2005 First Quarter Presentation

Transcription

1 2005 First Quarter Presentation

2 Safe Harbor This presentation contains statements of a forward-looking nature. These statements are made under the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of You can identify these forward-looking statements by terminology such as "will," "expects," "anticipates," "future," "intends," "plans," "believes," "estimates" and similar statements. These forward-looking statements are based on the current assumptions, expectations and projections of the Company's management about future events. Although the assumptions, expectations and projections reflected in these forward-looking statements represent management's best judgment at the time of this presentation, the Company can give no assurance that they will prove to be correct. Numerous factors, including those related to market conditions and those detailed from time-to-time in the Company s filings with the Securities Exchange Commission, may cause results of the Company to differ materially from those anticipated in these forward-looking statements. Many of the factors that will determine the Company s future results are beyond the ability of the Company to control or predict. These forward-looking statements are subject to risks and uncertainties and, therefore, actual results may differ materially. The Company cautions you not to place undue reliance on these forward-looking statements. The Company undertakes no obligation to revise or update any forward-looking statements, or to make any other forward-looking statements, whether as a result of new information, future events or otherwise. All references to Company and NetEase as used throughout this presentation refer to NetEase.com, Inc. and its subsidiaries.

3 Summary Financial Results (Figures in RMB 000) Total revenues: 2005 Q Q Q1 Q4 04-Q1 05 growth Online game services 262, , , % Advertising services 45,275 44,686 34, % Wireless and others Total Revenues Gross profit 20, , ,206 24, , ,378 62, , ,368 (18.7%) 17.9% 22.1% Gross margin 82.0% 79.2% 80.5% Operating profit 162, , , % Net profit 153, , , % Net profit per ADS, basic (US$) $0.58 $0.50 $ %

4 Business Highlights

5 China s Premier Internet Company Internet Portal Advertising Revenue Fee-based Products Revenue #1 Wireless VAS Online Games Wireless Valueadded Services Revenue Online Games Revenue

6 China s Internet and Broadband markets are second largest in the world and 100 growing (in Millions) Dec.01 Jul.02 Dec.02 Jul.03 Dec.03 Jul.04 Dec.04 Internet Users Broadband Users * Source: CNNIC 15 th Internet Development Study

7 Chinese online game market expected to grow to USD $1.3 billion annually in 2009 Industry Revenue Forecasts % % 41.2% % % % 29.1% 50.0% 40.0% 30.0% % % % Revenue (RmB billions) Growth * Source: Online Game Industry Report, CGPA & IDC

8 Our game titles are dominating the market Peak CCU for major MMORPG titles in 2005 Q1 Source: announcements from individual official web sites: Woool - (Mar 12) Legend of Mir II estimate based on 2004Q4 financial report Lengend of Mir 3G estimate only Lineage (Dec 04) The first myth- (Jan 18)

9 Expansion of the Pre-Paid Points Distribution Network Points and pointcards distributed through a wide network of wholesalers and large retailers (i.e., 7-eleven in Guangzhou) Work with over ~500 distributors Wide reach over ~200,000 sales outlets (i.e. net cafes) Points can also be used on a full range of NetEase products and services

10 Online Games

11 Self-Developed MMORPG Advantage NetEase is a proven leader in self-developing and operating MMORPGs Fantasy Westward Journey (self-developed) Westward Journey Online II (self-developed) Total Peak CCU for all MMORPG products surpassed 1 million on April 9, 2005 Soon to be Commercial Launch MMORPG Projects: Fly For Fun (licensed) Project DaTang (self-developing) Project 3-D (self-developing) MMORPG Connects Thousands of Users User User User User Game User User User User User User User Online Games

12 Both Westward Journey II AND Fantasy Westward Journey continue to achieve new peak users 600,000 Peak Concurrent Users 500, , , ,000 Fantasy Westward Journey Westward Journey Online II 100,000 - Apr May Jun Jul Aug Sep Oct Nov Dec Jan Fe b Mar Online Games April 2004 to March 2005

13 Online Games 2D MMORPG Market Popularity In view of the market popularity of our existing 2D games WJ 2 and FWJ we will focus more resources on developing more comprehensive expansion packs for the 2D market In the meantime, we will continue to work on the development of our new next generation MMORPGs on slightly pushed-back launch schedules in 2005

14 In Q1 2005, Westward Journey Online II Online events inside the virtual world were held for the New Year, Chinese New Year and Valentine s Day. The response for the online activities was excellent with new peak users levels achieved during the events. The 5th expansion pack was launched in Jan, including new advanced character system for high level players The next expansion pack is scheduled for July 2005, new content will focus on advanced missions for massive participants. Online Games

15 Fantasy Westward Journey In Q1 2005, The third expansion pack for FWJ was launched in early March. Response from players was positive with peak concurrent users hitting new levels during the quarter. Although FWJ has been launched for more than 1 year, the growth is still very strong. Revenue growth maintained at around 28%, number of registration growth over 38% The next expansion pack for FWJ is scheduled for Sept 2005, new content will focus on advanced characters system. Online Games

16 Key factors driving strong growth Expansion pack The expansion pack for WJ2 (launched in Jan) and for FWJ (launched in Mar) are mostly welcomed by game players, and lead to significant growth during the period. Technical optimization In 2005 Q1, we have done various technical optimization and successfully increased the maximum capacity of our game servers. Huge user base As our games have become much more popular, especially for FWJ, we believe we have reached the tipping point, i.e. our existing user base has became the amplifier of our promotion channels, through the means of referral, words of mouth and peer group effect. In-game activities are more successful Online Games

17 Online Games Fly for Fun MMORPG Beta FlyFF under some major modifications and planned for a commercial launch in the second half of 2005 The beta period, designed to receive customer feedback and discover technical issues, is on-going. We are now working on fixing technical issues and a the same time expanding the content to prepare for commercial launch

18 Online Games Fly for Fun MMORPG Beta While both WJ2 and FWJ are community-oriented type of games. FlyFF is more an action-oriented 3D game. The game is targeting a different user group among the Chinese gamers. FlyFF requires relatively low hardware requirement even though it is a 3D game, we believe its deployment in China will not be difficult.

19 Project DaTang 2.5-Dimensional MMORPG Project DaTang is another MMORPG we are self-developing. It is targeted to launch in the second half of This new MMORPG is in the martial arts genre of MMORPGs based in the Tang Dynasty period the golden age of literature and art in Chinese history. A martial arts game, as differentiated from Chinese mythology games, again it is targeting another popular user group among the Chinese gamers Online Games

20 Project 3D Fully 3-Dimensional MMORPG The development of our first self-developed 3D game, Project 3D, is progressing smoothly. The beta test of the game is targeted for the second half of Project 3D is based on traditional Chinese mythology. Various beautiful scenic spot throughout China will be simulated inside the game using advanced 3D technology Online Games

21 Online Games Casual Online Games We plan to launch an online casual game platform, betalaunching 9 games together in the Q2 2005, and total 20 games by the end of the year. The first batch of games are in internal beta testing now. The casual game platform will be integrated with our own instant messenger product Popo, so as to leverage the consumer base. Popo is now the no.3 instant messenger in China, with over 27 million registrants and peak concurrent users over 460k. We anticipate selling virtual items and using the NetEase Pointcards as the billing mechanism.

22 Online Games

23 Internet Portal

24 Online Advertising Industry Expected to Grow Advertising spending in China is expected to continue grow strongly due to increasing consumer spending power and influx of brands Online Advertising expected to grow faster than overall advertising Online Advertising is still a small % of overall advertising in China While it provides an Interactive and more Cost Effective way (versus other forms of advertising) to reach the Consumer Internet Portal

25 Internet Portal NetEase Massive Marketing Platform The NetEase websites provide a massive interactive marketing platform for advertisers Increasing Page views and Audience in China Over 439 million average daily page views in March 2005 Unique Visits increasing NetEase has extremely large sticky user base who are young trendsetters with demonstrated spending power (such as on Online Games and Wireless VAS) Junior College and above 65% Primary 2% Middle & High 33% % >35 <18 13% 15% % % Education Age

26 Expand our Content and Services NetEase will continue to Revitalize and Revamp key Content Channels Forming or seeking partnership with well-established vertical sites to develop certain content channels Focus resources on other key channels Maintain our position as largest free provider in China 80, ,000 75, ,000 70,000 65,000 80,000 60,000 60,000 55,000 40,000 50,000 45,000 20,000 40,000 Jan March May Jul Sep Nov Jan Mar Frontpage and Channels Average Daily Pageviews (in thousands) *Note: Oct and Feb contain National holidays 0 Q1'04 Q2'04 Q3'04 Q4'04 Q1'05 Registered Accounts (in thousands) Internet Portal

27 Vertical Content Partnerships In Q1 2005, we established a partnership with SouFun, China s largest real estate vertical site The cooperation with SouFun on our Real Estate Channel will enable us to deliver more timely, in-depth real estate information to our users Internet Portal

28 Vertical Content Partnerships In Q1 2005, we extended our partnership with China Financial Online (JRJ.com), a vertical media company focusing on financial and market information China Financial Online and NetEase will cooperate on related channels such as Finance, Stocks and Mutual Funds which will allow us to deliver more timely, indepth financial information to our users Internet Portal

29 Channel Sponsorships In April 2005, we announced that Li Ning became the Title Sponsor for the NetEase Sports Channel Becoming the Sports Channel title sponsor, Li Ning, a well known Chinese consumer sports brand, can strengthen its brand among the growing Internet population We can also elevate the profile of the NetEase Sports Channel by associating with Li Ning s strong track record of sponsoring sporting events and famous Chinese athletes Internet Portal

30 Wireless VAS

31 Non-SMS Services Growing Non-SMS services revenue (MMS, WAP, IVRS, Java, Color Ring-back tone) contribution growing 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Revenue Contribution Q Q Q Q G IVR & Color Ringtone SMS

32 Wireless VAS Strategic Initiatives Continue to expand our presence in the 2.5G and Non-SMS area new functionalities on 2.5G provide users a better experience than current limited SMS functionality Focus on developing higher-end wireless value-added services which are integrated with our online portal Leverage the strong community and communication aspect of the online portal, by providing MMS , Popo on WAP, Love/Dating on WAP, etc. We are also developing services to integrate with our online game business and add auxiliary products for SMS (e.g., SMS security control over accounts) Take advantage of 3G opportunities as they arise

33 Power to the People