Text | Yifan Finance Xing Shubo

In June 2000, NetEase was listed on Nasdaq, and Ding Lei enjoyed flowers and applause. At that time, NetEase's main product was free email.

In the eyes of American investors, NetEase Mailbox, which is comparable to Yahoo Mailbox, is the best communication tool in the Internet era. In the same year, Tencent’s users surged, but it could not find a profit model. Ma Huateng approached Ding Lei, his entrepreneurial idol at the time, and wanted to sell QQ. The valuation was around one million yuan, but Ding Lei refused.

One is that it coincided with the Internet bubble, and Ding Lei had no time to take care of it; the other was that the email system was very popular at the time, and Ding Lei personally felt that QQ technology was backward.

Everyone knows what happened next.

In 2002, NetEase launched "Westward Journey" and found a new growth point in the Chinese Internet ecosystem, the game. The surge in gaming business made NetEase proud in 2003. It jumped from US$0.95 in early 2002 to a high of US$70 in 2003. The growth rate was comparable to that of virtual currencies. It was not inferior to that at the beginning of this year and became the "No. 1 Nasdaq stock". .

"Westward Journey II"

Tencent looked jealous.

According to the "Tencent Biography", Ma Huateng proposed that Tencent make games at the time, but several partners were worried that Tencent had no game genes and believed that games could only be done by companies like NetEase and Shanda.

But Ma Huateng doesn’t believe in evil. Sure enough, the quality of the first few Tencent games was extremely poor, the servers kept going offline, and most of them were involved in plagiarism. Compared with the glory days when everyone in Internet cafes had a "Westward Journey" point card, the future of Tencent games is bleak.

But 20 years later, Tencent has become the leader in the gaming industry, while NetEase has become a follower.

01 The arrogance and helplessness of the second best player in the industry

Let’s look at two pictures first:

Tencent's game conference on May 16 set up six major chapters: "Social Service", "High-energy Passion", "Leisure and Stress Reduction", "Dimensional Shuttle", "Cultural Innovation" and "Technological Exploration", with the intention of building a " "Super Digital Scene", which coincides with the recently popular concepts of the Metaverse and the True Internet. At this press conference, Tencent released more than 60 products. In addition to the appearance of several popular old games, it mainly focused on new products and new IPs, which has the meaning of "the Sun and Moon God Sect unifies the world."

Four days later, NetEase was not to be outdone and also released more than 60 products, gathering 12 major IPs under NetEase. According to statistics from game media 17173, NetEase has only 27 new games, and the rest of its products are old games used to prop up its appearance. The "Journey to the West" series alone has 7 games in total, accounting for more than one-tenth. There are also products that have nothing to do with games, such as campus recruitment and NetEase membership. This move seems like Yue Buqun wants to be the leader of the martial arts alliance and has to use the "Sunflower Collection" to make up for it.

You can have fewer products, but you can’t lose face. This is the arrogance and helplessness of the industry’s second best.

What is arrogant is the original ability of NetEase games and the arrogance of "the ancestors were once rich". What is helpless is that the current game market is no longer the era where you can make money by selling cards 20 years ago.

Although Tencent and NetEase are both platform companies focusing on games. But according to the financial reports of both parties in the first quarter of 2021, it is obvious that Tencent’s revenue is healthier, while NetEase relies more on games.

NetEase's first quarter financial report showed that its net revenue was 20.5 billion yuan, and its online game service net revenue was 15 billion yuan. Games contributed more than two-thirds of NetEase's revenue.

NetEase financial report

Tencent’s revenue in the first quarter was 135.303 billion yuan, with total mobile game revenue and PC client game revenue of 41.5 billion yuan and 11.9 billion yuan respectively. Tencent games contribute more than one-third of Tencent's revenue.

Tencent has enough food in its belly and is not panicking. It can delve into the industry chain and expand the scope of IP cooperation. At the same time, it can maintain its absolute control over large-scale competitive mobile games such as MOBA and FPS.

NetEase, which is a "small business", is obviously a little impatient, from its founder Ding Lei to the launch of new game products and the development of new games.

Because from all levels, games are too important to NetEase. If the game catches a cold, NetEase's financial report will not look good, and Ding Lei will get angry.

In 2017, during a press conference held by the production team of NetEase's Xianxia game "Ni Shui Han", Ding Lei "went crazy" and cursed. In addition to NetEase executives, the attendees of this press conference were also many game media, and there was even a live broadcast on NetEase CC. Immediately, a recording of the on-site swearing was spread all over the Internet.

(actual video)

According to Aurora Big Data's "2017 Mobile Game Market Research Report", among the top ten mobile game penetration rates in 2017, NetEase only had one game, "Onmyoji", on the list, ranking ninth; the top three were all games owned by Tencent, and even The game's auxiliary application "King of Glory Assistant" actually ranked fourth.

From the perspective of game categories, NetEase's penetration rate in the role-playing category was only single digits that year: 4.4%. The rest of the share was occupied by real-time strategy, casual puzzles and even game assistants, and these are Tencent's strengths.

In 2018, NetEase's penetration rate in role-playing games increased, but it did not rely on the fairy tale "Ni Shuihan", but a new game that is a mix of role-playing and shooting games.

In January 2018, NetEase's mobile chicken-fighting games "Knives Out" and "Terminator 2" took the lead and occupied the mobile chicken-fighting game market. NetEase's game penetration rate also reached 7.1%.

In February and March, with the entry of the orthodox mobile version of Tencent's PC game "Peace Elite", the penetration rate of Tencent's mobile games reached 38%, and the number of users exceeded 400 million, reaching the peak for the whole year. NetEase's chicken game was squeezed out of the Chinese market and turned to the Japanese market to seek opportunities. It has also won the number one ranking of Japanese mobile games several times.

At this stage, the gap between NetEase and Tencent is not just in size. In the field of gaming, there are deep-seated reasons.

Sun Tao, CEO of Huawen Games, once wrote in an article: "Those who have narrow vision, do not understand the layout, and are eager to launch products are naive. NetEase is like this. Its ability, understanding, and magnanimity are far behind Tencent, and NetEase cannot compare."

He mentioned in the article that NetEase's game "New World 2" did not give credit to the production staff, copied the automatic path-finding system of the web game, and did not respect the production staff nor the player's IQ; NetEase's game skills and professions plagiarized "World of Warcraft", It is not the originality it claims to be; the art style of "Onmyoji" is inconsistent; the recharge experience of "Late Land" is poor, the card drawing logic is confusing, etc.

Finally, Sun Tao concluded, "NetEase's main products are all based on project thinking, while Tencent's main products are all based on corporate thinking. They are not on the same scale, and the decision-making is obviously different, which affects the future pattern."

02 Following the trend vs. rashly advancing

In the new game scene, NetEase is usually a follower of traditional game categories such as MOBA, FPS, and ARPG, except for the "Journey to the West" series. MOBA "Decisive Battle!" The same is true for "Heian Kyo" and FPS "Knives Out". They took advantage of the game trend of the year to make quick money.

When it comes to niche games or even newer categories, NetEase Games seems too impatient. For example, "Light Encounter" was born out of a niche independent game. Its unique gameplay and light and shadow effects are actually more suitable for display on the console. Mobile games cannot bring out the full charm of this aesthetically oriented independent game. However, NetEase has made mobile games, and in terms of operation Not good.

Asymmetric competitive mobile games should have been a powerful tool to challenge Tencent’s MOBA competition, but NetEase did not make good use of it. After NetEase launched the 1v4 "Identity V" around April 2018, asymmetrical competition once again revived NetEase games. However, in October of that year, this number dropped to 40 million users, with a penetration rate of only 3.8%, indicating that Most players are not optimistic about asymmetric competitive mobile games.

"The Fifth Personality"

The reason is that asymmetric mobile games are difficult to achieve balance because of the unequal number of players, and balance is related to the fairness of the game. Without fairness, how can we talk about competition?

In addition, MOBA games have actually become an important social place for Generation Z after social software, and they also have the ability to interact with voice and text messages. This allows the game to not only play games, but also have social attributes such as making friends, sharing, and trading.

In 2017, Yao Xiaoguang, then president of Tencent Interactive Entertainment’s Tianmei Studio Group, talked about “Honor of Kings” for the first time, saying that it had become a new way of socializing.

Mr. Liu Chiping, President of Tencent, once expressed a point of view. He believes that the current Internet is very similar to the martial arts world written by Jin Yong. In the martial arts world, a group of people often cannot defeat a person with a high level of martial arts; in the Internet world, no matter how many products there are, they cannot defeat a product with higher knowledge.

Yao Xiaoguang strongly agrees with this point of view. He said that if the perception is wrong, you will not be able to accomplish anything even if you are too busy every day.

In fact, the earliest in-game social system was "Westward Journey", but unfortunately, NetEase is still posting game advertisements in 163 and 126 mailboxes, and has not been able to make breakthroughs in social networking, especially game social networking, like Tencent. This may be the cognitive difference that Liu Chiping and Yao Xiaoguang think.

"Westward Journey II" communication channel

The same is true for "Identity V".

Asymmetric games that are more immersive have neither strong social elements nor compact competitiveness. NetEase using this game to try to win in the MOBA game camp is equivalent to cutting off its own meridians. The value of asymmetric games lies in storytelling, experience, and immersion. In fact, they can develop into a product ecology similar to the currently popular offline script killing. However, NetEase did not do so and continued to run blindly on the road to asymmetric games.

This year NetEase is still increasing its focus on asymmetric mobile games and has begun internal testing of its new 2v4 game "Mission Zero", hoping for good results. After all, it would be too monotonous if the MOBA game only had "Honor of Kings".

But whether NetEase can increase the fairness and sociability of the game still depends on whether NetEase has learned the lessons of "Identity V".

03 Can NetEase, which is “floating”, return to putting content first?

NetEase mentioned a concept at this press conference, content first, bringing the game back to the game.

At present, this concept cannot be wrong in the current game environment, but it is not powerful enough and is more like a coping strategy than a goal.

As early as 2018, a report by iiMedia Consulting mentioned that the game industry has reached an inflection point, that is, from an incremental market to a stock market, and player demand has begun to change from being able to play to being able to play well. This means that content-oriented high-quality games will rise to the top, while channel-oriented low-quality krypton gold games will withdraw from the stage of history.

As can be seen from market development, Shanghai F4, MiHoYo, Lilith, etc., which insist on high-quality games, can win a large market with just one or two games; while low-quality web games have become popular with the web games of Sanqi Interactive Entertainment and Youzu.com. Mobile games are also gradually declining; social marketing is beginning to compete with app stores; new players such as ByteDance and Alibaba Interactive Entertainment have also begun to enter the game and focus on high-quality games.

MiHoYo "Genshin Impact"

What is NetEase doing at this time? Paddling.

The old IPs "Westward Journey" and "Fantasy Westward Journey" attract middle-aged and elderly players under the banner of sentiment; classic games such as "World of Warcraft" and "Eve of Star Wars" continue to contribute cash flow, while gradually losing market share like a frog boiling in warm water; "Yin Yang" Works such as "The Master" and "The Coast of the Land" could have made great strides in new categories, but they still can't escape the cycle of online games that require buying more money to draw cards, not to mention these are already old games.

In the era of Tencent's rise, NetEase was second; in the era of Shanghai F4's rise, NetEase also lagged behind; although NetEase was always able to push niche themes into the mainstream online game and mobile game market as soon as possible, it was like "Knives Out". 》Generally, in the end, you can always be intercepted halfway by others, and then use your rich experience, resources, financial resources, and manpower to defeat NetEase.

At this press conference, we can still see that NetEase is sparing no effort to launch new categories and new theme games, such as the apocalyptic ocean survival-themed "Codename: ATLAS", the apocalyptic steampunk-themed "IN", and the single-player plot focusing on cyberpunk style. The reasoning mobile game "Unknown Record" and the 2v4 stealth confrontation mobile game "Mission Zero".

NetEase Games 2021 Online Conference

From the perspective of players, media and game practitioners, such new attempts are of course welcome. After all, new ideas and new gameplay are the vitality of the game industry. But for NetEase itself, people feel sorry for its misfortune and angry that it cannot fight for its dominance in the market.

Or it can be said that NetEase's original intention of constantly developing new products is not that it does not want to rest on its laurels, but that its "old capital" of original creation and agency has been exhausted.

NetEase is not willing to be kicked off the poker table, it just wants to be on the poker table.

At this juncture when old rivals continue to squeeze the market and new manufacturers continue to conquer cities and territories, whether NetEase can maintain its status as the second largest player in the world does not depend on how many new games NetEase can release every year. As Tencent Liu Chiping said: "The rules of the world are as follows: A quality game is much better than a few dozen mediocre games."

04 The market will not always give NetEase the opportunity to be the second best player.

This NetEase press conference all revealed its tone of pleasing Generation Z.

But Generation Z is not a business term, but hundreds of millions of real players behind it. Moreover, when these players grew up, the number and quality of games they played far exceeded that of the generation of players in Internet cafes 20 years ago.

For the Internet cafe generation, Bai Yueguang might have been NetEase and Shanda 20 years ago, and Tencent might have been Tencent 10 years ago. Now, both NetEase and Tencent are facing the dilemma of being abandoned by the well-informed Generation Z. One of the main reasons is that the new generation no longer plays mobile phones, but consoles.

The current global console game market share is 32%, split between mobile games and client games. As mobile gaming grows, the console market declines slightly. But in the Chinese market, although the current market share of console games is not high, the sales of the three major game consoles are rising. In particular, the popularity of masterpieces such as "Cyberpunk 2077" and "The Legend of Zelda: Breath of the Wild 2" will gradually divert players from other platforms.

"Cyberpunk 2077"

People move up the ladder, and after players have tried the charm of 3A games, it is difficult to go back to low-level games.

And with the gradual growth of residents' income, China's console game market will continue to approach the world's mainstream level, accounting for at least 30% of the market share.

In the competition that can be seen with the naked eye, big game companies are either transforming or holding on to their basics; small but beautiful game companies will firmly control market segments; the most uncomfortable thing is the industry's second best, climbing up to the ceiling It is blocked, and if it goes down, it will not be able to compete with those companies that have done their best and invested all the company's resources in one or two high-quality games.

By then, upstream technical resources and art resources will be more concentrated on the head platform; downstream players will also become increasingly demanding on game quality.

Under siege from all sides, old players who relied on their emotions returned to make daily living, and new players may not necessarily buy NetEase games. They don’t have so many resources to follow Tencent’s big net to fish, and they are not willing to follow MiHoYo and only make one or two games. After all, in the past NetEase is also the leader in gaming.

If he doesn't "succeed" if he's high, and if he doesn't "succeed" if he's low, Ding Lei will be anxious. After all, the outside world often sees Ding Lei taking his time raising pigs, singing, and entertaining guests, but the market will not always give NetEase the opportunity to be the second best.

Playing a game is like sailing against the current. If you don't advance, you will retreat. It's the same for everyone.