. But the latest App Annie data certainly seems to indicate that NetEase is finding bigger success in this area that will probably play a growing role in the overall online game picture going forward.

We’ll close out with the pork story, which is mostly entertaining right now but could theoretically become an important new revenue source in the future. The business was originally run separately from NetEase when Ding launched it with fanfare and a healthy amount of derision back in 2009. Reports later emerged that the business was struggling, though that doesn’t appear to have deterred Ding. (previous post)

I’ll admit I’m quite ignorant on the subject of pork prices, but the latest reports say that Ding’s pig venture has just held its first auction for a black-haired pig and got 109,501 yuan for the swine weighing 42 kilograms. (Chinese article) The report is a bit vague, but appears to imply the pig was one of several items being auctioned by Ding, and that the price after 12 hours of auction equated to a whopping 2,607 yuan per kilogram.

The actual price is probably less important than the fact that Ding was able to bring his products to market and get such wide attention. It’s quite possible the published price was manipulated, which would hardly be a first for China, and that this is more of a PR stunt. But regardless, the auction and apparently strong interest do testify to Ding’s tenacity and perhaps bodes well for this newer business. If things go well, the pork business could even get separately listed and become an interesting new venture on its own in this pork-loving and increasingly affluent market