NetEase Games' 2023 has indeed experienced a counterattack.
"Egg Boy Party", which was launched in May 22, was only considered a little-known of NetEase's vast new projects at first, but it has experienced a wave of exponential growth in 2023 and has become the project with the largest number of active users in NetEase Games.
During the Spring Festival holiday, "Egg Boy Party" also relied on the "money ability" of Guangpu to buy and the operation of online activities, gathering a large number of users, and the number of daily active players once exceeded 40 million.
With such a large amount of activity, NetEase has finally obtained an opportunity for a large DAU platform-level product after many years.
However, the glorious results of "Egg Boy Party" in terms of the number of users and revenue have also made NetEase Games face new challenges
If you don't have a big DAU game, you always want to make a hit; After the hit, NetEase Games changed from "winning the world" to "defending the world", challenging the corporate strategy of "China's second largest game company". In addition, the high proportion of young users of "Egg Boy Party" has caused a lot of consumer complaints, and it has been highly "concerned" by parents, Shanghai Consumer Protection Committee and other parties since last year, and the pressure on NetEase to protect minors has also increased.
The light is added, but NetEase can't "sit back and relax"; Walking on thin ice, NetEase made a mistake, and the next step was the abyss.
As a product of NetEase's big dau, the operating logic of "Egg Boy Party" is different from many other games.
The vast majority of games on the market rely on a small number of loyal and willing to pay for the game. While some of these players are not small, they don't generate revenue from the majority of users.
Mei Qing, who is a dual player of "Egg Boy Party" and "Against the Cold", shared her observations on two game marketing ideas with Leifeng.com:
Whether it is fashion or props, there are many payment points that can be heavily kryptonite, which are basically delivered to players for free; The idea of "Egg Boy Party" is to constantly introduce new editing content, new maps, and new tricks, so that players can continue to spend money to unlock new things.
For general games, you can make the ARPPU (per capita payment of paying users) high for the wool of the "big R"; For other players, as long as you can keep them in the game and keep the ecology running reasonably, it is enough.
Unlike "Egg Boy Party", big dau games need to pay more attention to making all players, no matter how many, become paying users of the game, do high ARPU (per capita payment of active users), and rely on the scale effect generated by ** to achieve "small profits but quick turnover".
Among them, there is a major unstable factor for "Egg Boy Party":
A large part of the Egg Boy Party's user plate is minors, and many are even young users who are still in elementary and junior high school.
If they are to become paid users of the game, the problem of the protection of minors is insurmountable; If you give up this part of the users, then the revenue growth of "Egg Boy Party" will become a difficult problem to solve.
On social platforms, there are endless topics about minors and games during the Spring Festival, which has touched the nerves of countless parents and teenagers. On the consumer service platform Black Cat, complaints about "Egg Boy Party" inducing minors to recharge and refusing to refund after appeals are still increasing, according to incomplete statistics, the game currently has nearly 20,000 complaints.
For minors who are still in school, the Chinese New Year not only means having enough time to devote to games during the winter break; It also means that the New Year's money - the "annual salary" of teenagers - arrives, and the game has become the first destination of their "investment".
Should teens play games? How long should I play? How much do I charge into the game? There are always two sides to these problems, but in an increasingly antagonistic environment, the risk of public opinion is often accompanied by game developers - and many users of "Egg Boy Party" belong to this age group, and the risk is especially great.
Every game developer has faced such a problem, and NetEase is certainly no exception. And today, with the surge in the number of users of "Egg Boy Party", the haze under the light is also heavier - when game users generally bind this game to minors, it also brings significant risks to NetEase.
If you want to wear a crown, you must bear its weight. Under this platform-level opportunity of big DAU, how to balance the expansion of revenue with the ensuing ** and compliance risks is also a challenge that NetEase must face in the new year.
2023 can be called a big year in the development of NetEase Games.
On February 29, NetEase released its quarterly report and annual financial report for 2023. Among them, the net revenue of game-level related value-added services accounted for about 78% of the total revenue8%, reaching 81.6 billion yuan, an increase of 7 billion yuan, or about 9., compared with last year's revenue of 74.6 billion yuan4%。
In terms of stock price, NetEase's share price has also risen well since the end of 2022, and it is one of the best-performing Chinese concept stocks. Even after the December crash of last year, the stock price has rebounded rapidly this year and is now roughly stable at the level of the end of November, close to the company's all-time high.
The same is true that last year NetEase finally surpassed Meituan in market value to become China's fourth-largest internet company. According to the network, founder Ding Lei also took advantage of this shareholder wind, and his worth soared by $4.6 billion, rising to fifth place on the Bloomberg China Rich List, standing in front of Jack Ma and Li Ka-shing.
Behind the huge revenue growth of the game segment is the substantial increase in NetEase's operating expenses. According to the financial report, NetEase's sales and marketing expenses will soar by 5% in 2023700 million yuan, which means that the importance of buying volume in NetEase Games' strategy has also increased.
It is not difficult to see from the analysis of the financial report that NetEase's marketing and sales expenses almost skyrocketed in the fourth quarter of last year, and the increase throughout the year was basically concentrated in this period.
The reason for this, as long as you pay attention to the game industry, will understand that NetEase's "Egg Boy Party" was forced to make a buying call in order to cope with the challenge of Tencent's "Yuan Dream Star".
However, buying a large amount of money in a short period of time will inevitably cause anxiety about how to "retain" users:
Users who rely on brainless money to buy volume in the short term are often unable to stay in the product ecology for a long time——If the daily activity of 40 million is just a flash in the pan supported by huge marketing, then NetEase's investment ROI will inevitably be greatly reduced.
At the ** meeting on the night of the release of the financial report, Ding Lei also personally assured investors: "The proportion of market expenses next year will not change significantly compared with this year, and we are still very strict in the management of market expenses." ”
And in the "tug-of-war" with the competition, buying volume will only be like sailing against the current:
At the expense of buying bullets, once the intensity decreases, users are easy to be quickly washed away by competing products. Caught in this "arms race", both sides must keep increasing the weight until one side gives up.
If we enter 2024 with this attitude, NetEase's investment in market expenses, whether it is short-term delivery volume or long-term sustainability and accuracy, will be tested.
From today's point of view, although "Egg Boy Party" has brought NetEase a platform-level opportunity that has been rare for several years, it must also be prepared for danger in times of peace, taking into account the multiple factors of the game's life cycle, the challenges of increasingly mature competition, policy fluctuations, and the involution of the buying market.
Some investors are concerned about whether NetEase Games' huge investment in marketing can continue to turn into revenue returns? Once marketing efforts are reduced, will the 40 million daily active users be retained?
In the new year, NetEase still needs to answer these difficult questions.
Talking about the organizational structure of NetEase Games, investor Hua Hong told Leifeng.com that NetEase in her eyes is different from most Internet companies of the same size in China - NetEase Games' studios are more like "small workshops".
In terms of structure, NetEase Games only has two major studio groups, "Mutual Entertainment" and "Thunder Fire", which are divided into each studio as a unit, and the studios are responsible for their own profits and losses, and the income is not only the best external commercial revenue, but also can come from the "insourcing" business that supports other studios.
Cao Lu, a person in the circle, commented on the mode of NetEase Games' "touching the award", which is to rely on the continuous stacking of products, whether the specific project can belong to the "watch the sky and eat", as long as the number of products piled up is large, there will always be one or two that can become a hit.
success is an unexpected joy, NetEase is used to it. Cao Lu said.
However, the market and industry are always changing, and NetEase's "small workshop" model is also facing more challenges.
One of them is that in order to launch explosive models, the company's strength must be united and fully promoted. The relatively decentralized structure within NetEase has also created a "departmental wall" between major departments to a certain extent.
Taking IP cooperation as an example, Cheng Huang, a NetEase employee, once complained to Leifeng.com that although NetEase's brand authorization center belongs to the general office, because the office is mainly located in Guangzhou, it is closer to the base camp of NetEase Interactive Entertainment, and there is more support for Mutual Entertainment.
As a result, you can see that the peripherals of "Egg Boy Party" range from dolls, parasols, accessories to cards, while the peripherals of Thunderfire's "Against the Cold" and "Naraka: Infinite" are always heavier figures, weapons, and so on.
The support of the middle office department is biased, which is only one aspect of the problem caused by NetEase's more decentralized organizational structure.
On the other hand, looking at NetEase's philosophy of "one will succeed and ten thousand bones will wither", how many games can make a splash in the market, but because they have not received enough support, so they are lost to everyone, which is also a question worth pondering.
In 2023, NetEase has relied on crazy "coins" to attack the city and uproot, and has seen good results.
in dataIn AI data, NetEase will still be among the game companies with annual revenue of more than $1 billion in 2023 with "Egg Boy Party", and rank fifth among 18 companies in the world.
Under the scenery, NetEase is also facing a new crisis - the big DAU opportunity brought by "Egg Boy Party" has pushed NetEase games to a new height, but also brought new challenges to the company from various angles.
In the past, some people criticized Ding Lei and NetEase for often holding a "second philosophy": making a fortune quietly, keeping a low profile in Buddhism, and "quietly" making money without attracting attention.
And when more and more spotlights are on NetEase, in 2024, this "second philosophy" may be about to become invalid, and risks from various angles such as compliance and operation have to be guarded against.
The story of NetEase is also the story of the future of many other game companies in China.
In the movie "The Grandmaster", it is said that "passing the hand is like climbing a mountain, one step at a time", game companies are charging towards the top of the mountain, and if someone can climb to the height of NetEase today in the future, they will inevitably find that the height is not cold.
And the same is "The Grandmaster", the movie also said, "It's better to think about progress than to stop thinking". On this road, although there are endless difficulties and dangers on the side, there are more strong enemies in front of you, and challengers are around;
On another day, even if there are new thorns and bumps, NetEase can only enter, not stop.
Note: Wen Zhonghuahong, Tian Basket, Cao Lu, Cheng Huang, and Mei Qing are pseudonyms. ）