NetEase founder William Ding.
Zhang Peijian/VCG via Getty Images
China’s wobbly economic recovery and uncertain outlook have hurt the fortunes of many of the country’s billionaires, but not so much for online gaming mogul William Ding. The 51-year-old founder of NetEase, China’s largest game company after Tencent, has managed to add a whopping $12.2 billion to his net worth, thanks to a slew of blockbuster games. But now Ding might be facing an imminent test on whether the momentum can be sustained.
Ding, who has long been competing with Tencent’s billionaire cofounder Pony Ma in the online gaming market, is now the country’s fourth richest person with a net worth of $31 billion on the Real-Time Billionaires List. Although the bespectacled and soft-spoken tycoon is still one notch below Ma’s $35.6 billion in the wealth rankings, NetEase has fared better with investors. Dual-listed in Nasdaq and Hong Kong, the company’s shares have soared 80% since bottoming last October. From the beginning of this year, 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.
Analysts say the billionaire, who derives the majority of his wealth from a 45.5% company ownership, is less susceptible to macro headwinds by focusing on gaming. The sector is usually not impacted 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. Tencent, on the other hand, gets almost half of its revenues from other businesses, including advertising and payment, which are more closely intertwined with consumer spending and corporate budgets.
And 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. 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. 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.”
NetEase declined to make Ding available for an interview. Under the low-profile mogul, who is said to have a hands-on management style and often bypasses mid-level managers to work directly with coders, the company might make AI a cornerstone of its future development. In a July speech delivered during a conference organized by the Zhejiang province of China, which has been confirmed by the company, Ding said NetEase would invest more than $1.4 billion every year to train AI-based models and explore combining the technology with games, as well as other industries such as education.
The billionaire has a stake in the latter, as NetEase also generates sales from its New York-listed online learning arm Youdao, which provides digital tools such as an eponymous translation service in addition to e-courses in STEM education as well as adult vocational training. But gaming accounted for more than 80% of its $3.6 billion in revenues in the first quarter, while net income stood at $983.6 million.
Ding is also known for his personal interest in sustainable agriculture. The mogul, 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 first three months of the year.
To be sure, NetEase could face challenges in keeping players engaged. Charlie Chai, an analyst at Shanghai-based 86 Research, says he’d advise investors to take profit now as downloads might slow after the initial phase, where the company put more strength in operating and promoting the games. Risks are also highlighted by Blue Lotus Research Institute, which wrote in a July note published on Smartkarma that new games in June might face lifecycle issues.
“Although Justice Mobile achieved remarkable results in its initial release (>10 mn downloads on the first day, per our est.), we expect its performance to fade afterwards,” the firm wrote. “This is primarily because the development team initially provided too much content, and subsequent content production capacity are expected to fall behind.”
But the analysts have also pointed out NetEase’s strong game developing abilities, with Blue Lotus adding in the note that “the likelihood of continuously launching successful products is still high.”
Ding, in the meantime, is expanding abroad. The mogul has said he hopes to eventually get half of NetEase’s sales from international markets, up from the current 10-plus percent. To that end, NetEase is partnering with Warner Bros. Discovery to promote the role-playing video game Harry Potter: Magic Awakened globally. It has also recently acquired French game developer Quantic Dream and Canadian gaming studio SkyBox Labs. In the Japanese market, the company’s Knives Out battle royale game has been a hit.
Outside Japan, however, the company hasn’t had much success, notes Morningstar’s Su. Tommy Wong, a Hong Kong-based analyst at China Merchants Securities, says he’d like to see the company accelerate its overseas expansion. “It is something they talked about over the past years,” he says. “But right now it is only around 10%.”