Ding Competes with Tencent in Lucrative Gaming Market
Even as China’s economic recovery remains weak and outlook uncertain, online gaming tycoon William Ding has managed to add a staggering $12.2 billion to his net worth since October. The 51-year-old founder of NetEase, China’s largest gaming company after Tencent, owes his fortune to a string of hit games. Ding has long been competing with Tencent’s billionaire cofounder Pony Ma in China’s lucrative online gaming market. Ding is now the country’s fourth richest person with a $31 billion net worth on the Real-Time Billionaires List, after Nongfu Spring founder Zhong Shanshan, ByteDance founder Zhang Yiming and Tencent’s Ma.
While Tencent’s Ma also gained roughly $12 billion as shares of the internet giant rose about 70% from an October low, NetEase has fared better with investors. Dual-listed in Nasdaq and Hong Kong, NetEase’s shares have soared 80% over the same period. From the beginning of 2022, its shares have far outpaced Tencent’s single-digit stock market gain by rallying 30%, making Ding a rare winner as China’s economy loses further steam in July.
Gaming Focus Insulates NetEase from Macro Headwinds
Analysts attribute Ding’s gains to NetEase’s focus on gaming, a sector less impacted by economic conditions. The gaming sector is usually not affected as much by economic conditions, and is now loosened from regulatory shackles after the resumption of gaming license handouts last year, with approval now stabilizing at 80 to 90 games per month. On the other hand, Tencent gets almost half of its revenues from other businesses, including advertising and payment, which are more closely intertwined with consumer spending and corporate budgets.
In addition to legacy titles such as online battle game Fantasy Westward Journey, NetEase’s new releases are performing better than expected, says Ivan Su, senior equity analyst at Morningstar Asia.
New Game Releases Topping China’s Download Charts
Titles that have been topping download charts in China this year include car racing game Racing Master, casual game Eggy Party and its latest hit, multiplayer battle game Justice Mobile. Justice Mobile, for its own part, has been within the ranks of the top three most downloaded games in China’s iOS store since its June 30 launch, according to analytics firm data.ai.
Leveraging AI to Enhance Gameplay
It is also one of the first smartphone games in China to use generative AI – the technology that power ChatGPT— in enabling virtual characters to come up with different responses and storylines during conversations with players.
“In Justice Mobile, we are seeing a lot of extra gameplay players can spend time on,” says Su. “New games launched have done really well.”
Under the low-profile Ding’s hands-on management style, NetEase may make AI a cornerstone of future growth. Ding plans to invest over $1.4 billion annually in AI models for gaming and education. But keeping players engaged long-term poses risks, analysts say.
Ding’s Interests Beyond Gaming
The bespectacled and soft-spoken tycoon is also known for his personal interest in sustainable agriculture. Ding, who was China’s richest man in 2003 with a net worth of $2.95 billion at the time, ventured into pig farming in 2009. The decision was reportedly prompted by his own dissatisfaction with meat he ate at a local hotpot restaurant. Now, NetEase sells pork sourced from the billionaire’s own farms across China via its e-commerce arm Yanxuan.
The e-commerce arm largely accounted for the $270.5 million in sales reported under the innovative businesses segment during the year’s first three months.
Global Expansion Remains a Priority
Ding has said he hopes to eventually get half of NetEase’s sales from international markets, up from the current 10-plus percent. However, the company hasn’t had much success outside Japan.
To that end, NetEase is partnering with Warner Bros. Discovery to promote the role-playing Harry Potter: Magic Awakened video game globally. It has also recently acquired French game developer Quantic Dream and Canadian gaming studio SkyBox Labs.
Tommy Wong, a Hong Kong-based analyst at China Merchants Securities, says accelerating global expansion remains a priority. “It is something they talked about over the past years, but it is only around 10% right now.”
Maintaining Momentum Poses Challenges
Ding’s gaming focus has paid off handsomely in an uncertain economic environment. But maintaining momentum in a hit-driven industry is always challenging. Ding’s AI investments and international ambitions could determine whether his hot streak continues.
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