Businessmodel of NetEase.com

Customer Segments

NetEase has a segmented market business model, with customer groups that have slightly different needs. The company targets its offerings at consumers and businesses.

Value Proposition

NetEase offers one primary value proposition: brand/status.

The company creates accessibility by providing a wide variety of options. Its Internet services include everything from Internet to e-mail to social networks to finance services to payment platforms.

The company has established a strong brand due to its success. It is one of the top Internet technology companies in China. It develops some of the country’s most popular online PC and mobile games, including Fantasy Westward Journey II, New Westward Journey Online II, Tianxia III, Heroes of Tang Dynasty Zero, Ghost II, Battle to the West, and The World HD.

It is also one of the largest providers of free e-mail services in China, and provides advanced features such as facial and voice search recognition. Lastly, it has more than 15,000 employees and has offices in Beijing, Hangzhou, Shanghai, Guangzhou, Seoul, Hong Kong, Tokyo, Sydney, Frankfurt, Milan, and San Francisco.

Channels

NetEase’s main channel is its website. Its other channels include app stores, physical retail stores (where it sells prepaid cards for game play), and its direct sales team (primarily for business customers).

The company promotes its offerings through its social media pages, sponsorships, advertising (online, print, and outdoor), and in-game marketing campaigns.

Customer Relationships

NetEase’s customer relationship with consumers is primarily of a self-service nature. Customers utilize its services while having limited interaction with employees.

NetEase’s customer relationship with businesses is primarily of a personal assistance nature. Its employees work closely with clients to shape strategies for services such as advertising.

Key Activities

NetEase’s business model entails designing, developing, and delivering its services for customers.

Key Partners

NetEase partners with third-party promoters who market its online game titles to consumers in specific locations (primarily university campuses and Internet cafes) in order to extend its reach.

They receive a commission for any referrals that lead to sales. It also works with third-party manufacturers by incorporating their technologies into its solutions to enhance its offerings.

Key Resources

NetEase’s main resources are its human resources, who include the programmers, network engineers, and graphic designers that design and develop its services.

Its important physical resources include its over 39,000 network servers in China.

Lastly, it has relied on funding from investors, raising $8.75 million from two investors as of August 2005.

Cost Structure

NetEase has a cost-driven structure, aiming to minimize expenses through significant automation and low-price value propositions. Its biggest cost driver is cost of revenues, a variable expense.

Other major drivers are in the areas of sales/marketing and research/development, both fixed costs.

Revenue Streams

NetEase has two revenue streams.

• Service Revenues – Revenues generated from fees charged to users of online game services and e-mail, eCommerce, and other services
• Advertising Revenues – Revenues generated from fees charged to brands for advertising their offerings on its platforms