NetEase Peaks with $30B in User Spending
In this article, we discuss how NetEase managed to achieve such an astonishing success, how the games driving revenue changed over the years, and what makes them so unique.
— by Diana Levintova
NetEase hit a new height with $30B in user spending. While the publisher has numerous successfully monetized games, there are 6 of them that generated over $1B of net revenue for a lifetime, and 3 which earned more than $1.5B, including Fantasy Westward Journey (梦幻西游), accountable for 25% of revenue, Knives Out for 10% and Onmyoji (阴阳师) for 8%.
Disclaimer 1: Please note that the Google Store's absence in China might lead to some undervaluation of net revenue and user spending. This Business Apps’ analysis indicates that the total user spending in alternative Android stores in China is about 50% of what users spend in the Apple App Store in China. Therefore, it appears that the total user spending on NetEase's mobile apps since January 2015 has surpassed $42 billion.
Disclaimer 2: In the title, we discuss user spending, while the graph displays net revenue - the amount the publisher receives after deducting commissions and including taxes that stores automatically withhold.
Notably, while NetEase continuously works on its revenue improvement, drivers of its success have significantly shifted. Games that were accountable for the revenue jumps in 2017, including Chinese Odyssey Westward Journey (大话西游), Onmyoji and The Enchanting Phantom (倩女幽魂) has noticeably lost their market share. Thus, Onmyoji monthly revenue gain decreased from $70M per month in the peak to $4M in January 2024. Chinese Odyssey Westward Journey went down from $45M in the peak to $3M in the last month. Similarly, The Enchanting Phantom dropped from $30M to $2.5M over 6 years in monthly revenue.
However, there are new rising stars in the publisher’s portfolio that are maintaining the total metrics at the same heights. The latest one is Swords of Legends (逆水寒) which was released in June 2023 and since then has already generated a total of $403M.
The game's soaring popularity in China, where it generates 100% of its revenue, can be attributed to several key factors. Foremost, the game stands out for its intricate storyline, high-quality graphics, and diverse gameplay features. It offers detailed character customization, land ownership, and employs multiple technologies to enhance the gaming experience. Aimed at three main player groups—those seeking an immersive experience, gamers interested in profit, and newcomers attracted by its popularity and large community—the game caters to a wide audience with its engaging content and innovative functionalities.
Additionally, the Swords of Legends found its ideal platform after transitioning from PC, where it initially struggled to gain traction, to mobile, where it flourished. NetEase's substantial marketing efforts, involving collaborations with major influencers, also played a crucial role.
Another intriguing aspect is the game's ability to attract a large female audience. This phenomenon is largely due to the popularity of "idols" (influential celebrities from music or TV with significant impact on pop culture) in China, who command a vast female following. Swords of Legends stands out by offering extensive character customization options, allowing players to create avatars that not only look exceptionally attractive from the start but can also be tailored to resemble their favorite idols more closely.
Regarding its geographical strategy, NetEase derived the majority of its revenue from the Asian region, with China accounting for 82%, followed by Japan with a 12% contribution, and a significantly smaller percentage from Western countries, including a 2% share from the US.