On October 25th, the US East Time, Netease has a listing on the New York Stock Exchange, the issue price of 17 US dollars / ADS, code DAO. The first trading day closed at $12.5/ADS (down 26.47% than the issue price), corresponding to a market value of $1.4 billion.
Netease has been established in 2006, and 13 years for Internet companies means at least two generations. The “adult ceremony” of independent listing came a bit late, and losing one-quarter of the family on the first day was also considered a “blood hurricane”, which may indicate the rough road of the road to the cliff.
“Bundled three-stage rocket”
When China’s Internet was just emerging, Sina, Sohu, and Netease also called the “three major portals”, among which Netease was full of strength, the latest market value of 36.3 billion US dollars, Sina, Sohu market value of less than 3.2 billion US dollars, less than NetEase.
After the game became the main source of income, NetEase’s profitability has increased by several orders of magnitude compared with the “three portals” era, while Sina and Sohu have made achievements in “reproduction”: Sina hatched a microblog with a market value of $11 billion. And the market value of 220 million US dollars. Sohu splits the $1.9 billion Sogou and the $500 million market share.
“Netease is good at making products” is the consensus of many Chinese netizens. Netease has a good way, Netease cloud music, a cloud note, and Netease news client… are very easy to use.
The “gene theory” is not a problem. The important reason why NetEase products are easy to use is that the game is very profitable. Other products have little pressure to realize and can focus on the user experience. The game is responsible for making money, and other products only need to be “beautiful.”
But the ceiling of the game is not high, and the annual “total plate” is about 200 billion. Under the situation of the two strong divisions, Netease game revenue is difficult to make a big breakthrough. In short, relying on the game “to support the family alone” is not only unfair, but also a long-term solution.
Ding Lei’s heart-felt business is e-commerce, and bystanders can see that his goal is to create “another NetEase”. In September 2019, Alibaba purchased the koala for $2 billion, and NetEase’s e-commerce exploration came to an end.
In this context, Netease, which is beautiful in the “Grand View Garden” in the past, has a way to “make money to support the family”. The first step is Netease.
Netease has a “three-level rocket” mode of “old teeth”: tools – scenes – cash. The tool attracts users, the scene precipitates users, and the liquidation completes the closed loop.
“Tools” are learning products such as a dictionary and a cloud note. The “scene” is a platform. As of the end of 2017, the end of 2018 and the end of June 2019, the average MAUs were 73.7 million, 96.4 million and 105 million respectively.
There are two ways to “realize”: self-operated product sales and platform services.
A closer look at Netease has found that it is a “bundled three-stage rocket”, bundled with NetEase smart hardware. Unlike bundled rockets used in space launches, Netease is not tied to boosters but “loads.”
The term “three-stage rocket” is a bit of a twist. Simply put, NetEase has a “educational vertical e-commerce” or “Jingdong selling courses.” The biggest difference with Jingdong is that Netease has a small number of products that are self-operated and mostly from third parties.
Do you sell products or sell traffic?
The main way to realize Netease’s way is to sell paid content with a quality course. In addition, there are some cloud members who generate some membership income (continuous monthly rate is 15 yuan / month), and some translators provide some paid services ( 0.11 yuan to 0.25 yuan per word).
Netease’s revenue classification is entirely e-commerce thinking, “product sales” is the sales amount of self-owned copyright paid courses, and “platform service” is the service fee/commission/advertising fee charged to third-party sellers.
In 2017, the sales revenue of its own courses was 150 million, and the service income was 306 million. The former accounted for 32.9% of revenue. However, the service income is less than one tenth of the turnover (depending on the commission rate), and more than 95% of the content from the perspective of paying users From a third party.
H1 in 2019, product sales revenue of 315 million, surpassing platform service revenue for the first time. Assuming a commission rate of 10%, 88% of the paid courses are from third parties; assuming a commission rate of 5%, more than 94% of the paid courses are from third parties.