NetEase Inc (NTES) 2014 Q3 法說會逐字稿

Good day and welcome to the NetEase third-quarter 2014 earnings conference call. Today's call is being recorded. At this time I would like to turn the call over to Ms. Brandi Piacente. Please go ahead.

大家好，歡迎參加網易2014年第三季財報電話會議。今天的電話會議正在錄音中。現在我想將電話交給布蘭迪·皮亞森特女士。請您發言。

Thank you operator.

謝謝接線生。

Please note that the discussion today will contain forward-looking statements regarding the future performance of the Company and are intended to qualify for the Safe Harbor from liability as established by the US Private Securities Litigation Reform Act. Such statements are not guarantees of future performance and are subject to certain risks and uncertainties, assumptions and other factors. Some of these risks are beyond the Company's control and could cause actual results to differ materially from those mentioned in today's press release and this discussion. A general discussion of the risk factors that could affect the business and financial results is included in certain filings of the Company with the Securities and Exchange Commission including its Annual Report on Form 20F. The Company does not undertake any obligation to update this forward-looking information except as required by law.

請注意，今天的討論將包含有關公司未來業績的前瞻性陳述，旨在符合美國《私人證券訴訟改革法》規定的免責安全港條款。此類陳述並非對未來績效的保證，且受某些風險、不確定性、假設和其他因素的影響。部分風險超出公司控制範圍，可能導致實際結果與今天的新聞稿和本次討論中提及的結果有重大差異。本公司向美國證券交易委員會提交的某些文件（包括其20F表格年度報告）中包含了對可能影響業務和財務業績的風險因素的一般性討論。除非法律要求，否則本公司不承擔更新此前瞻性資訊的任何義務。

As a reminder, this conference is being recorded. In addition a webcast replay of this conference call will be available on the NetEase corporate website at ir.netease.com. I will now turn the conference call over to Mr. Onward Choi, Acting Chief Financial Officer who will read the prepared remarks on behalf of Mr. William Ding, Chief Executive Officer of NetEase.

溫馨提示：本次電話會議正在錄製中。此外，本次電話會議的網路回放將在網易公司網站ir.netease.com上提供。現在，我將電話會議交給代理財務長蔡安華先生，他將代表網易執行長丁磊先生宣讀準備好的演講稿。

Thank you Brandi. Before I begin please note that for the purposes of this discussion all percentages are based on renminbi.

謝謝布蘭迪。在開始之前，請注意，為了方便討論，所有百分比均以人民幣為單位。

Our portfolio of traditional online and growing mobile offerings continues to be embraced by China's dynamic online marketplace. During the third quarter our revenues increased by 32.3% year over year and 12.7% sequentially, with growth across each of our three business segments. Our growth was led by our online game services, which grew 16.8%, and our advertising services, which grew 60.1%. We also saw an increasing contribution from our email, ecommerce and others business, which improved by 252.5% compared with the same period last year.

我們傳統的線上業務和不斷增長的行動端產品組合繼續受到中國蓬勃發展的線上市場的青睞。第三季度，我們的營收年增32.3%，季增12.7%，三大業務部門均成長。其中，線上遊戲服務（成長16.8%）和廣告服務（成長60.1%）引領了成長。電子郵件、電商及其他業務的貢獻也不斷提升，與去年同期相比成長了252.5%。

During the third quarter we continued to see compelling user statistics for a number of our self-developed games and we were also encouraged by the adoption of our mobile games. Our strategy to increase our focus on mobile games and broaden our market reach is also progressing well as we ramped up R&D and marketing efforts in the third quarter.

第三季度，我們多款自主研發遊戲的用戶數據持續亮眼，行動遊戲的受歡迎程度也令我們備受鼓舞。隨著我們在第三季加強研發和市場推廣力度，我們更加重視行動遊戲並拓展市場覆蓋範圍的策略也進展順利。

Looking at some of our individual game performances, we saw standout results in the third quarter from 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 in strong performance as users welcomed the introduction of an expansion pack in July as well as an item-based version that came out in August.

綜觀我們各款遊戲的表現，《夢幻西遊2》的PC版和行動版以及卡牌戰鬥手遊《小西遊》在第三季均取得了優異的成績。 《新西遊Online II》也表現出色，用戶對7月推出的資料片以及8月推出的道具版表示歡迎。

For our licensed games, Blizzard Entertainment's Hearthstone - Heroes of Warcraft performed well and we rolled out Curse of Naxxramus, 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 the early test versions 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.

就我們的授權遊戲而言，暴雪娛樂的《爐石戰記-魔獸英雄傳》表現優異，我們在7月推出了暴雪為該遊戲打造的首款單人冒險遊戲《納克薩姆斯的詛咒》。我們將繼續與暴雪緊密合作，為中國玩家帶來令人興奮的新遊戲。暴雪的免費線上團隊競技遊戲《風暴英雄》的早期測試版已於10月在中國上線。我們也期待著暴雪《魔獸世界》第五個資料片《德拉諾之王》將於2014年11月18日在中國上線。

Our games are designed to withstand the test of time and engage our users in new and interesting ways and attract new users. The introductions of new expansion packs and unique game play are key to accomplishing these goals.

我們的遊戲旨在經受住時間的考驗，以新穎有趣的方式吸引玩家，並吸引新用戶。推出新的擴充包和獨特的遊戲玩法是實現這些目標的關鍵。

During the third quarter we launched new expansion packs for new Westward Journey Online III, Ghost II, Heroes of Tang Dynasty II and Heroes of Three Kingdoms. We have also released a handful of expansion packs so far this quarter. In October we released an expansion pack for Fantasy Westward Journey II and a comprehensive upgrade of the Legend of Tibet. And earlier this month we released another expansion pack for New Westward Journey Online II.

第三季度，我們為《新大話西遊3》、《倩女幽魂2》、《大唐英雄傳2》和《三國英雄傳》推出了新的資料片。本季度迄今為止，我們也發布了一些資料片。 10月份，我們發布了《夢幻西遊2》的資料片，並對《藏地傳奇》進行了全面升級。本月早些時候，我們發布了《新大話西遊2》的另一個資料片。

For the remainder of the year we have a number of new releases planned to help extend the longevity of our games and encourage new players to join our gaming community. To name a few, we are currently planning to release new expansion packs for, Tianxia III, Heroes of Tang Dynasty II and Legend of Fairy.

今年餘下時間，我們計劃發布一系列新遊戲，以延長遊戲壽命，並吸引新玩家加入我們的遊戲社群。例如，我們目前正計劃發布《天下三國》、《大唐英雄傳2》和《仙俠傳奇》的新資料片。

Throughout the fourth quarter we also plan to release new mobile titles that build on the successful September release of mobile games such as Stay Calm My Lord and Dark Blade. We are also excited to commercially launch our first-person shooter game Crisis 2015 in the fourth quarter.

我們也計劃在第四季推出一些新的行動遊戲，這些遊戲將以9月成功發行的《Stay Calm My Lord》和《Dark Blade》等手游為基礎。我們也很高興在第四季推出我們的第一人稱射擊遊戲《Crisis 2015》。

Next in the queue is our 3D oriental fantasy MMORPG, Revelation. Beta testing for this game has resulted in very positive feedback so far and we continue to develop this exciting new game in preparation for its commercial launch. We have an additional MMORPG under development. This game offers players an all-new warfare gaming experience and will begin the first-round testing later this year.

接下來是我們的3D東方奇幻MMORPG《天諭》。目前，這款遊戲的Beta測試回饋非常積極，我們將繼續開發這款令人興奮的新遊戲，為其正式發布做準備。我們還有一款MMORPG正在開發中。這款遊戲將為玩家帶來全新的戰爭遊戲體驗，並將於今年稍後開啟首輪測試。

As we have discussed on previous calls, the mobile market in China is thriving, making our social networking platform, YiChat, an ideal vehicle for integrating our mobile applications and services. During the quarter we continued to introduce a number of new and exciting functions. These new capabilities, such as window chat and integrated community photo sharing, are being well received by YiChat users. This supports our growing user base and increased activity levels on these platforms.

正如我們在先前的電話會議上所討論的，中國行動市場蓬勃發展，這使得我們的社交網路平台易信成為整合我們行動應用和服務的理想平台。本季度，我們繼續推出了一系列令人興奮的新功能。這些新功能，例如視窗聊天和整​​合社群照片分享，受到了易信用戶的熱烈歡迎。這支持了我們不斷成長的用戶群以及這些平台活躍度的提升。

Our focus remains on introducing new features that fit into our Fresh Social Life strategy. With that in mind you can expect to see even more differentiated and innovative social networking functions incorporated into YiChat in the future.

我們將繼續專注於推出符合「新鮮社交生活」策略的新功能。未來，您可以期待在易信中看到更多差異化、創新的社交網路功能。

Looking at our prosperous advertising services business, the top performing advertising verticals in the third quarter were automobile, food and beverage, and financial services. We saw additional monetization from our mobile news applications and the 2014 FIFA World Cup, which greatly supported revenue growth from this business segment in the third quarter.

我們蓬勃發展的廣告服務業務，第三季表現最佳的廣告垂直領域是汽車、食品飲料和金融服務。我們的行動新聞應用程式和2014年FIFA世界盃帶來了額外的商業化收益，大大支撐了該業務部門第三季的營收成長。

Our email service is also demonstrating steady momentum and by the end of the third quarter we had 710m email users.

我們的電子郵件服務也展現出穩定的勢頭，截至第三季末，我們擁有 7.1 億電子郵件用戶。

Additionally, we are very happy with the rapid growth of our ecommerce business during the period. Over the past few quarters, we have seen a considerable increase from this business driven by ecommerce sales.

此外，我們對本季度電商業務的快速成長感到非常高興。在過去幾個季度中，我們看到在電商銷售額的推動下，該業務實現了顯著成長。

We continue to look for ways to diversify and expand our offerings for the traditional online community and its rapidly expanding mobile counterpart. At the same time we remain dedicated to our roots of introducing innovative products and services. Key investments in our marketing and research capabilities enable us to further this growth and positions us well for our next wave of growth. As we near the end of the year and look to 2015, we are focused on introducing top quality offerings that diversify our portfolio, with complementary products and services that support our growth and strengthen our pipeline.

我們持續探索多元化發展之路，拓展面向傳統線上社群及其快速擴張的行動社群的服務。同時，我們始終秉持推出創新產品和服務的初衷。對行銷和研發能力的重點投資，使我們能夠進一步發展，並為下一波成長做好準備。年末將至，展望2015年，我們將專注於推出優質產品，豐富我們的產品組合，並提供互補的產品和服務，以支持我們的成長並強化我們的產品線。

This concludes William's update. Now I will provide a review of our third quarter financial results. I will primarily focus on the discussions of margins and expense fluctuations along with net profit.

William 的更新到此結束。現在我將回顧我們第三季的財務表現。我將主要討論利潤率、費用波動以及淨利潤。

Total sales tax for the third quarter of 2014 were RMB209.2m or $34.1m compared to RMB184.4m and RMB157.7m for the preceding quarter and the third quarter of 2013 respectively. The year-over-year and quarter-over-quarter increases in sales tax were mainly due to the increase in our total revenues.

2014年第三季銷售稅總額為人民幣2.092億元（約3,410萬美元），上一季及2013年第三季分別為人民幣1.844億元及人民幣1.577億元。銷售稅總額較去年同期成長主要源自於公司總收入的成長。

Gross profit for the third quarter of 2014 was RMB2.3b or $367.9m compared to RMB2b for the preceding quarter and RMB1.7b for the third quarter of 2013.

2014 年第三季毛利為人民幣 23 億元（3.679 億美元），而上一季為人民幣 20 億元，2013 年第三季為 17 億元人民幣。

The year-over-year and quarter-over-quarter increases in online games gross profit were primarily driven by increased revenues from certain of our self-developed games, such as Fantasy Westward Journey II and new Westward Journey Online II, as well as from our various mobile game products.

網路遊戲毛利與去年同期相比的成長主要得益於我們部分自主研發遊戲（如《夢幻西遊2》和《新大話西遊2》）以及各種手機遊戲產品收入的成長。

The year-over-year and quarter-over-quarter increases in advertising services gross profit were primarily the result of strong demand from the automobile, food and beverage, and financial services sectors, the monetization of our mobile news application and other mobile applications, as well as advertising revenue related to the 2014 FIFA World Cup.

廣告服務毛利年增率和環比成長主要得益於汽車、食品飲料和金融服務業的強勁需求、我們的行動新聞應用程式和其他行動應用程式的貨幣化，以及與 2014 年 FIFA 世界盃相關的廣告收入。

The year-over-year and quarter-over-quarter increases in email, ecommerce and others gross profit were primarily attributable to an increase in revenue from our ecommerce business.

電子郵件、電子商務和其他業務毛利的同比和環比增長主要歸因於我們電子商務業務收入的成長。

Gross profit margins for our online game business for the third quarter for 2014 was 77.2% compared to a gross profit margin of 77.6% and 79.7% for the preceding quarter and the third quarter of 2013 respectively. The year-over-year decrease in gross profit margins was mainly due to increased revenue contributions from both mobile games and licensed games as a percentage of our total online game revenues.

2014年第三季度，我們線上遊戲業務的毛利率為77.2%，上一季及2013年第三季的毛利率分別為77.6%及79.7%。毛利率年減的主要原因是手機遊戲和代理遊戲的收入占我們線上遊戲總收入的比例均上升。

Our gross profit margin for the advertising services business for the third quarter of 2014 was 66.3% compared to a gross profit margin of 60.9% and 59.4% for the preceding quarter and the third quarter of 2013 respectively. The year-over-year and quarter-over-quarter increases in gross profit margins were mainly due to enhanced economies of scale driven by revenue growth.

2014年第三季度，我們廣告服務業務的毛利率為66.3%，上一季及2013年第三季的毛利率分別為60.9%及59.4%。毛利率的年比和季增主要得益於收入成長所帶來的規模經濟效應。

Gross profit margin for the email, ecommerce and others business for the third quarter of 2014 was 49.6% compared to a gross profit margin of 35.7% and 4.1% for the preceding quarter and the third quarter of 2013 respectively. The year-over-year and quarter-over-quarter increases in gross profit margins were mainly due to increased revenue from our ecommerce business, which has relatively high gross profit margins.

2014年第三季電子郵件、電商及其他業務的毛利率為49.6%，上一季及2013年第三季的毛利率分別為35.7%及4.1%。毛利率的年比和季增主要得益於毛利率相對較高的電商業務收入的成長。

Our total operating expenses for the third quarter of 2014 were RMB1.1b or $172.6m compared to RMB823.7m and RMB635.2m for the preceding quarter and the third quarter of 2013 respectively.

2014 年第三季度，我們的總營運費用為 11 億元人民幣（1.726 億美元），而上一季和 2013 年第三季分別為 8.237 億元人民幣和 6.352 億元。

The year-over-year increase in operating expenses was mainly due to increased selling and marketing expenses for our ecommerce business and advertising services promotions, most of which were related to our mobile news applications and the 2014 FIFA World Cup, promotions of our online and mobile games, as well as staff-related research and development costs resulting from an increase in the number of employees and average compensations.

營業費用較去年同期成長主要由於電子商務業務和廣告服務促銷的銷售及行銷費用增加，其中大部分與我們的行動新聞應用程式和2014年FIFA世界盃有關，以及我們的網路和手機遊戲的推廣，以及因員工數量和平均薪資增加而產生的與員工相關的研發成本。

The quarter-over-quarter increase in operating expenses was mainly due to increased selling and marketing expenses for our online games and ecommerce business as well as high staff-related research and development expenditures and share-based compensation costs.

營業費用較上季成長主要是由於網路遊戲和電子商務業務的銷售和行銷費用增加，以及與員工相關的研發支出和股權激勵成本增加。

For the third quarter of 2014 we recorded a net income tax charge of RMB197.3m or $32.2m compared to RMB97.9m and RMB206.5m for the preceding quarter and the third quarter of 2013 respectively. The effective tax rate for the third quarter of 2014 was 14.4% compared to 7.4% and 16.5% for the preceding quarter and the third quarter of 2013 respectively.

2014年第三季度，我們錄得淨所得稅費用為人民幣1.973億元（約3220萬美元），而上一季和2013年第三季度分別為人民幣9790萬元和人民幣2.065億元。 2014年第三季的有效稅率為14.4%，而上一季和2013年第三季分別為7.4%和16.5%。

The year-over-year decrease in the effective tax rate was mainly due to the fact that certain of our subsidiaries were approved as key software enterprises in the fourth quarter of 2013 and are subject to a preferential tax rate of 10% for 2014.

有效稅率年減主要由於公司部分子公司於2013年第四季被認定為重點軟體企業，2014年可享有10%的優惠稅率。

The quarter-over-quarter increase in the effective tax rate was mainly due to the fact that we recognized certain tax credits related to annual tax-filing benefits in the second quarter of 2014, most of which comprised extra tax deductions for research and development expenses approved by the tax authorities.

有效稅率環比增長的主要原因是，我們在2014年第二季度確認了與年度納稅申報優惠相關的部分稅收抵免，其中大部分為稅務機關批准的研發費用額外稅收抵免。

We also had a net foreign exchange gain of RMB2.2m or $0.4m in the third quarter of 2014 compared to a net foreign exchange loss of RMB20.2m and a net foreign exchange gain of RMB5.9m for the preceding quarter and the third quarter of 2013 respectively. The quarter-over-quarter and year-over-year changes in foreign exchange gains or losses were mainly due to exchange gains or losses arising from our foreign currency denominated bank deposits and short-term loan balances as the exchange rate of the US dollar against the RMB fluctuated over the period.

2014年第三季度，我們錄得淨匯兌收益220萬元人民幣（約40萬美元），而上一季及2013年第三季的淨匯兌損失分別為2,020萬元人民幣及590萬元人民幣。匯兌收益或損失的環比和同比變動主要歸因於本季美元兌人民幣匯率波動導致我們外幣銀行存款和短期貸款餘額產生的匯兌收益或損失。

Our net profit for the third quarter of 2014 totaled RMB1.2b or $188.8m compared to RMB1.2b and RMB1b for the preceding quarter and for the third quarter of 2013 respectively.

2014 年第三季度，我們的淨利潤總計 12 億元人民幣（1.888 億美元），而上一季和 2013 年第三季度的淨利潤分別為 12 億元人民幣和 10 億元。

We reported basic earnings per ADS of $1.45 and diluted earnings per ADS of $1.44 for the third quarter of 2014. Our basic and diluted earnings per ADS were $1.5 each for the preceding quarter and $1.31 each for the third quarter of 2013.

我們報告 2014 年第三季每股美國存託憑證基本收益為 1.45 美元，每股美國存託憑證攤薄收益為 1.44 美元。上一季每股美國存託憑證基本收益為 1.5 美元，2013 年第三季每股美國存託憑證攤薄收益為 1.31 美元。

As of September 30, 2014, our total cash and time deposits balance was RMB20.4b or $3.3b compared to RMB18.6b as of December 31, 2013. Our cash flow generated from operating activities was RMB1.1b or $186.9m for the third quarter of 2014 compared to RMB1.2b and RMB1b for the preceding quarter and the third quarter of 2013 respectively. In addition, as of September 30, 2014, we had a loan from an offshore bank in the principal amount of $90m that was secured by RMB deposits of the Company in an onshore branch of this bank in the amount of RMB614.2m, which was recognized as a short-term investment.

截至2014年9月30日，我們的現金及定期存款總額為人民幣204億元（約合33億美元），而截至2013年12月31日，該餘額為人民幣186億元。 2014年第三季度，我們經營活動產生的現金流為人民幣11億元（約1.869億美元），而上一季及2013年第三季分別為人民幣12億元及人民幣10億元。此外，截至2014年9月30日，我們從一家境外銀行獲得了一筆本金為9000萬美元的貸款，該貸款以本公司在該銀行境內分行的人民幣6.142億元存款作為擔保，該筆貸款被確認為一項短期投資。

We continue to return value to our shareholders and are pleased to announce that, in line with our quarterly dividend policy, the Board of Directors has approved a dividend of $0.36 per ADS. We expect to pay this on December 5, 2014 to shareholders of record as of the close of business on November 28, 2014.

我們持續為股東創造價值，並欣然宣布，根據我們的季度股息政策，董事會已批准每股美國存託憑證 (ADS) 0.36 美元的股息。我們預計 2014 年 12 月 5 日向 2014 年 11 月 28 日收盤時登記在冊的股東發放股利。

Thank you for your attention. We would now like to open the call to your questions. Operator, please go ahead.

謝謝您的關注。現在我們開始回答您的問題。接線員，請繼續。

(Operator Instructions). Alicia Yap, Barclays.

（操作員指示）。 Alicia Yap，巴克萊銀行。

Hi. Good morning William, Onward and Brandi. Thanks for taking my questions. My first question is regarding your ecommerce business and the other revenue lines, obviously which almost doubled sequentially and is actually catching up very quickly on your advertising revenue. So could you give us some color in terms of how much and how big was the lottery business this quarter? And what are the market opportunities in this virtual ecommerce business that you guys have? And, other than lottery, is it the meaningful one is also the car insurance and all that? So any color on how this segment will grow would be appreciated.

大家好。 William、Onward 和 Brandi 早安。感謝你們回答我的問題。我的第一個問題是關於你們的電商業務和其他收入來源的，顯然這些收入幾乎環比翻了一番，而且實際上正在迅速趕上你們的廣告收入。那麼，能否請您詳細介紹本季彩券業務的規模與數量？你們的虛擬電商業務有哪些市場機會？除了彩票之外，汽車保險之類的業務是否也很重要？如果您能透露一下這個細分市場將如何成長，我們將不勝感激。

So thank you Alicia for your questions. So with regard to our performances on the revenues performance in the third quarter especially on the ecommerce and other revenues, of course a very big portions of it would be coming out from our lottery business. And we also uphold a very positive will about its growing potential in the upcoming periods.

感謝艾莉西亞的提問。關於我們第三季的收入表現，尤其是電商和其他收入，其中很大一部分當然來自彩票業務。我們對未來一段時間彩票業務的成長潛力也抱持著非常樂觀的態度。

And on the other hand you also mentioned about the growth especially on our advertising segment, which we are also very feel happy about it given the fact that there has been some major events happening around, crossing between the second the third quarter, with regard to the FIFA World Cup, which made about a good contribution. And on the other hand there has also been good demand from advertisers to go along with using our mobile news application, which we also see a good growth there.

另一方面，您也提到了我們廣告業務的成長，我們對此感到非常高興，因為第二季和第三季期間發生了一些重大事件，例如世界杯，這些事件為我們的業績做出了不錯的貢獻。另一方面，廣告商對我們行動新聞應用程式的需求也很高，我們也看到了良好的成長。

And overall apart from the email, ecommerce and others business segments, we see a good [growth] there. The advertising and our gaming business are also performing quite well in the third quarter.

總體而言，除了電子郵件、電商和其他業務部門外，我們看到了良好的成長。廣告和遊戲業務在第三季也表現良好。

So can I follow up on the advertising revenue then? What is, or could you share, in terms of the percentage of revenue coming from mobile devices?

那我可以跟進一下廣告收入嗎？能分享一下來自行動裝置的收入佔比是多少嗎？

And also, since you guys are doing many things right and which allow you to grow these business segments seems like better than your peers, which advertising vertical that you think you are actually gaining some market share?

而且，由於你們做了很多正確的事情，並且這些事情讓你們的業務部門成長得比同行更好，那麼，你們認為你們在哪些垂直廣告領域實際上獲得了一些市場份額？

Well, just as what we have previously mentioned in the second quarter about our contributions on the mobile front on our various business segments or business lines, we do see that for the advertising front there has been a good growth quarter over quarter and also year over year. But at the moment we haven't yet disclosed the exact percentages of it, but we are quite happy with this growth performance over the past quarters.

正如我們之前在第二季提到的，行動業務對我們各個業務部門或業務線的貢獻，我們確實看到廣告業務環比和同比都實現了良好的成長。目前我們還沒有公佈具體的成長百分比，但我們對過去幾季的成長表現相當滿意。

Okay. So just last question from me is on the World of Warcraft. Have you seen any resilience from the users after the price increase in October?

好的。我的最後一個問題是關於《魔獸世界》的。在十月份價格上漲之後，您是否看到用戶有所回彈？

And then when you released the Heroes of the Storm later, where do you think the gamers will come from? Should we worry on any potential cannibalization of the World of Warcraft gamers? Thank you.

那麼，你們之後發布《風暴英雄》的時候，你覺得玩家會從哪裡來？我們是否應該擔心《魔獸世界》玩家可能會被蠶食？謝謝。

So basically the price increase that have just become effective in October has also proved to be a very successful reception in the market. And given the fact that we will have another new expansion pack coming out soon on November 18, which is the fifth expansion pack for the World of Warcraft, the Warlords of Draenor, we do look positively upon to it.

所以，10月剛生效的價格上調，基本上也得到了市場的認可。考慮到我們即將在11月18日推出另一個新資料片，也就是《魔獸世界》的第五個資料片《德拉諾之王》，我們對此持正面態度。

Okay. Great. Thank you so much.

好的。太好了。非常感謝。

Okay. Thank you.

好的。謝謝。

Jialong Shi, Credit Suisse.

史家龍，瑞士信貸。

Hi. Good morning William, Onward, Brandi. Thanks for taking my questions. First of all, congratulations on the success of your new mobile game (inaudible), which I think has surged to number one spot on iOS app store ranking gross revenue. My question is about your mobile games. I just wonder how much of your game revenue was generated by mobile games in Q3 and how much of the mobile game revenue was contributed by NetEase proprietary channel, and how much from third party app stores?

大家好。早安，William、Onward 和 Brandi。感謝你們回答我的問題。首先，恭喜你們的新手遊（聽不清楚）取得了成功，我認為它已經飆升至 iOS 應用商店總收入排行榜的第一位。我的問題是關於你們手遊的。我想知道你們第三季的遊戲收入中有多少來自手遊？有多少來自網易自營通路？又有多少來自第三方應用程式商店？

(Interpreted). So in terms of our mobile games revenue contributions out of our total game revenues, it has come to around 9% as of the third quarter of 2014. And we do look upon that this trend will still be growing in the upcoming periods and we look positively upon to it. And on the other hand the distributions will mainly be coming out from our own internal resources, from our official website and stuff like that.

（解釋）。就我們手機遊戲收入佔總遊戲收入的貢獻而言，截至2014年第三季度，這一比例已達到9%左右。我們預計這一趨勢在未來一段時間內仍將持續成長，並對此持樂觀態度。另一方面，遊戲收入的分配將主要來自我們自己的內部資源，例如官方網站等。

Thank you for the color. I'll get back to the queue.

謝謝你的顏色。我會回到隊列。

Eddie Leung, Merrill Lynch.

美林證券的 Eddie Leung。

Good morning. Thank you for taking my question. Just have one question. I understand that usually when you launch new games the sales and marketing costs would go up, but this quarter I remember Onward also mentioned that some of the marketing expenses would be related to other business like ecommerce. So just wondering if you could share more color on what exactly you have been doing in terms of promoting your ecommerce as well as your mobile news applications, and how should we think about the potential fluctuation in sales and marketing expenses in the upcoming one or two quarters? Thanks.

早安.感謝您回答我的問題。我只有一個問題。我知道通常新遊戲發佈時，銷售和行銷費用都會增加，但我記得本季《Onward》也提到，部分行銷費用會用於電商等其他業務。所以，能否詳細介紹一下您在推廣電商和行動新聞應用程式方面的具體工作？以及我們該如何看待未來一兩個季度銷售和行銷費用的潛在波動？謝謝。

So basically our view about our spending on the S&M front is that there are quite a lot of new products and services that we offer to the market. And you would also see that in the third quarter that there has been quite an increase in terms of the spending on various fronts.

所以，我們對於銷售與市場（S&M）方面支出的看法基本上是，我們向市場推出了大量新產品和服務。而且你也會發現，第三季各方面的支出都有了顯著成長。

And on the advertising, because we have been spending on promoting our brands and there has also been some mega events happening around, which is the FIFA World Cup and with more promotions on promoting our own mobile news applications, so this would be an area that we have been increased the spending there. And on the other hand, with regard to our ecommerce-related business segments, because we also got our lottery products in place and we have also make good use of both the online and offline resources to promote our products, with also get a very good feedback from the markets and responses. And we do see that both segments has been growing quite well in the past quarters.

在廣告方面，由於我們一直在投入資金推廣我們的品牌，而且近期也有一些大型賽事，比如世界杯，我們也加大了對自家移動新聞應用程序的推廣力度，所以我們在這方面增加了支出。另一方面，就我們的電商相關業務而言，我們也推出了彩票產品，並充分利用線上線下資源進行推廣，也獲得了良好的市場回饋。我們確實看到，這兩個業務在過去幾個季度都實現了良好的成長。

And we are also looking forward that this trend could still be up-keeping in the upcoming periods.

我們也期待這一趨勢在未來一段時間內能夠持續維持。

Got that. Thank you.

明白了。謝謝。

George Meng, Morgan Stanley.

摩根士丹利的喬治孟（George Meng）。

Hi. Good morning William, Onward and Brandi. Thank you very much for taking my questions. I had two questions related to your games. First one is regarding your PC games. Basically you've already launched the item-based version of your new Westward Journey Online II this quarter and I just wonder are you going to launch more item-based versions of your existing PC games, especially some of your high-contributing PC games going forward, because I think obviously most of the other companies are doing it all item-based and you're also trying to convert some of your time-based to item-based? That's the first question. Thanks.

大家好。 William、Onward 和 Brandi，早安。非常感謝你們回答我的提問。我有兩個關於你們遊戲的問題。第一個是關於你們的 PC 遊戲。基本上，你們本季已經推出了以道具為基礎的新版《大話西遊2》的道具版本。我想知道你們未來會不會推出更多現有 PC 遊戲的道具版本，尤其是一些高貢獻值的 PC 遊戲？因為我認為大多數其他公司顯然都在做道具版本，而你們也在嘗試將一些基於時間的遊戲轉換為基於道具的版本。這是第一個問題。謝謝。

(Interpreted). So with regard to your first question, basically for now NetEase has got two, principally two time-based games, namely Fantasy Westward Journey and also Westward Journey Online II. Both of them are principally operating on the time-based model. And we have also tried out one, which is the Westward Journey Online II on the item-based model, and basically if we are to expand the footprint in this area or this direction, the other game would hopefully be the Fantasy Westward Journey.

（翻譯）。關於你的第一個問題，目前網易基本上有兩款基於時間的遊戲，分別是《夢幻西遊》和《大話西遊2》。這兩款遊戲主要都是基於時間模式運作的。我們也嘗試了一款以道具模式為基礎的《大話西遊2》。如果我們要在這個領域或方向上拓展業務，另一個遊戲希望是《夢幻西遊》。

But, having said that, we believe the focus or the concentrations from the Company's perspective is to place the importance of the user experiences at a higher position rather than defining or rolling out the games whether they are running on the time-based models or item-based models. And, after all, NetEase has been in the marketplace of operating the time-based-model games for over 12 years right now and we have been quite successful in this area, and we do see that the users and the players are still quite happy with this kind of game options to choose from.

但話雖如此，我們認為公司應該將使用者體驗放在更重要的位置，而不是定義或推出基於時間模式或基於道具模式的遊戲。畢竟，網易在基於時間模式的遊戲市場運營已超過12年，並且在這方面取得了相當大的成功，我們也確實看到用戶和玩家仍然對這類遊戲的選擇感到滿意。

Got it. And my second question is related to your mobile games, especially Hearthstone. Can you give us any update on the performance of Hearthstone this quarter?

明白了。我的第二個問題與你們的手機遊戲有關，尤其是《爐石戰記》。能介紹一下《爐石戰記》本季的業績嗎？

And also for the Hearthstone mobile phone version, because it's now delayed by Blizzard, I just wonder is there any impact on your launch schedule. And do you actually expect like a simultaneous launch with other leading markets when Blizzard actually launch that mobile phone version of Hearthstone going forward? Thanks.

另外，由於暴雪推遲了《爐石戰記》的手機版發行，我想知道這會對你們的發布計畫有什麼影響嗎？暴雪以後正式推出《爐石戰記》的手機版時，你們預計會與其他主要市場同步發行嗎？謝謝。

Well, basically I think for the performances of Hearthstone in the past quarters I think it's still up-keep at very healthy levels and we are still quite happy to see the reception from the market as such. And given the fact that there has been some newly introduced game mode for the players to choose from, we do still see that the appetite from the market is still very good.

嗯，總的來說，我認為《爐石戰記》在過去幾季的表現仍然保持著非常健康的水平，我們也很高興看到市場對它的接受度。考慮到遊戲新增了一些遊戲模式供玩家選擇，我們確實看到市場對它的需求仍然很高。

Although you mentioned that there has been a certain delay on certain mobile versions of it, but currently we do not see that would pose any significant impact to the overall performances of this game.

雖然您提到某些行動版本出現了一定的延遲，但目前我們認為這並不會對遊戲的整體表現造成任何重大影響。

Okay. Got it. Thanks. That's very helpful.

好的。明白了。謝謝。這很有幫助。

Tian Hou, TH Capital.

天后，泰合資本。

Hi William and Onward. I have a couple of questions. One is related to your mobile game distribution. As current point you distribute most of your mobile games through your own platform. And if we look back on PC stage, a lot of mobile games at that time they were distributing by themselves and then later on we saw the distribution start to concentrate and actually lots of big player is no longer big player. And Tencent become much more concentrated player because their distribution power.

你好，William，Onward。我有幾個問題。一個是關於你們的手機遊戲發行。目前，你們的手機遊戲大多是透過自己的平台發行的。回顧PC遊戲發展階段，當時許多手機遊戲都是自己發行的，後來我們看到發行管道開始集中，許多巨頭不再是巨頭。而騰訊憑藉著強大的發行能力，成為了更集中的玩家。

So I wonder in mobile stage, as we're still early on mobile, so what do you see the trend? Is the distribution also going to become consolidated and concentrated, and become a major part of a development for mobile games?

所以我想知道，在行動遊戲領域，由於我們目前還處於早期階段，您認為趨勢如何？發行管道是否也會變得更加整合和集中，並成為行動遊戲開發的重要組成部分？

(Spoken in foreign language).

（用外語說）。

So basically just to recap on the main highlights that William has replied to Tian's questions.

所以基本上只是回顧一下 William 回答 Tian 的問題的主要要點。

Basically no matter we are talking about the PC or the client-based games, or the mobile games, what is the most important factor would be the product itself. And William's trying to say that the product is the king or the content is the king. And basically if a company would be able to roll out or to develop and launch some first-tier products to the market, they would possess the capabilities to attract a good user base, the players to come to the product itself, and they would be quite sticky to the game itself.

基本上，無論我們談論的是PC遊戲、客戶端遊戲還是手遊，最重要的因素都是產品本身。 William 想說的是產品為王，還是內容為王。基本上，如果一家公司能夠推出或開發一些一流的產品並推向市場，他們就有能力吸引良好的用戶群，吸引玩家來玩產品，並且他們對遊戲本身也會有相當強的黏性。

Just now you also mentioned about an example about what Tencent has been doing. And we do acknowledge that they have got three games, three licensed games that has been doing quite well in the market up to now, but this has also come up after a long time experiences to find out what works best in the space. We do see that in a much longer term what is more important is to provide a very good and high-quality services to our users and we do see that the distribution in some ways is not that important than the importance of the qualities of the game itself.

剛才您也提到了騰訊一直在做的事情。我們確實承認，他們目前擁有三款遊戲，三款代理遊戲，在市場上表現相當不錯，但這也是經過長期實踐摸索後才得出的結論，我們一直在摸索出最適合這個領域的方案。我們確實認為，從長遠來看，更重要的是為用戶提供優質服務，我們也確實認為，從某種程度上來說，發行管道不如遊戲本身的品質重要。

You also mentioned that for the client-based games the distribution capabilities somehow is quite strong in some ways, but we also see that for the mobile games this can also be achieved in the way that, because this is less complicated and it would be much easier for the users or the players who likes to do the download, store and play the games, and we do see that we can out-reach to the targeted users much easier. And so we do see that this would still be the trend going forward.

您也提到，客戶端遊戲的分發能力在某些方面相當強大，但我們也發現，對於手游來說，分發能力同樣可以實現，因為這種方式更簡單，對於喜歡下載、存儲和玩遊戲的用戶或玩家來說，會更加便捷，我們也確實看到，我們可以更輕鬆地觸達目標用戶。因此，我們確實認為這仍將是未來的趨勢。

William, (spoken in foreign language). So, Onward, I still have one question related to your sales and marketing, R&D. So I realize as you spend more hiring more people, spend more money developing, promoting your new products, and I wonder going forward, as a percentage of revenue how should we see these two lines?

威廉（用外語講話）。那麼，Onward，我還有一個關於你們銷售、行銷和研發的問題。我意識到，隨著你們在招募更多員工、開發和推廣新產品方面投入更多資金，我想知道未來，作為收入的百分比，我們應該如何看待這兩條線？

Well, first of all, I would like to reiterate that because we do not give out any formal guidance on our various financial metrics and so what I would try to give you the colors would be somewhere around the strategies and the directions on how the Company would be viewing on how to spend on different categories of expenses like the S&M or the R&D.

嗯，首先，我想重申一下，因為我們沒有對各種財務指標給出任何正式的指導，所以我試圖給你提供的信息是圍繞戰略和方向，關於公司如何看待如何在不同類別的費用上支出，比如銷售與市場或研發。

In this year this is a very meaningful year especially for NetEase because we have been putting quite a lot of big adverts in terms of launchings a couple of mobile games and some new client-based games alike. At the same time we also see there has been some good tractions, both in terms of our portal businesses as well as our ecommerce-related businesses as well. And which means that this would be a year where we would be investing more to cope with the future opportunities ahead that we look upon to be very positive for growing the Company's business in the upcoming periods.

今年對網易來說意義非凡，因為我們在推出幾款手遊和一些新的客戶端遊戲方面投入了大量的廣告。同時，我們也看到門戶業務和電商相關業務都取得了一些良好的進展。這意味著我們將在今年加大投資，以抓住未來的機遇，我們期待這些機會對公司未來業務的成長非常有利。

And so what I would say is that in terms of the sales and marketing we would still up-keep at a very active efforts in order to invest in our different business segments in order to build up our own brand, the image, and to put our different products and services to our targeted audiences. And at the same time we would also be exploring some new opportunities ahead.

所以我想說的是，在銷售和行銷方面，我們仍將保持非常積極的投入，投資於我們不同的業務領域，打造我們自己的品牌和形象，並將我們不同的產品和服務推向目標受眾。同時，我們也將探索未來的一些新機會。

And as for the R&D expenses, in the third quarter you will see that it has come up quite a bit because usually this would be the period or the season where we would get the new intakes from the market. And we also see that in the third quarter there is quite a big increase in terms of the headcounts to the overall workforce to cope with the business growth and expansions ahead.

至於研發費用，你會發現第三季成長了不少，因為通常這個時候是我們從市場獲得新產品的時期或季節。我們也看到，為了因應未來的業務成長和擴張，第三季員工總數也大幅增加。

And just to give you a sense on the size of our R&D team, in the last quarters, which means the first two quarters of 2014, we have mentioned that we have around 2,400 R&D people within the Company. And after the third quarter the new intakes of the new graduates to build up our own R&D people, for now we have around 3,400 R&D people.

為了讓大家大致了解我們研發團隊的規模，我們提到，在上個季度，也就是2014年的前兩個季度，公司內部約有2,400名研發人員。第三季之後，我們又吸收了新畢業生，壯大了我們自己的研發團隊。目前，我們約有3,400名研發人員。

Okay. That's very helpful. Thank you. That's all my questions.

好的。這很有幫助。謝謝。我的問題就到這裡。

Alex Yao, JPMorgan.

摩根大通的 Alex Yao。

Hi. Good morning guys. Just very quick question on the mobile gaming revenue accounting. How do you guys account for mobile gaming revenue? Thank you.

大家好，早安。我只想問一個關於行動遊戲收入會計的問題。你們是如何計算行動遊戲收入的？謝謝。

So basically the simple answer to it is that we have been taking the gross basis to recognize our revenue.

因此，基本上，簡單的答案是，我們一直採用總額基礎來確認我們的收入。

Okay. So all the mobile game revenue will be booked on the gross basis. You guys have -- or do you have any plan to book it on the net-net basis?

好的。所以所有手機遊戲收入將以總收入入帳。你們有計劃以淨收入入帳嗎？

Well, I think for now this is what we would be doing based on our game portfolios.

嗯，我認為目前這就是我們根據我們的遊戲組合所做的事情。

Okay. What would be the rough gross margin, operating margin for your mobile gaming business?

好的。你們的手機遊戲業務的毛利率和營業利益率大概是多少？

Well, I think we wouldn't break them up separately for the mobile games categories, but basically we do see, you would also see that in the third quarter we have still up-keep at a relatively healthy levels of the gross margins, given the fact that there has been a growing contributions from the mobile games.

嗯，我認為我們不會將它們單獨拆分為手機遊戲類別，但基本上我們確實看到，您還會看到，在第三季度，考慮到手機遊戲的貢獻不斷增長，我們的毛利率仍然保持相對健康的水平。

Is it fair to say it's slightly less profitable than in-house developed PC games, but better than the licensed PC games?

是否可以說它的利潤比內部開發的 PC 遊戲略低，但比授權的 PC 遊戲更好？

I think this would be a fair assessment.

我認為這是一個公平的評價。

Thank you.

謝謝。

Okay. Thank you.

好的。謝謝。

Jiong Shao, Macquarie.

邵炯，麥格理。

To just summarize my questions, I have two questions. Firstly, just want to get a sense on the mobile game launching plan and the development objective in terms of the genre focus?

總結我的問題，我有兩個問題。首先，我想了解你們的行動遊戲發布計劃以及遊戲類型方面的開發目標。

And also, to clarify the 9% of the mobile revenue, how much is for advertising and how much is for mobile games?

另外，請明確一下 9% 的行動收入，其中有多少是用於廣告，有多少是用於手機遊戲？

And second question is related to what are the other key mobile apps that's going to contribute monetization in the next two years? (Spoken in foreign language).

第二個問題是，未來兩年還有哪些重要的行動應用程式將為獲利做出貢獻？ （用外語說）。

(Spoken in foreign language).

（用外語說）。

So basically Jiong, with regard to your first question, maybe I answer it one by one. First of all, just to give you some clarity on the 9% numbers, these were mainly related to the mobile games' contributions.

所以，基本上，關於你的第一個問題，我可能需要逐一回答。首先，為了讓你更清楚了解9%這個數字，它主要與手機遊戲的貢獻有關。

And with regards to the upcoming Q4 launch, what William has highlighted just now, because we have quite a handful of various games that are going to come up to the market in upcoming periods and so we do have a scheduling as such. And it wouldn't be that easy to give you a quick and fast answer on this call, but perhaps we can organize something to give you a sense at a later point of time.

關於即將在第四季度發布的遊戲，正如William剛才強調的那樣，因為我們有不少不同類型的遊戲將在未來一段時間內上市，所以我們確實有一個計劃安排。這次電話會議很難快速回覆您，但也許我們可以安排一些時間，讓您稍後再了解。

And apart from the mobile games' initiatives, there would also be some other game initiatives that we will be rolling out in the fourth quarter. One of them would be the expansion pack for the World of Warcraft and another one would be our own client-based games that we have got a plan to launch in the fourth quarter. And just as what we have highlighted earlier in today's earnings call, the client-based games will hopefully will be the Revelation. And another one would be the Crisis 2015, which is the first-person shooter game.

除了手遊項目外，我們還將在第四季度推出一些其他遊戲項目。其中一個是《魔獸世界》的資料片，另一個是我們自己的客戶遊戲，我們計劃在第四季推出。正如我們在今天的財報電話會議上所強調的那樣，客戶端遊戲有望是《天諭》。另一個是《危機2015》，這是一款第一人稱射擊遊戲。

And just hold on for the second question.

請稍候，等待第二個問題。

(Spoken in foreign language).

（用外語說）。

So basically with regard to your second questions about our mobile apps developments or the performance so far up to date, basically we are quite happy with all categories of applications that we have launched so far in the market, whether we're talking about the dictionary, the Cloudnote. And just to highlight one, is about our mobile news applications in the third quarter, we have also been ranked by organizations as the number one uses in terms of the usage of these applications.

關於您提出的第二個問題，關於我們行動應用程式的開發情況，或者說迄今為止的表現，我們對目前在市場上推出的所有類別的應用程式都感到滿意，無論是字典還是雲端筆記。特別要強調的是，在第三季度，我們的行動新聞應用程式在使用率方面被各大機構評為第一。

And another thing with regard to the dictionary is that on November 4 the Youdao Dictionary has also launched -- and the Cloudnote, should be the Cloudnote, have launched another 4.0 version about the new functionalities to the market. And we do look upon that this will also brought good tractions there.

關於字典，還有一件事，11月4日，有道字典也上線了－雲端筆記，應該是Cloudnote，也發布了4.0版本，為市場帶來了新功能。我們確實期待這也會為市場帶來良好的推動。

And apart from that, other than the gaming initiatives, on some other areas that we have been working on so far, including the music, the newsreader and also the YiChat, we have also made some good progress and developments there as well.

除此之外，除了遊戲計畫之外，我們還在音樂、新聞閱讀器和易信等其他領域開展工作，並取得了一些良好的進展和發展。

Wendy Huang, Standard Chartered.

渣打銀行的 Wendy Huang。

So my first question is about price increase. Have you done a price increase for all your time-based games already? If not, is there any other time-based games that you may still do the price increase in the future?

所以我的第一個問題是關於漲價的。你們所有限時遊戲都漲價了嗎？如果沒有，還有其他限時遊戲你們未來還會漲價嗎？

And also will you do the price increase on a regular basis going forward.

而你們今後會定期提高價格嗎？

My second question is about your game live broadcasting business. It seems that recently you block third-party to broadcast your major games and also at the same time you stop broadcasting other third-party games as well. So what's the rationale behind this change and how will this affect your game operation going forward? Thank you.

我的第二個問題是關於你們的遊戲直播業務。最近你們似乎封鎖了第三方直播你們的主要遊戲，同時也停止了其他第三方遊戲的直播。這個改變背後的原因是什麼？這會對你們未來的遊戲營運產生什麼影響？謝謝。

(Spoken in foreign language).

（用外語說）。

So with regard to the first question on the price increase for the time-based games, on the self-development games front, basically we have already done it in February or the last year, in the Chinese New Year in 2013 for the Fantasy Westward Journey and also Westward Journey Online game. And in October 16 this year World of Warcraft, another game that has been in operations in the market for over eight years now, has also made another price increase. And basically this would be the current status of the price increase area and we've got no other plans of revising the price for our time-based games.

關於第一個關於限時遊戲漲價的問題，就自主研發遊戲而言，我們基本上在去年二月，也就是2013年春節期間就對《夢幻西遊》和《大話西遊Online》進行了漲價。今年10月16日，另一款在市場上營運了八年多的遊戲《魔獸世界》也再次進行了漲價。目前漲價的情況基本上是如此，我們目前沒有其他調整限時遊戲價格的計畫。

And with regard to your second question about the game broadcasting businesses, basically we would like to highlight that NetEase has put very top priorities to invest in this area, which we always believed that it would be a fun and a good things for the players to enjoy for watching this kind of broadcasting materials or the clips. And we also focus on the qualities of producing such kinds of video clips for the users or the players who like to watch over.

關於您關於遊戲直播業務的第二個問題，我們想強調的是，網易非常重視對這一領域的投資，我們始終相信，觀看這類直播內容或影片片段會讓玩家感到愉快和享受。我們也非常注重為喜歡觀看的用戶或玩家製作此類影片片段的品質。

And another point we would like to highlight is that our broadcasting platforms is open to all people and we welcome people to make good use of these platforms to broadcast different videos as such. And there is no questions of being that we have make it to be a very closed mode of running this broadcasting services.

我們想強調的另一點是，我們的廣播平台向所有人開放，我們歡迎大家充分利用這些平台來播放各種類型的影片。我們完全沒有理由認為我們的廣播服務模式過於封閉。

Okay.

好的。

And that is all the time we have for questions tonight. I would like to turn the call back over to management for any additional or closing remarks.

今晚我們回答問題的時間就到這裡。我想把電話轉回給管理階層，請他們補充發言或做最後總結。

Thank you once again for joining us today. If you have any further questions please feel free to contact Cassia Curran, NetEase's IR Manager based in Hangzhou, or the Piacente Group Investor Relations. Have a wonderful day.

再次感謝您今天的參與。如有任何疑問，歡迎聯絡網易杭州投資者關係經理Cassia Curran或Piacente集團投資者關係部門。祝您擁有美好的一天。

And that does conclude today's call. Thank you all for your participation.

今天的電話會議到此結束。感謝大家的參與。

Portions of this transcript that are marked (interpreted) were spoken by an interpreter present on the live call.? The interpreter was provided by the Company sponsoring this Event.

本記錄中標記（翻譯）的部分是由現場通話中的口譯員朗讀的。口譯員由贊助本次活動的公司提供。