Top Performers

ByteDance, Xiaomi, and SHEIN lead the list, showcasing the strength of Chinese brands in the entertainment, electronics, and fashion sectors.

Lenovo, Huawei, and AliExpress also remain strong contenders, emphasizing the diversity and innovation in China’s tech and e-commerce industries.

Sector Growth

Smart devices, automobiles, and e-commerce experienced the fastest brand power growth, with China’s industrial ecosystem and technological innovations providing a competitive edge.

Consumer electronics, entertainment apps, and online fashion account for a substantial portion of the brand power growth.

Brand Expansion

Chinese brands have successfully penetrated international markets, with notable growth in regions like Europe, North America, and Southeast Asia.

Brands like BYD and NIO in the automotive sector, and OPPO and Vivo in consumer electronics, have expanded their global footprints, contributing to the increasing brand power.

Market Trends

The report highlights a shift in consumer preferences towards brands that offer meaningful differentiation and high engagement. Brands that have successfully created unique and compelling brand experiences have seen significant growth.

There has been a notable increase in the brand power of mid-sized brands, indicating a shift from the dominance of top-tier brands to a more competitive landscape.

Notable Brand Highlights

• ByteDance: As a global leader in digital content and social media, ByteDance’s platforms like TikTok have become household names worldwide, driving significant brand recognition and engagement.
• Xiaomi: Known for its high-quality yet affordable electronics, Xiaomi continues to expand its product lines and market reach, solidifying its position as a leading global brand.
• SHEIN: The online fashion retailer has disrupted traditional retail with its fast-fashion model, capturing a significant global market share and expanding rapidly across multiple regions.
• BYD: In the automotive sector, BYD’s focus on electric vehicles has positioned it as a key player in the global shift towards sustainable transportation solutions.
• OPPO and Vivo: These smartphone giants have continued to innovate and expand their international presence, offering advanced technology and appealing to a broad consumer base.

Strategic Insights

The report suggests that the key to the success of Chinese global brands lies in their ability to offer meaningful differentiation and engage deeply with consumers. Brands that can innovate and adapt to changing consumer preferences will continue to thrive in the competitive global market.

• Consumer Engagement: Successful brands have invested in understanding and meeting the functional and emotional needs of their consumers, creating strong brand loyalty and advocacy.
• Technological Innovation: Continuous investment in technology and innovation has enabled Chinese brands to stay ahead of the curve, offering cutting-edge products that resonate with global consumers.
• Global Strategy: A tailored approach to international markets, considering local preferences and cultural nuances, has been crucial for the expansion and acceptance of Chinese brands abroad.

Top 50 Brands from Kantar BrandZ 2024 China Global Brands

1. ByteDance
2. Xiaomi
3. SHEIN
4. Lenovo
5. Huawei
6. AliExpress
7. Haier
8. TEMU
9. OPPO
10. Hisense
11. TCL
12. Tencent
13. vivo
14. Chery
15. BYD
16. Anker
17. DJI
18. MiHoYo
19. OnePlus
20. Kuaishou
21. realme
22. GWM
23. TP-LINK
24. HONOR
25. Lynk & Co
26. MAXUS
27. Insta360
28. WORX
29. Lilith
30. Century Games
31. JAC
32. Roborock
33. CHANGAN
34. Geely
35. Midea
36. DiDi
37. POCO
38. ECOVACS
39. Trip.com
40. Magic Tavern
41. Habby
42. Tsingtao Beer
43. EcoFlow
44. Infinix
45. IGG
46. Kunlun
47. eufy
48. 37Games
49. NetEase Games
50. LightInTheBox

BCG: The most innovative Chinese companies

Netease Operation Highlights for Q4 2019

Expanded user base and diversified portfolio with new games launched in China including:

• Fantasy Westward Journey 3D, released in December, topped China’s iOS download chart soon after its launch, capturing wide interest from game players.
• Introduced other thrilling new titles including Xuan Yuan Sword: Dragon Upon the Cloud, Bloom & Blade, Onmyoji: The Card Game, Champion of the Fields, The Ninth Institute and Astracraft.

Deepened international brand recognition with popular games:

• Knives Out remained popular in Japan and topped the iOS grossing chart several times in the fourth quarter.
• Identity V ranked third on Japan’s top iOS grossing chart several times in November and December
• Marvel Super War, released in December in several Southeast Asian markets, gained popularity and topped many iOS download charts.

The continued popularity of Blizzard Entertainment’s World of Warcraft^® in China, bolstered by the release of World of Warcraft Classic, achieving a record number of total monthly subscribers in the fourth quarter, with increased revenue quarter-over-quarter.

The advanced exciting game pipeline, including Onmyoji: Yokai Koya, Harry Potter: Magic Awakened，EVE Echoes, Ghost World Chronicle, Revelation mobile game, Diablo^® Immortal^™ and Pokémon Quest.

Net revenues from Youdao’s learning services and products were RMB311.9 million (US$44.8 million) for the fourth quarter of 2019, a 128.6% increase from the same period in 2018.

Advanced NetEase Cloud Music with strong revenue growth, expanding the Company’s community of independent musicians to more than 100,000 and over 270 billion playbacks of their songs in 2019.

Netease Q4 2019 Financial Highlights

Net revenues were RMB15,734.8 million (US$2,260.2 million), an increase of 9.2% compared with Q4 2018.

• Online game services net revenues were RMB11,604.3 million (US$1,666.9 million), an increase of 5.3% YoY.
• Youdao net revenues were RMB410.4 million (US$59.0 million), an increase of 78.4% YoY
• Innovative businesses and others net revenues were RMB3,720.0 million (US$534.4 million), an increase of 17.9% YoY

Gross profit was RMB8,210.4 million (US$1,179.4 million), an increase of 9.0% YoY.

Total operating expenses were RMB5,234.0 million (US$751.8 million), an increase of 17.5% YoY.

Net income from continuing operations attributable to Netease’s shareholders was RMB3,053.7 million (US$438.6 million). Non-GAAP net income from continuing operations attributable to the Company’s shareholders was RMB3,662.3 million (US$526.1 million).

Basic net income per ADS from continuing operations was US$3.40. Non-GAAP basic net income per ADS from continuing operations was US$4.07.

Netease Financial Results for The Fiscal Year 2019

Net Revenues

Net revenues for the fiscal year 2019 were RMB59,241.1 million (US$8,509.5 million), compared to RMB51,178.6 million for the fiscal year 2018.

• Net revenues from online game services were RMB46,422.6 million (US$6,668.2 million) for fiscal year 2019, compared to RMB40,190.1 million for fiscal year 2018. Mobile games accounted for approximately 71.4% of net revenues from online game services for fiscal year 2019, compared to 71.0% for fiscal year 2018.
• Net revenues from Youdao were RMB1,304.9 million (US$187.4 million) for fiscal year 2019, compared to RMB731.6 million for fiscal year 2018.
• Net revenues from innovative businesses and others were RMB11,513.6 million (US$1,653.8 million) for fiscal year 2019, compared to RMB10,256.9 million for fiscal year 2018.

Gross Profit

Gross profit for the fiscal year 2019 was RMB31,555.3 million (US$4,532.6 million), compared to RMB27,346.1 million for the fiscal year 2018.

• The year-over-year increase in online game services gross profit for fiscal year 2019 was primarily attributable to increased revenue contribution from mobile games such as Life-After, Invincible and Identity V.
• The year-over-year increase in Youdao gross profit for fiscal year 2019 was primarily attributable to the rapid development of its learning services and products.
• The year-over-year increase in innovative businesses and others gross profit for fiscal year 2019 was primarily due to increased net revenues from NetEase Cloud Music, CC live-streaming and Yanxuan, as well as improved cost control.

Operating Expenses

Total operating expenses for fiscal year 2019 were RMB17,764.6 million (US$2,551.7 million), compared to RMB17,368.8 million for fiscal year 2018. The year-over-year increase in total operating expenses for fiscal year 2019 was primarily due to increased research and development investments and staff-related costs, partially offset by decreased selling and marketing expenditures.

Other Income

Other income consisted of investment income/ (loss), interest income, foreign exchange gains and losses and others. The year-over-year increase in other income for fiscal year 2019 was mainly due to fair value changes of equity investments in publicly traded companies.

Income Taxes

The Company recorded a net income tax charge of RMB2,914.7 million (US$418.7 million) and RMB2,460.7 million for fiscal years 2019 and 2018, respectively. The effective tax rate was 17.8% for fiscal year 2019, compared to 22.2% for fiscal year 2018. The lower effective tax rate for fiscal year 2019 was mainly due to reduced losses from certain subsidiaries of the Company.

Net Income and Non-GAAP Net Income

Net income from continuing operations attributable to the Company’s shareholders for fiscal year 2019 totaled RMB13,275.0 million (US$1,906.8 million), compared to RMB8,291.1 million for fiscal year 2018.

Non-GAAP net income from continuing operations attributable to the Company’s shareholders for fiscal year 2019 totaled RMB15,662.7 million (US$2,249.8 million), compared to RMB10,761.3 million for fiscal year 2018.

NetEase reported basic and diluted net income from continuing operations per ADS of US$14.80 and US$14.67, respectively, for fiscal year 2019, and basic and diluted net income from continuing operations per ADS of US$9.20 and US$9.15, respectively, for fiscal year 2018.

Non-GAAP basic and diluted net income from continuing operations per ADS were US$17.46 and US$17.31, respectively, for fiscal year 2019, compared to non-GAAP basic and diluted net income from continuing operations per ADS of US$11.94 and US$11.87, respectively, for fiscal year 2018.

Netease net revenues and net income attributable to the company’s shareholders increased by 15% and 46% year-over-year in the second quarter of 2019, according to its announced financial results.
Netease launched several new games in China and abroad in Q2 2019, further enriching their strong game portfolio that spans a variety of genres. In addition to Knives Out and Identity V, a number of new games have gained user recognition in Japan, including Life-After and Cyber Hunter.

Netease Q2 2019 Financial Highlights

• Net revenues were RMB18,769.0 million (US$2,734.0 million), an increase of 15.3% compared to the second quarter of 2018.
  • Online game services net revenues were RMB11,433.4 million (US$1,665.5 million), an increase of 13.6% compared to the second quarter of 2018.
  • E-commerce net revenues were RMB5,246.9 million (US$764.3 million), an increase of 20.2% compared to the second quarter of 2018.
  • Advertising services net revenues were RMB581.6 million (US$84.7 million), a decrease of 8.3% compared to the second quarter of 2018.
  • Innovative businesses and others net revenues were RMB1,507.2 million (US$219.5 million), an increase of 23.2% compared to the second quarter of 2018.
• Gross profit was RMB8,125.8 million (US$1,183.7 million), an increase of 12.2% compared to the second quarter of 2018.
• Total operating expenses were RMB4,639.6 million (US$675.8 million), a decrease of 5.5% compared to the second quarter of 2018.
• Net income attributable to the Company’s shareholders was RMB3,071.4 million (US$447.4 million). Non-GAAP net income attributable to the Company’s shareholders was RMB3,645.4 million (US$531.0 million).^[1]
• Basic earnings per ADS were US$3.47; non-GAAP basic earnings per ADS were US$4.12.^[1]

Netease Q2 2019 and Recent Operational Highlights

• Launched exciting titles in China including BuildTopia, Love is Justice, Sky and an updated version of Tom and Jerry.
• Strengthened global presence with NetEase’s games receiving international recognition:
  – Knives Out remained popular in Japan and topped the iOS grossing chart several times in May and June.
  – Identity V reached Japan’s top 3 iOS grossing chart for the first time in July.
  – Introduced new popular titles in Japan and the U.S. including Life-After (previously known as Night Falls: Survival), Cyber Hunter and Super Mecha Champions.
• Launched a new video game studio in Montréal, with plans to hire local and international talent to further enhance NetEase’s research and development capabilities.
• Acquired a minority stake in Behaviour Interactive Inc., Canada’s largest independent game studio.
• Announced strategic collaborations with world-famous IP owners including Marvel Entertainment and The Pokémon Company.
• Advanced pipeline with upcoming titles including Fantasy Westward Journey 3D, Xuan Yuan Sword: Dragon Upon the Cloud, Pokémon Quest and Bloom & Blade.
• NetEase Cloud Music launched its community module known as “Cloud Village,” which influences the way users experience music.

China’s online gaming market totaled 57.36 billion yuan (US$8.29 bn) in Q2 2018, a negative growth of 10.8% year-on-year and 3.6% quarter-on-quarter.

Mobile games contributed 65.1% to the total online gaming revenue in Q2 2018, a slight drop compared with the previous year. PC games show a growing trend as e-sport increasingly gains popularity and becomes an official item of the international sports events.

Tencent remained its leadership position with the largest share of 53.17% in Q2 2018. Netease and Perfect World took the next two places with a share of 17.54% and 2.7%, respectively. Bilibili moved up to sixth place with a share of 1.38%.

NetEase rose to the second place right after Tencent in November 2017 by total number of iOS app downloads with two mobile games, Knives Out and Rules of Survival according to App Annie.

Tencent remains the biggest iOS app publisher by total downloads in Nov 2017 with a total number of 445 apps, followed by NetEase (248 iOS apps), Alibaba Group (154 apps), and Baidu (190 apps).

Tencent is also the top iOS publisher by total revenues, followed by NetEase, OneSmile, and Baidu.

The top 10 iOS apps by total download in Nov 2017 are Knives Out, WeChat, Taobao, Alipay, Baidu, QQ, Tencent Video, Rules of Survival, iQiyi, and Honour of Kings.

The top 10 iOS apps by total revenues are Honour of Kings, Fantasy Westward Journey, Tencent Video, Kwai (one of the most popular short-video apps full of entertaining content), Westward Journey Online, Ghost, Onmyoji, King of Chaos, iQiyi, and Archangel Sword H5. All are gaming apps except the three video apps (Tencent Video, Kwai, and iQiyi).

China smartphone market in Q3 2017; 4 out of 10 using Huawei or iPhone

E-commerce enterprises in China have taken an increasing role spearheading cross-border commerce in goods and services between China and other nations. As consumers within the country have become more affluent, some enterprises have begun importing increasing amounts of high-quality consumer goods from abroad while others provide platforms for importers to sell goods B2C and C2C.

The following is an overview of the state of the cross-border e-commerce sector in the first half of 2017.

Cross-border e-commerce market overview

From 2013 to the present the value of cross-border transactions conducted using e-commerce platforms has more than doubled, from 2.9 trillion yuan (US$ 434.7 billion) to 6.3 trillion yuan (US$944.5 billion) in 2016, and is expected to surpass the US$1 trillion mark in 2017. In 2016, year-on-year growth was 23.5%, a figure expected to fall slightly to 19.0% in 2017.

Following improvements in logistics and international supply chains, consumers are becoming “sea scourers” (haitao, researching and purchasing imported goods online) as a way to meet their needs, leading to rapid growth in the number of Chinese consumers purchasing imported goods online.

In 2016, 41 million Chinese consumers purchased imported goods online, an increase of 78.3% from the year prior, and it is expected that this figure will grow by a further 41.5% in 2017, to 58 million.

For comparison, there is a total of 765 million discrete accounts on all e-commerce platforms in China, meaning that 7.6% of consumers will make an international purchase in 2017. This also implies that while growth rates will taper off over time, the market is far from saturated relative to the size of the overall e-commerce market.

The e-commerce market for imported goods is dominated by four companies, NetEase Kaola, Tmall Global, VIPShop Global, and JD Worldwide, of which Tmall Global and JD Worldwide are offshoots of larger e-commerce platforms, Taobao and JD.com.

These four collectively account for 72.7% of the market. JD Worldwide and other companies which are able to rely on a larger e-commerce platform and strong supply chain will be able to leverage these advantages to occupy a strong market position.

Understanding China’s “sea scourers”

Survey data shows that nearly 70% cross-border online shoppers have bought imported goods in the first half of 2017, of whom just 1.6% were dissatisfied or very dissatisfied, while 80% were satisfied or very satisfied.

Economic development within China has allowed cross-border e-commerce platforms to continually develop their product selection, while technological improvements have contributed towards a better shopping experience, such that consumers are generally satisfied with their options and the quality of the goods and customer service they receive.

“Sea scourers” are motivated to buy imported goods by several factors, the most important of which are a search for quality and authenticity, a belief that imported goods are a better value for the money, and the variety of brands available online from international sources.

In a market such as China, where e-commerce is not always reliable and counterfeit goods are commonplace, it’s only natural that the most common concern driving consumers to buy imports is product quality.

In addition, clear patterns emerged from the survey data regarding spending; 66.2% of transactions were in the range of 300-1000 yuan (US$45-150), indicating that average spending among “sea scourers” is higher than among ordinary e-commerce users, but that the majority of them are not buying high-priced luxury goods. This reinforces the data above; most “sea scourers” are motivated by a search for quality and authentic goods which is harder to find in domestic products.

A large majority of consumers (65.2%) say they buy imported goods online at least once a month, with a significant fraction saying they purchase goods weekly, suggesting that buying imported goods has become routine and an important part of the consumption habits of many households.

Analysts believe that increasing consumer affluence coupled with the quality of the goods available from overseas markets will continue to drive e-commerce users abroad to fulfill their daily needs.

Preferred nations of origin

In cross-border e-commerce, developed economies dominate as exporters. Japan, South Korea, the United States, France, and Germany were the biggest suppliers of goods to cross-border shoppers. 43.9% of China cross-border online shoppers reported having purchased Japanese-sourced goods, predominantly in the cosmetic, skincare, and nutrition industries.

South Korea and the United States were in second and third place; consumers primarily purchased skincare products, foodstuffs, and fashion from South Korea and nutrition, fashion, and infant-related products from the US. France and Germany were both sources of infant-related and nutrition products, while France also provided cosmetics and Germany, skincare products.

Survey responses showed that quality is not just a consideration for consumers in choosing to buy from abroad, but also in choosing from where to buy. 36.6% of “sea scourers” reported choosing products from a given country of origin based on product quality, a significant margin over those who chose based on style (27.8%) or reputation (18.9%).

… and e-commerce platforms

Meanwhile, among new “sea scourers”, NetEase Kaola, Tmall Global, JD Worldwide, and Little Red Book dominate as preferred cross-border e-commerce platforms.

Cross-border online shoppers chose among competing e-commerce platforms based primarily on three factors: guarantees of product authenticity, platform popularity, and variety and completeness of choices offered.

The majority choose e-commerce sites which control the import and sale of all products on the site, with 57.4% preferring such sites, while just 26.2% prefer sites which offer a platform to independent sellers. Those who responded in favor of centralized sites cite quality assurance, professional operations, and stringent selection of products as their primary reasons for preferring them.

In keeping with the above, consumers found NetEase Kaola, Amazon Global, and Little Red Book to be the most credible platforms when looking to buy authentic, name-brand products from abroad.

Additionally, these three sites had the highest satisfaction rating among surveyed consumers, with average ratings of 8.2/10, 8.0/10, and 7.8/10 respectively, suggesting that centralized commercial platforms have a leg up among consumers who are accustomed to a “Wild West” environment in e-commerce in China.

By exercising more control over procurement and ensuring the authenticity of goods purchased on their sites, they are able to offer a measure of security that the individual seller-dominated Tmall Global and similar platforms cannot.

Read part 2 here.

Premium quality products are becoming increasingly popular in China, and more and more e-commerce companies are turning its focus from low prices to high quality including Netease Yanxuan, Mijia Youpin (Xiaomi), Biyao, and Tmall (Taobao Xinxuan).

China’s upper middle class and affluent households will drive 75% of consumption growth, and the proportion of young consumer groups in overall growth is 69%.The average disposable income per capita in China was 23,821 yuan in 2016, an increase of 8.4% over the previous year.

The quality e-commerce platforms focus on delivering high quality products directly to consumers with competitive pricing and faster response to the market demand.

Netease launched Yanxuan in April 2016 and reached 30 million registered users and 60 million yuan GMV by September 2016. Xiaomi launched Mijia Youpin brand in April 2017 focusing on smart devices such as TV, smartphone, and routers.

Biyao was founded in January 2014 and launched in July 2015. Alibaba launched a Tmall store called Taobao Xinxuan at good.tmall.com, selling directly to consumers.

Quality Retail E-Commerce Platform Users

Taobao Yanxuan saw more female users (56.35%) while the majority of Xiaomi’s Mijia Youpin and Biyao users are male (71.87%, 67.58% respectively).

Quality retail e-commerce users are mainly between 24 and 35 years old who have higher and stable income with high-quality requirement on the products.

Over 60% quality retail e-commerce users in China are from tier-1 and tier-2 cities. Mijia Youpin sees higher penetration in tier-3 cities (26.88%).

Yanxuan and Taobao Xinxuan both focus on household products while Biyao on apparel and Mijia on smart household products.

5 Trends of Chinese digital consumers

Tencent is the number one public company ($10.2 bn) in the world by game revenues in 2016, followed by Sony ($7.88 bn) according to Newzoo. Another Chinese company Netease also made it to the top 10 ($4.2 bn) whose revenues grew by over 50%.

APAC territories will generate $46.6 billion in 2016, or 47% of total global game revenues according to Newzoo.

China alone accounts for half of APAC’s revenues, reaching $24.4 billion in 2016 to cement its place as the largest games market in the world, ahead of the US’s anticipated market size of $23.5 billion. China will remain the largest games market for the foreseeable future, growing to $28.9 billion by 2019.

Top 10 Public Companies by game Revenues

Consolidation of the Top 10

The current top 10 public companies by game revenues accounted for 54% of the global games market in 2016, up from 43% in 2015.

Related: China online gaming market overview 2011-2019

China online gaming market reached 177 billion yuan (US$25.7 bn) in 2016 and is estimated to grow to exceed 232 billion yuan (US$33.69 bn) in 2019 according to data from iResearch.

The proportion of mobile games grow to over 56% in 2016 and will exceed 66% in 2019. The total number of mobile gaming users is 521 million and the PC end has 484 million users in 2016.

Tencent is the top online gaming company by revenues with 325.2 billion yuan (US$47.23 bn) revenues from PC and 383.4 bn yuan (US$55.68 bn) from mobile, followed by Netease (PC: 108.3 bn yuan/US$15.73 bn; mobile: 165.1 bn yuan/US$23.98 bn).

This article is an excerpt from EBook – China Internet Insights 2017

Online videos became mainstream media for online learning in China in 2016 with Netease leading in online learning market in China according to a recent survey conducted by Netease and Guokr.

The top three online learning platforms are Netease Open (open.163.com), Zhihu mobile app, and Netease Courses (study.163.com) while TED also made it to the top five.

Paying for online learning content is much more accepted in China in 2016; quality content is a key factor. 70% respondents paid for online learning in 2016 comparing with only 26% a year ago.

Online videos became mainstream media for online learning in China in 2016, being the top engagement (41.97%) of online learners & followed by downloading paid content (26.29%) and paid apps (18.11%). Personal interests and professional skills are the top reasons for online learning in China.

Three-quarters of online learners are satisfied in the learning content.

In 2014, the total value by revenue of China internet market was RMB637.73 billion (US$104.15 billion) with 74.4% in revenue via PC. Alibaba’s market value exceeded RMB253.41 billion (US$41.38 billion), ranking top among all China internet companies in 2014, followed by Tencent and Baidu according to data of iResearch.

As of 31 December 2014, top 5 listed internet companies by market value were Alibaba (US$253.41 billion), Tencent (US$135.50 billion), Baidu (US$80.32 billion), Jingdong (US$31.52 billion) and Netease (US$13.01 billion). Since Alibaba’s IPO in September 2014, it has been the biggest internet company in China.

Mobile Alibaba ranked top among China mobile shopping providers with market share of 86.2% in 2014, followed by Jingdong and Vipshop. Alibaba’s Taobao and Tmall played the most important roles in China mobile shopping market.

Read more about Alibaba: INFOGRAPHIC: Alibaba Investment Timeline 2005-2014

Also read: BrandZ™ Top 100 Most Valuable Chinese Brands 2015: 3 of Top 5 are Internet companies

Netease completed 2014 with a 42.5% YoY increase in Q4 revenues, led by a 35.7% increase in online game services, a 22.7% increase in advertising services and a 224.2% increase from Netease expanding e-mail, e-commerce and others business.

Netease total revenues for Q4 2014 were RMB3,683.6 million ($593.7 million), compared to RMB3,325.9 million in Q3 2014 and RMB2,585.1 million in Q4 2013.

Online games revenues were RMB2,863.3 million ($461.5 million) for Q4 2014, compared to RMB2,459.6 million in Q3 2014 and RMB2,109.5 million in Q4 2013.

Advertising revenues were RMB439.5 million ($70.8 million) for Q4 2014, compared to RMB478.3 million and RMB358.2 million for Q3 2014 and the Q4 2013.

Revenues from e-mail, e-commerce and others were RMB380.8 million ($61.4 million) for Q4 2014, compared to RMB388.0 million in Q3 2014 and RMB117.5 million in Q4 2013.

Related: Netease Had 680M Registered E-mail Users by Q2 2014

Netease gross profit was RMB2,485.4 million ($400.6 million), compared to RMB2,258.4 million in Q3 2014 (an increase of 10%) and RMB1,727.2 million in Q4 2013 (an increase of 43.9%). Net profit totaled RMB1.3 billion ($204.9 million), compared to RMB1.2 billion in both Q3 2014 and Q4 2013.

Netease Fiscal Year 2014 Financial Results

Total revenues for fiscal year 2014 were RMB12.5 billion (US$2.0 billion), compared to RMB9.8 billion for the preceding fiscal year.

• Revenues from online games were RMB9.8 billion (US$1.6 billion), compared to RMB8.3 billion in 2013
• Revenues from advertising services were RMB1.6 billion (US$250.1 million), compared to RMB1.1 billion
• Revenues from e-mail, e-commerce and others were RMB1.1 billion (US$179.5 million), compared to RMB368.0

Gross profit for fiscal year 2014 was RMB8.5 billion (US$1.4 billion), compared to RMB6.7 billion in 2013. The increase in gross profit for fiscal year 2014 was primarily driven by increased revenues from online game services, advertising services and e-commerce business.

Related: Netease owns one of the top news app in China

The increase in online game services gross profit in 2014 was primarily attributable to increased revenues from the Company’s self-developed games such as Fantasy Westward Journey II, New Westward Journey Online II and various mobile games, as well as from Blizzard’s Hearthstone^®: Heroes of Warcraft™.

The increase in advertising services gross profit in 2014 was due to a rise in demand, mainly from the automobile, communication services and foods and beverages sectors, as well as from the increased monetization of the NetEase Mobile News Application and the impact of the 2014 FIFA World Cup.

The improvement in e-mail, e-commerce and others gross profit in 2014 was primarily attributable to an increase in revenue from NetEase’s e-commerce business.

Total operating expenses for fiscal year 2014 were RMB3.7 billion (US$594.1 million), compared to RMB2.4 billion for the preceding fiscal year. The increase in operating expenses in 2014 was primarily due to increased marketing expenses as a result of marketing and promotional activities for NetEase’s online games, e-commerce and advertising services businesses, mainly due to the 2014 FIFA World Cup, and increased research and development expenses resulting from increased headcount and average compensation.

Net profit for fiscal year 2014 totaled RMB4.8 billion (US$766.6 million), compared to RMB4.4 billion for the preceding fiscal year. For fiscal year 2014, Netease reported a net foreign exchange loss of RMB18.0 million (US$2.9 million), compared to a net foreign exchange loss of RMB15.3 million for the preceding fiscal year.

Also read: Baidu’s Performance in 2014

Interbrand, a brand consultancy company, released its 2014 Best China Brands report last week. Tencent claims the #1 position with China Mobile dropping to #2.

Eight brands entered the report this year, including Alibaba Group (#3), Huawei (#13), PICC (#20), Chow Tai Fook (#22), JD.Com (#25), 360 (#41), DEEJ (#48), Lao Feng Xiang (#50). In light of digital and mobile technology transforming the global marketplace, there appears to be increasing similarities between this year’s top Chinese brands and those brands recognized on the world stage.

“Brands across geographies have reached a pivotal point in terms of their development,” said Jez Frampton, Interbrand’s Global Chief Executive Officer. “They are entering what Interbrand has defined as the Age of You—and they are working to develop truly personalized and curated experiences around the individual consumer that this forthcoming age demands. Brands from all categories and sectors are getting “smarter” – with products and devices working in concert with one another, across supply chains and in tandem with our own individual data sets.”

The brand valuation methodology used for Best China Brands is the same methodology Interbrand uses to determine its annual Best Global Brands ranking. Interbrand examines three key aspects that contribute to a brand’s value:

• The financial performance of the branded product and service
• The role the brand plays in influencing customer choice
• The strength the brand has to command a premium price or secure earnings for the company.

The 2014 Best China Brands illustrate that those brands that have embedded technology and mobile applications throughout their core offerings have performed the strongest. Meanwhile, brands from more traditional industries demonstrated great potential as well. Overall, the total brand value of this year’s 50 Best China Brands increased 22 percent when compared to the total value of the 50 Best China Brands in 2013, representing the largest increase in the table’s overall brand value since the inception of Best China Brands. The strong performance of China’s Internet brands marks the end of an era for the financial services and telecommunication brands that had previously dominated the Best China Brands ranking.

With eight new brands making an appearance, the Best China Brands ranking has become more diversified and, consequently, Interbrand has been able to identify the following emerging trends:

The new ecosystem is cultivating the growth of super brands.

The total brand value of Internet brands has increased from 11 percent to 24 percent compared to last year, making the industry the second most valuable after the financial services industry. TAB (Tencent, Alibaba and Baidu), in particular, are either cooperating with or surpassing traditional industries in changing how consumers live, work, learn, and connect with each other and the world at large. Since the second half of 2012, TAB has acquired and invested in a wide-range of companies, including those representing the following sectors and industries: financial services, entertainment, education, and healthcare. As a result, these leading brands are creating entirely new brand ecosystems aimed at improving customer convenience and overall quality of life for all.

Mobile Internet, the Internet of Things, and Big Data have equipped brands with the power to change the word.

Mobile Internet, the Internet of Things, and Big Data not only provide opportunities for revolutionizing and changing traditional industries and Internet brands, but have also created greater synergy as a result of cross-platform collaborations—propelling the transformation and progress of society on a larger scale. Huawei, Lenovo, Haier, Gree and Midea particularly stand out, as they continue to actively explore and develop the concept of “smart city” and “smart home.”

Banking and Telecom industries call for transformation—a test of foresight and innovative capability.

The growth rate of the banking industry (12 brands earned positions on this year’s Best China Brands ranking) continues to slow down with the top four banks garnering less than 5 percent growth in brand value. Both state-owned and private commercial banks face greater challenges and more competitive pressure than ever before and are urgently in need of a “second transformation.” Those banking brands that possess foresight and innovative capabilities have undergone transformation either on their own or by collaborating with another brand—and have maintained their double-digit growth as a result. The business of voice calls and text messages for the Chinese telecom industry continues to decline under the proliferation of Mobile Internet. Facing numerous difficulties, Chinese telecom brands have implemented a series of actions to accelerate transformation. Only time will tell if such actions are too little too late or have the desired impact.

In addition to the trends outlined above, the significant movement amongst the 2014 Best China Brands also reflects four key challenges that Chinese enterprises face in the age of mobile Internet:

Revisit the concept of the age of Mobile Internet

Many Chinese enterprises lack a deep understanding of brand strategy and digital strategy. Their knowledge of ‘digital’ is limited to brand communication channels (online ads, official Wechat and Weibo) and e-commerce channels. Chinese enterprises need to adjust their mindset in both strategies to executional levels in the Age of Mobile Internet.

Emphasize a brand’s authenticity and differentiation.

Building a brand requires the coordination of all departments. A marketing department could be responsible for brand communication, but if no other departments, including sales and operations for example, do not support the corresponding brand experience, it would result in an inconsistent brand experience for the users, thereby reducing the brand’s level of authenticity, Differentiation is the perceived difference and uniqueness of the brand vis-à-vis the competitors. Without clear brand differentiation, brands can only compete on price. A brand’s core competency has shifted from technological capability to the ability to influence customers and consumers. If a brand were to build on its authenticity and differentiate itself from out inside out, it holds greater potential to bring greater value to its brand.

Clarify the direction of brand development.

Compared to great international brands, Chinese brands have a tendency to lack a clear brand vision. A clear brand vision can give a brand depth and bring it to life, garnering recognition and loyalty from the public. In contrast, those organizations lacking clear brand vision can only compete on price and thereby must work all the harder to remain relevant in today’s rapidly-changing Chinese and global marketplaces.

“Imaginative” becomes a key challenge for Chinese brands.

Today, Chinese enterprises need to think about how to create new brand experiences with their consumers instead of simply answering consumers’ current needs. Therefore, Chinese organizations need to inject a tremendous amount of imagination into their brands and into the experiences they build around those brands.

“The reason why Chinese brands face so many challenges and are operationally big, while fundamentally weak, lies in the gap of authenticity, relevance and differentiation compared to world’s most influential and powerful global brands,” said James Wang, General Manager of Interbrand Beijing. “Many Chinese enterprises are still in the early stages of brand development, or what Interbrand calls the Age of Identity. However, with every great challenge there lies a great opportunity.”

Yao Chen Gang, General Manager of Interbrand Shanghai also noted, “The Age of Mobile Internet brings great opportunity for Chinese brands to outpace competitors. The annual shipments of Chinese 4G smartphones can surpass a hundred million. Based on the economic value brought by Mobile Internet, the scale of China will likely be 3 to 4 times of the United States in the future. In this age, brand owners should clarify the brand’s vision, infuse creativity and imagination, create a well-rounded brand experience and co-create value together with consumers. With Huawei becoming the first Chinese brand to enter the Best Global Brands ranking, we look forward to seeing many more Chinese brands earn a top position in the near future.

Click here to read the report in Chinese (PDF).

Stats of Top Selling Brands on Taobao/Tmall in 18 Categories in Sep 2014

Netease total revenues for the third quarter of 2014 were RMB3,325.9 million (US$541.9 million), compared to RMB2,951.9 million and RMB2,514.3 million for the preceding quarter and the third quarter of 2013, respectively.

Its net profit for the third quarter of 2014 totaled RMB1.2 billion (US$188.8 million), compared to RMB1.2 billion and RMB1.0 billion for the preceding quarter and for the third quarter of 2013, respectively.

Revenues from online games were RMB2,459.6 million (US$400.7 million) for the third quarter of 2014, compared to RMB2,336.5 million and RMB2,105.5 million for the preceding quarter and the third quarter of 2013, respectively.

Revenues from advertising services were RMB478.3 million (US$77.9 million) for the third quarter of 2014, compared to RMB389.1 million and RMB298.8 million for the preceding quarter and the third quarter of 2013, respectively.

Revenues from e-mail, e-commerce and others were RMB388.0 million (US$63.2 million) for the third quarter of 2014, compared to RMB226.3 million and RMB110.1 million for the preceding quarter and the third quarter of 2013 (252.5%), respectively.

Netease YiChat (Yixin) provides a platform for integrating their mobile applications and services. With a focus on our ‘Fresh Social Life’ strategy, the introduction of exciting new functions has supported their growing YiChat user base and increased activity levels.

Our third quarter revenues were driven in part by the success of a number of our self-developed games, and our strategy to increase our focus on mobile games is progressing well. We saw standout performances from games including the PC and mobile versions of Fantasy Westward Journey II, as well as our mobile card battle game, Mini Westward Journey. New Westward Journey Online II also delivered a strong performance following the launch of an expansion pack in July and an item-based version in August. For our licensed games,Blizzard Entertainment’s Hearthstone^®: Heroes of Warcraft^™ (‘Hearthstone’) performed well, and we rolled out Curse of Naxxramas^™, Blizzard’s first solo adventure for this game, in July. We continue to work closely with Blizzard to bring exciting new games to Chinese audiences, and an early test version of Blizzard’s free-to-play, online team brawler Heroes of the Storm^™, was launched in China in October. We are also looking forward to the Chinese launch of the fifth expansion for Blizzard’s World of Warcraft^®, Warlords of Draenor^™, on November 18, 2014

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